Chapter Three Talking Your Way to Project Success
by Deborah Bovarnick Mastin, Esquire
“Studies confirm that the failure of communication is the largest and most expensive cause of disputes on projects.”
Construction projects are complex and intricate pieces of work. They involve numerous companies and individuals who must coordinate their work to reach completion. Each project is unique - a “one-off.” How do you define a successful project? My former clients, large county government entities building massive infrastructure projects, defined a successful project as one that was completed within budget, on time, without aggravation and without lingering claims and disputes. Experience teaches us that projects with effective lines of communication are more successful than those where the team’s communications are poor. Prudent owners, designers and constructors anticipate the need to establish effective protocols for team members’ communications in order to address and resolve unforeseen events that are likely to arise during construction. These protocols are the foundation of successful communications.
On a construction project you can expect the unexpected to happen. That unexpected condition could be an unknown subsurface condition, an unexpected delay in delivery of a critical project component or simply divergent interpretations of the requirements of the scope of the work. It is likely that the scope of the work (or the time needed to perform the work) will
shift during the course of the project. It is the rare project that does not need to be adjusted during its progress. When the process works, consensus is reached among team members about the scope and cost of these adjustments and they are committed to a signed document called a change order. Under ideal conditions, a change order is signed before the revised work is started and in a timely manner to minimize adverse impacts to the project. For this to occur, all project team members need to be aware of the situation that demands a modification to the work. For instance, the designer needs to provide advice to the owner about available options to address an issue and provide clarifications regarding the design intent to the constructor. The constructor needs to assess the costs and schedule impacts resulting from each of the various options and the owner needs to evaluate the options presented and select the preferred solution (in light of the costs and impacts associated with each option). The project team members may need to research supply, delivery and other aspects of these options in order to address unforeseen situations (all while under the pressure of a project already under construction). Unfortunately, more often than not, poor communication results in incomplete or incorrect solutions, work being performed before consensus is reached and a change order is signed and/or the incomplete transfer of information to subcontractors (resulting in legal claims that are costly and time consuming to resolve).
Over the last several decades, construction professionals have implemented a variety of new and creative strategies in an effort to reduce the claims and adverse impacts that arise from unplanned or unexpected events that occur during the any given
project. Unconventional project delivery methods, including design-build, construction manager at risk, construction manager not at risk and integrated project delivery systems are some of the more common project delivery variations that have been introduced during the continuing search for methods to improve communication and ensure a successful project. Technical advances in computing have also brought opportunities for improved communication through the sharing of information in the cloud or through Building Information Modeling software. Internal operational mechanisms have also been introduced into project management structures to support communications about ongoing construction processes. These mechanisms, including co-location of project personnel (“The Big Room”), early mediation, standing neutrals and Dispute Boards (a/k/a Dispute Resolution Boards, Dispute Review Boards, Dispute Avoidance Boards, or DRBs, all referred to here as “Dispute Boards”) offer a forum during the progress of the work to minimize disputes (by addressing issues as they arise) and mitigate adverse impacts to projects. These mechanisms create specific channels of communication among project team members. They capitalize on the communication skills of the project personnel and those of the dispute resolution experts who are engaged to assist them.
Goals of a communications protocol
Time is money. A communications protocol should support timely decision-making and not drag out the timeline for a final decision. Information needs to get to the final decision makers as quickly as possible. If the field staff is only authorized to report to supervisors, those supervisors need to be involved from the start. Weekly project meetings serve a vital role in
keeping the project team members informed about current and anticipated conditions on the job. In many cases the project team can use the assistance of a trained consultant to assist with the communication. This consultant can be a mediator, a Standing Project Neutral or a Dispute Board. Both early mediation and Dispute Boards allow the project team to discuss potentially contentious matters in a confidential environment, in real time, while the work is progressing and before any resources have been committed to address unforeseen events.
A number of different communication protocols can be implemented independently or in combination within the project management structure:
1) The Big Room
Off-site location of key personnel can delay decision-making. This problem is magnified when the off-site personnel are in different time zones, or are so far away from the job site that they are not even at work or awake during working hours on the jobsite. Simply housing the staff of the major project team members, the owner’s project management team, the design team and the constructor’s team all together in one trailer (rather than isolating them into separate trailers) can go a long way to supporting communications on the project. Trailermates will do things like going out for lunch together and going out for beers after work. They are more likely to see each other as colleagues instead of adversaries. As a result, the information flow will most likely be more informal, immediate and convenient.
