Magazine article Business Credit

Alternative Dispute Resolution

Magazine article Business Credit

Alternative Dispute Resolution

Article excerpt

The construction industry is undergoing a sea-change in the avoidance or early resolution of disputes on building construction projects.

Moving away from the counter-productive pattern of allowing jobsite disputes to accumulate for resolution through litigation or protracted arbitration, it is instead aiming at avoiding disputes or addressing problems as quickly as possible. For credit managers in the construction field, the benefits are faster collection of both base-contract amounts and extras covering changes in the scope or timing of work.

Much of the credit for this enlightened approach goes to the Dispute Avoidance and Resolution Task Force (DART). DART formed in 1990 as a result of a meeting of construction industry leaders sponsored by the American Arbitration Association (it is expected to become part of that association in 1994). The participants explored how the construction industry might best emulate the successful example set by U.S. Corps of Engineers projects. These projects make use of partnering and dispute-resolution boards (DRBs) to minimize the potential for disputes and provide a means of effectively dealing with any problems. DART is composed of representatives of all major segments of the construction industry--public and private owners, contractors, subcontractors, architects, engineers, insurers, and attorneys.

Disputes often result in the withholding of payments until some agreement is reached. Partnering (once simply an industry buzzword) has evolved into a practical program encouraging construction team members to substitute cooperation for confrontation. Typically, the partnering process begins before work starts. Representatives of the owner, design professionals, the construction manager, general contractor, and major subcontractors meet informally for several days. This allows the parties to get to know one another and helps to ensure a full understanding of the sequences and timing of the work. Also, they can identify and jointly address potential problems with the job. The meeting ordinarily culminates with an agreement in principle to work cooperatively. A neutral facilitator is assigned to keep the meeting on track and the interchange between all parties constructive.

Partnering Means Better Credit Management

Construction credit managers may expect fewer accounts receivables to be treated as "disputed" or "doubtful. …

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