As originally conceived, arbitration was intended to be a relatively lower cost and private alternative to otherwise potentially complex and public dispute resolution in court. As such, arbitration was quickly adopted by many participants in the construction industry as the preferred method for dispute resolution. Over time, however, arbitration has evolved to such an extent that, in many instances, it more closely resembles the litigation process. As a result, while still a private form of dispute resolution, some of the cost efficiency that was to be achieved by agreements to resolve disputes in arbitration rather than litigation has been lost. Nonetheless, some of the efficiencies and cost savings that have been lost can still be realized by adopting more detailed and thoughtful dispute resolution procedures in construction contracts.

Oftentimes, parties simply use or modify forms for construction contracts prepared by one of the leading industry groups – American Institute of Architects or Associated General Contractors – or on forms largely derived from one of the industry standard documents. The dispute resolution clauses in these contracts typically provide that all disputes are to be resolved in arbitrations administered by one of the leading providers of arbitration services: the American Arbitration Association or JAMS. Unless something to the contrary is stated in the contract, the rules and procedures of the specified provider of the arbitration services will control the arbitration proceedings. As applied, these rules and procedures, though well intentioned, sometimes result in both pre and post-hearing activities that substantially increase the cost of the arbitration proceeding.

Whether using an industry form or a contract written specifically for your project, one way to achieve more cost-effective dispute resolution is to include more specific terms in the disputes clause in the contract that will govern how the arbitration proceeding will be handled. Set forth below are some examples of terms that can be of assistance in achieving cost savings....