2) Dispute Boards
The Florida Department of Transportation calculates that it spends less than 0.1% of a project cost on its Dispute Boards and that it has avoided spending millions of dollars in attorneys’ fees, consultant fees, and lost staff productivity by using Dispute Boards.
The best use of a Dispute Board is as an enhancement and support to the project management team. Dispute Boards facilitate communication between the owner, the designer and the contractor, which allows the team to address unplanned events before committing resources to any given solution. In fact, there is a growing trend in Australia, New Zealand and the USA to call Dispute Boards “Dispute Avoidance Boards” or “Dispute Avoidance Panels.” Dispute Board input is best introduced before a dispute matures and before any money has been spent to address an unplanned event. Otherwise, the process simply becomes an expedited arbitration. Unlike mediation, arbitration, conciliation, litigation, standing neutral and early case evaluation services, Dispute Boards offer the opportunity to impact future behavior on a project by helping craft solutions in real-time. Neither mediation nor arbitration offers the parties this benefit because these processes evaluate past behavior.
At first blush, a Dispute Board looks like an arbitration panelthree industry professionals selected by the project team members (typically the owner and the contractor) for their experience, their neutrality, their commitment to the project (not to any party to the contract) and their training. They must be sufficiently experienced in the type of work required by the
contract so that they bring value to the table as trusted mentors as well as having appropriate technical experience to serve the project team. Additionally, they should possess the interest and temperament to facilitate a project with humor and calm professionalism. Ideally, both the owner and the contractor jointly select Dispute Boards panelists, but, when necessary, each party can select a single panelist (who then immediately becomes neutral; those two party-selected panelists can select the third panel member). Dispute Boards work well only when the parties trust the panel. It is critical that panelists maintain actual impartiality and neutrality as well as the appearance of impartiality and neutrality. Only communications with all project team members, including written, electronic and verbal communications are allowed. Unlike a mediation process, private caucuses with a single party are prohibited. Prior to selection, prospective panelists disclose past and current relationships that could give rise to a perceived conflict of interests or that could indicate a lack of neutrality with regards to members of the project team. These disclosures are similar to those made by prospective mediators or arbitrators.
Although a Dispute Board can convert to an arbitration panel (typically non-binding) if the problems encountered on the project prove to be intractable, a well-run Dispute Board motivates the parties to collaborate and mitigate the adverse impacts of unplanned events in real-time. Dispute Boards that meet regularly with the project team can help to avoid claims (particularly massive claims at the end of jobs asserting difficulties from the early project stages), minimize impacts on project schedules due to unforeseen conditions or unanticipated late changes in the scope of the work and maintain
predictability over the use of available funds. This process ensures that surprise end-of-job claims are almost entirely eliminated. The presence of the Board helps maintain collegiality and civility among the project team members and encourages collaboration for the good of the project.
Stakeholders who are not direct parties to the construction contract (such as subcontractors, tenants or lenders) can participate in Dispute Board meetings. Participation by these stakeholders enables consensus to be reached with all interested parties in a single forum. These stakeholders may be directly affected by decisions reached by the project team and they appreciate the opportunities to hear and to be heard before those decisions are reached. For example, will the recovery schedule involve night work or closing a section of the building for a limited period of time? A tenant might like to know and might have input on ways to minimize impacts to its operations.
Effective Dispute Boards meet monthly as a supplement to the regular project executive meetings. It is not necessary that a separate meeting be scheduled for regular monthly or quarterly Dispute Board meetings. Half-day meetings can be sufficient, especially for smaller projects. Discussions occurring during these meetings are often declared to be confidential settlement negotiations in order to encourage an open exchange of information and ideas from all participants so that a plan can be agreed upon. If there is a disagreement that is interfering with the possibility of a collaborative solution, the Dispute Board may be requested to offer an informal oral “advisory” opinion, which can help the parties resolve an issue without further assistance. Postponing or cancelling regular Dispute Board
meetings until a “dispute” arises is counterproductive and squanders the opportunity for the Board to facilitate avoidance or mitigation of adverse impacts to the project. All affected stakeholders should be invited to attend these monthly meetings, including major subcontractors and tenants. Most projects with Dispute Boards never need to hold a formal hearing. The written recommendation of the Dispute Board after a formal hearing may be binding or non-binding. The trend in the USA is for written recommendations of the Dispute Board to be non-binding. The contract may provide that written Dispute Board recommendations are admissible as reports of jointly selected experts, or that the recommendations are inadmissible in subsequent arbitration or litigation proceedings.
