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Real Estate Law

Mediation in the Zero Sum World of Construction

Construction is a zero sum game. What do I mean by that? I mean that even where you, a construction professional with a great construction lawyer, have reviewed and edited a subcontract presented to you or provided a well drafted contract to the other party that contains an attorney fees provision, every dollar that you spend on litigation is a dollar less of profit.

Couple the fact that no construction company can or should bid or negotiate work with an eye toward litigation (aside from having a well written contract that will be enforced to the letter here in Virginia). Particularly on “low bid” type projects, contractors and subcontractors cannot “pad” their bids to take into account the possibility of attorney fees, arbitration, or litigation. Furthermore, the loss of productivity when your “back office” personnel are tied up dealing with discovery, phone calls, and other incidents of litigation that do nothing but rehash a bad project and increase the expense saps money from the bottom line. While the possibility of a judgment including attorney fees may soften this blow, you are still out the cash.

All of this said, if you are in commercial construction for any significant period of time disputes will arise and I have discussed the process in some detail at other places here at Construction Law Musings. As a construction litigator, I am fully aware of this fact of life. Efficient management of these disputes is key, particularly when they escalate to the point where some form of outside “help” (read arbitrator or judge) is necessary.

This is where mediation comes in. Why should mediation be considered in almost every construction case? Frankly, its because you, as a business owner and contractor, have other better things to do than deal for six months to more than a year with a project that won’t be profitable even if you get a judgment for the full amount you are owed plus fees and expenses. Dwelling on past “bad” projects is never a money maker. Your time is better spent getting new work and performing good work on profitable construction projects.

Mediation has several advantages:

  1. Mediation will get the matter resolved long before the litigation and collection process. With mediation, you walk into the mediation and (if all goes well), walk out with an agreement that resolves the issues and gets at least some money moving right away.
  2. You are in control of your fate. I’ve discussed this one a lot here at Musings (and with those that I provide mediation services to). While no compromise is perfect, you can do many things in mediation that a judge or arbitrator is unable to do. Everything from fixed payments to other more creative solutions can and should be discussed. At the end of the mediation, you can sleep well knowing that you decided the outcome, and not someone sitting in judgment.
  3. While you may not get all of the money or satisfaction that you would have gotten if the project had gone well (the mediated result being a compromise after all), the time, expense, and stress savings (remember, only lawyers enjoy being in court) will more often than not leave you with more money in your pocket and allow you to focus on making money rather than collecting it.

To wrap this up, where you are losing money with every minute of litigation time spent on past jobs, mediation is a great alternative that can greatly assist you and your construction business.

For more on the process of mediation, and what kinds of services mediators can help with, explore both my firm website and the ADR posts here at Musings.

As always, I welcome your comments. Please subscribe to keep up with this and other Construction Law Musings.

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