Jerome F. Rock | Jerome Rock Law
This is a Construction Defect Resolution Facilitation Model customized for the unique conditions that often exist in a construction project; particularly when there is a dispute between the contractor and the owner concerning defects in the project. The unique feature of this approach is that the Neutral orchestrates the parameters of remediation that are acceptable to the Owner, and the Contractor self-performs the remediation without active involvement of its surety. The Neutral assists in identifying qualified construction professionals to articulate the work tasks, and to observe, inspect and approve completed operations. The work tasks are the result of a mediated exercise whereby the Owner and the Contractor (or others with potential liability) agree on the tasks, schedules and cost responsibility. The Neutral acts as a Standing Neutral to deal with good faith completion and acceptance with the work tasks.
The foundation of this process incorporates the basic mediation/facilitation approach to litigation settlement with which so many lawyers are familiar and comfortable. But there are enhancements, options and some adjustments to scheduling and sequencing of activities that can produce more timely, and hopefully more satisfying outcomes.
Model will achieve best results in situations where the following conditions exist:
Adopted Early in the Dispute timeline: prior to initiation of arbitration or litigation preferred, but can work during early stages of arbitration / litigation.
An Owner with obvious defects or deficiencies (not exclusively $$ damages) that can potentially be self performed by Contractor
Solvent contractor (general or sub) that can self perform all or part of remediation.
Surety with indemnity obligation from Contractor
Architect / Engineer / Supplier /Subcontractor with potential exposure
Insurers of Architects /Engineers
Facilitator/Neutral with skills to coordinate all the tasks, facilitate cooperation among all stakeholders and provide leadership to complete undertaking.
As an initial framework I have identified Six Stages for Contractor Self -Performed Remediation, explained below.
Stage One: Suggest Undertaking Concept and Obtain Buy-In
Educate all parties on plan concept and explain requirements for success.
Cost Advantage to all parties: Avoided / Reduced litigation expenses, lawyers, experts, staff.
Cost Advantage to Contractor: Cost Effective Self-Performance vs. Needlessly expensive Third Party Remediation.
Cost Advantage to Architects / Engineers: Assistance and cooperation in design of remediation effort can reduce cost.
Accelerated Time Schedule: Work is undertaken and completed in less time, owner can benefit from earlier use of project.
Benefits to all parties: Avoid Risk of Adverse Outcome through arbitration / litigation.
Obtain Buy-In, perhaps a Memorandum of Understanding agreeing to cooperate, establish realistic expectations.
Agree on Stand –Still, Tolling Agreements, confidentiality of settlement negotiations, etc.
Establish time line for each Stage, agree to cost sharing for initial Stages
Stage Two: Objective and Unbiased Investigation
Agree on the process to identify and select the “Expert” qualified in the subject and acceptable to the parties. Review any reports of specialists or experts already retained by parties.
Establish a scope of work for the “Investigation” Phase (in cooperation with the selected “Expert”).
Complete and review the “Investigation” phase.
Based on the identified construction defect(s) identified in the “Investigation” Phase, agree that a multi-stage “Framework for Remediation” Phase is feasible; enumerate and agree on assumptions, establish a scope of work for Phase 1 of the Framework for Remediation.
Definition of “Inspection” Phase: The Model envisions a qualified “Expert” that can perform a document review and field condition assessment of the project defects producing an objective and unbiased report of conditions/defects and conformance or variance with project documents. The “Expert” (or several experts) can be an architect, engineer, vendor or specialty contractor with experience and qualifications dealing with a type of defect or deficiency. One key factor is that the “Expert” should have the skills and ability to go from identifying the defect or deficiency to pragmatic construction options for remediation. Great effort should be made in selecting an ”Expert” that is acceptable to all parties.
The” Inspection” Phase is a stand alone effort to objectively identify defects or problems with the project, but contemplates a follow-on task for the “Expert” , the “Framework for Remediation “ .
Stage Three: Phase 1 of the Framework for Remediation
The objective of Phase 1 of the “Framework for Remediation” is to suggest a range of general options that would remedy the observed defects or deficiencies. Depending on the type of project and the defects, the options could range from maintaining functionality to replacing “as specified”. The cost of the options, and the relative responsibility of each party, will determine the approach to each subtask. The focus is to address remediation with a pragmatic approach that contemplates the best use of Contractor resources, existing acceptable work in place, all within the limits of acceptability set by the Owner. Financial contributions or commitments may be expected from parties and can be used to fund the Contractor effort, or directly compensate the Owner. Financial terms will be negotiated and included in the formal Settlement Agreement (Stage Five).
Parties Review Phase 1 of the Framework for Remediation and agree only that Phase 2 of the Framework for Remediation is feasible. The parties commit technical resources and management with authority to make decisions during Phase 2.
Engage “Expert” with scope of work to assist with Phase 2 of Framework for Remediation.
Stage Four: Phase 2 of the Framework for Remediation.
With assistance of “Expert” and the Neutral, parties agree on specific Scope of Work, with discrete Work Tasks with details on means and methods to complete the “Framework for Remediation”.
Establish Schedule and Budget costs for each Work Task.
Identify Inspector of Work Tasks, establish standards for acceptance.
Identify opportunities to leverage vendors or material suppliers.
Phase 2 of the “Framework for Remediation” contemplates a final give and take between the Contractor, Owner and other parties that eventually results in a definitive Scope of Work that embodies the future performance of the Contractor that is required under the formal Settlement Agreement (Stage Five).
Stage Five: Negotiate and Execute Settlement Agreement
Negotiate terms and Execute Settlement Agreement anticipating successful completion of Work Tasks for Framework for Remediation. Consider:
$ contributions by all parties
Time Schedule for completion / performance
Form of Releases / Dismissal / Withdrawal of pending actions
Surviving warranties after completion of Work Tasks
Provisions for Default by a party, agreement on forum for further resolution of disputes
Incorporate Real Time Dispute Resolution (Standing Neutral) during execution of Work Tasks
Role and Responsibilities of Standing Neutral
Stage Six: Contractor Self-Performance of Remediation
Contractor Execution of Work Tasks
Standing Neutral involved as needed
Inspection and Acceptance of Work Tasks by Expert
Final Release / Dismissal / Withdrawal of pending actions.
Project Participants:
Mediator / Standing Neutral: Jerome F. Rock, Esq.
Owners’ Counsel: Foster Swift Collins & Smith, PC
Contractor’s/Surety’s Counsel: Deneweth Dugan & Parfitt PC
Architect’s Counsel: Sullivan Ward Asher & Patton PC
Owner’s Representative Counsel: Kotz Sangster Wysocki PC