I was speaking with Howard Carsman who is the Global Construction Claims Manager at Intel Corporation on innovation in dispute resolution. We are both elected members of the IACCM Council on Dispute, Claim and Conflict Management. The topic of this post is the feedback I got from Howard on the innovative ways that Intel is using to avoid conflict on its construction projects.
After a career as practicing lawyer (law offices, sole practitioner, arbitrator & mediator), Howard started, four years ago, as the global head for Intel’s construction claims.
Based on bad experiences a couple of years ago, where two construction projects ended up in multiple arbitrations, Intel has drastically changed its approach on managing and resolving disputes on their construction projects. Intel has a considerable construction activity around renovating existing and building new industrial facilities.
It is worth noting that those two projects mentioned before also had failed mediation processes. Over the years, the experience in the US, at least from Howard’s perspective, is that mediation has become more complicated and more lawyer controlled. The frequency of actually resolving a dispute through mediation has reduced.
What did Intel change in terms of innovation in dispute resolution?
Intel’s new approach was to set-up a dispute avoidance and resolution program consisting of the following two layers:
• They have started a revised governance model. For each major project or multi-project program, an Executive Committee of Owner and Contractors is now meeting once a month. They go through the open issues and examine what is happening. If issues remain open for more than sixty days, the Executive Committee has 3 options: (i) dive in and solve, (ii) give directions, or (iii) refer to a third party neutral.
• Beyond the Executive Committee, the second line of defense to stop construction disputes from escalating relies on a Third Party Neutral. This characteristics are as follows:
- Its working principles are similar to a standing Dispute Board (cfr FIDIC 2017 DAAB) with a role for both dispute avoidance and dispute resolution.
- There is a fast track process of 30 to 40 days for smaller claims and a longer approach for larger claims.
- The Third Party Neutral can also act as “coach” or “adviser” based on monthly site visits. It will then give its (non-binding) observations and recommendations to both the Owner and the Contractor(s).
- The fixed costs of the Third Party Neutral are supported by the Owner. The Contractor and Owner jointly select the neutral, and there is an option to have a single neutral or a panel of three. If there are three members, one of them can step in as mediator in the earlier phase of the dispute. The potentially remaining dispute adjudication can then be handled by the other members. This will avoid or reduce potential conflicts of interest between mediator roles and adjudication roles.
What are the results of the changed practices in dispute avoidance and resolution?
So, what is the current feedback of experience from Intel? Well, this innovative dispute avoidance and resolution approach has already been used on 2 campuses in the US for construction projects of up to 2 BUSD. The process is also in place for the past eight months in Ireland.
And the good news is … that on these projects no claims have gone to arbitration anymore. Nor have any potential disputes triggered either of the formal claims resolution processes. All have been resolved informally, some with the use of the neutral in their capacity as mediator.
Conclusions & next steps
This way of working is innovative (in line with current trend on FIDIC DAAB) and other Owners could also be interested to know about it. The pool of suitable Third Party Neutrals should also be further developed. Ideally, we are speaking here of persons with an operational project background, not lawyers.
As the IACCM council on Dispute, Claim and Conflict Mgmt. we will be organizing events around innovation in dispute resolution. Probably the first event will be at the IACCM Americas Conference 2019 which will be hosted in Phoenix, Arizona from 4 to 6 November.
That’s where you can come in as reader of this post. If you have similar experiences like Intel above, we would really appreciate you share this with us to present it as a best practice. You will certainly benefit from the exchange by creating positive visibility for your company. Also, the exchange with other companies progressing in the same direction can bring some further learning to you. Please contact Howard Carsman or myself, Jan Bouckaert, to discuss about this.
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