“On-call” (a/k/a “Ad-hoc”) Dispute Boards are empaneled on many jobs. These Boards are not allowed to convene until after negotiation has failed and claims have been rejected. This use of Dispute Boards does not effectively utilize the potential offered by the structure to provide facilitation, nor does it support the parties in their efforts to resolve disputes in a timely manner.
When the Dispute Board’s efforts are relegated to formal hearings on claims, those claims have already dragged on, often until after the end of a project. This practice reduces Dispute Boards to a weak form of arbitration and is not particularly helpful in driving a successful project.
A Dispute Board is formed by contract. Sample specifications for Dispute Board operating procedures as well as sample engagement agreements with the panel members are available. 1
3) Standing Project Neutral and Mediation
Unlike an arbitrator or a judge, a mediator does not decide how to resolve a dispute. Rather, a mediator facilitates conversations among the parties and assists them in reaching a resolution they all agree to. A mediator can be brought in after direct negotiations by the project team members have broken down to assist them in resolving disputes. This kind of end-stage mediation has demonstrated great effectiveness in reducing the number of litigated or arbitrated claims prior to final hearings.
However, expanding the participation of the mediator by including the mediator at the very start of the project and maintaining communication with the mediator during the progress of the work is a much more effective use of the mediator’s facilitative skills. This scope of services is sometimes known as a Standing Project Neutral. This early engagement of the mediator allows the parties to address and resolve conflicts at the time they arise, and so mitigates the costs of lingering issues on a job. The mediator can assist in guiding the project team members to a productive and prompt exchange of information, so that each project team member can evaluate the impacts and costs of each unplanned situation while it is current. Early engagement of the mediator allows for a more successful project because issues are resolved on an on-going
1 See, Dispute Resolution Board Foundation (www.drb.org), and ConsensusDocs DRB Addendum (www.consensusdocs.org Documents 200.4 and 200.5
basis while the job is underway and are not reserved for a massive and expensive global claims resolution process after project completion.
Choosing the Right Process is Key
More than 15 years ago, I was involved as an in-house Owner’s counsel in connection with a new public performing arts center project costing roughly $450 million. I made some poor choices in drafting the contract, which involved a very structured “stepped” negotiation process. The process started with field personnel, went up the ladder to the CEOs of the various project team members and then initiated mediation (after the failure of mediation, it moved the disputes to a final resolution via a Dispute Board). I had assumed that a “stepped” process, similar to the standard partnering protocol, would be helpful. I couldn’t have been more wrong. As a result of these contract requirements, the staffs of the owner, designer and contractor and their lawyers (including me) found themselves in monthly mediation and arbitration proceedings during the progress of the work to address millions of dollars in disputes. These mediations and arbitrations addressed issues that were, in some instances over two years old and diverted attention of the project team from the current issues on the project. The stepped structure turned out to be burdensome and ineffective. By the time mediation commenced on an asserted claim, the owner, the designer and the project manager had already assumed entrenched adversarial positions. Each and every mediation ended in an impasse. Each dispute presented to the Dispute Board was stale and festering, having been a source of irritation for months. The contractual specification prevented any “realtime” resolution by the mediator or the Dispute Board. The
process was so painful that midway through the project, the project team members all agreed to restructure the claims management and dispute resolution provisions of the contracts.
After that project concluded, I became involved with a complex multi-billion completion project for a terminal at Miami International Airport. Using a concept of “real-time” interventions in regular Dispute Board meetings, many change orders were issued while the job was underway. The project finished with no claims, no mediations, no arbitrations, and no litigation. I was told (because lawyers were not invited to attend the Dispute Board meetings) that at these meetings the Dispute Board addressed current events on the job. The Dispute Board never held any formal hearings. In 2011, the project won the Gold award from the Construction Owners Association of America for exemplary contract administration.
Open and frequent communications drive project success. This is not just an academic conclusion. Studies confirm that the failure of communication is the largest and most expensive cause of disputes on projects. Empirical data supports the conclusion that creating structures that keep lines of communication open is crucial. The construction industry has developed various model structures that support direct communications between the project team members as well as structures that provide communications paths assisted by skilled and experienced facilitators, including early engagement of mediators and Dispute Boards. These structures add value to the project team and enhance the likelihood of a claim-free project outcome. The bottom line is this – whatever method is
chosen, effective, continuous communication among project participants is a prerequisite to success. Keep talking.
