By Christos Papoutsy
Founder and Publisher,
Hellenic Communication Service

Construction is a complex business involving many parties, including architects, contractors, and sub-contractors. With the many people invested and involved in a construction project come numerous opportunities for miscommunication and conflict. Following are some typical scenarios requiring mediation.

CHRISTOS PAPOUTSY, prior director of U.S. Arbitration & Mediation of New England's Northern New England Office, has over thirty years of business experience to his name as owner, president and CEO of several companies. He has successfully mediated commercial and community actions in both New Hampshire and Massachusetts. Mr. Papoutsy is a member of the New Hampshire Mediators Association.
In one case, an underground power cable was pierced by a fence pole. This was the result of miscommunication rather than carelessness. The developer, architect, several sub-contractors, and a carrier were obliged to resolve cable repair cost and insurance coverage issues. In another instance, the concrete floor of a warehouse cooler and freezer facility buckled, allegedly due to moisture penetration. A patient at a hospital injured her head and shoulder when her wheelchair tipped over as she negotiated a hospital sidewalk under construction.
There is endless variety to mid- and post-construction accidents, and in certain cases, the cause is carelessness. Pipes burst, for example, on the top floor of a thirteen-story cancer research hospital, during a winter cold snap; were they insufficiently insulated? Sewer excavation causes the foundation of a home to crack. A paper manufacturer's business is interrupted for twelve hours due to the negligence of a construction company installing new sewer lines for the city. Twenty-three tons of gravel stored on a roof during repair causes the roof to collapse. Nine parties dispute improperly installed tiles on some school buildings. A warehouse roof, covering an area of twenty-six acres, leaks; claims are brought against ten defendants.

A recent study indicates that the average cost for mediating construction disputes is just $2,335. More importantly, the estimated savings in the cases studied totalled more than 15.5 million dollars, over $40,000 per case. The estimated time saved per case, by pursuing mediation rather than arbitration, was approximately ten months.

Research also indicates that litigation is becoming costlier, and that approximately sixty percent of public construction projects will involve some type of litigation before completion. Throughout the country, numerous liability insurance companies for architects and engineers have embraced the alternative dispute resolution concept wholeheartedly and actively, and have encouraged the use of mediators to resolve claims brought against their clients.

See also:

Mediate Don't Litigate: The Need for Alternative Methods of Dispute Resolution, by Christos Papoutsy


Harvesting the Entrepreneurial Olive Tree, by Christos Papoutsy

For more articles of interest, visit the Business Arena

With every use of mediation, the construction industry benefits from a much quicker settlement of its dispute than if the case were allowed to go all the way to trial. A recent Ninth Circuit Court of Appeals decision considers lawsuits "clumsy, noisy, unwieldy, and notoriously insufficient. Fueled by bad feelings, they generate much friction yet produce little that is of any use." In the state of New Hampshire, fifty companies are participating in a Home Builders Association warranty program that requires all disputes to be settled through mediation.

What makes mediation a better route than arbitration, again, has to do with the inherent differences between it and arbitration. Mediation is a less formal, non-binding process in which both sides voluntarily present their case to a third party both have approved. The non-binding quality of mediation makes both sides more willing to listen than they'd be if they were constantly "on guard."

Influencing the trend toward alternative methods of dispute resolution is the ever-growing backlog of cases waiting for trial. The courts are jammed. More important than that, though, is the cost-savings factor; and settling a case more quickly makes sense for everyone involved. After all, success lies in settlement. While the trend in the 1980's was "litigation, litigation, litigation," these days most people involved in disputes are feeling like they've had enough.