Robert Ruggieri | Cohen Seglias Pallas Greenhall & Furman
Disputes are a fact of life in the construction industry. As a practicing construction attorney for twenty years, both with a law firm and in-house at a national construction contractor, I have negotiated and helped resolve hundreds of construction disputes between owners, general contractors, subcontractors, architects and engineers. The 2023 Annual Construction Disputes Report issued by Arcadis reported that in North America in 2022 the average value of disputes on construction projects increased 42% to an all-time high, a staggering $42.8 million. The average time required to resolve construction disputes was 13.6 months. These conflicts are not only costly and time-consuming but also damaging to relationships.
Recently, I revisited a book I read in law school, the Roger Fisher and William Ury classic, “Getting to Yes: Negotiating Agreement Without Giving In.” This groundbreaking work, published in 1981, has become a staple in negotiation training and has been widely praised for its practical advice and insights. I have found the principles explained in “Getting to Yes” are particularly valuable for resolving construction disputes as they provide a framework for addressing the complex issues that often arise on construction projects. By understanding these principles, professionals at any level in the construction industry, including superintendents, project managers and owners (and their attorneys), can navigate negotiations more effectively and achieve better outcomes.
Below are some key principles identified in the book, along with strategies and practical examples you can draw upon to handle your negotiations successfully.
Separate People from the Problem
“Getting to Yes” offers a unique approach to negotiation, emphasizing collaboration, problem-solving and mutual gain. The authors argue that traditional adversarial bargaining often leads to suboptimal outcomes and can damage relationships. Instead, they propose a principled negotiation approach focusing on the parties’ underlying interests. The book’s emphasis on “separating the people from the problem” is especially relevant in construction disputes, where emotions can run high. By focusing on the issues rather than the personalities involved, negotiators can create a more productive and constructive environment. Remember, it is not about who’s right or wrong but finding a mutually beneficial solution.
Example: A client accuses your team of poor workmanship, leading to heated exchanges that threaten to derail the project.
Resolution: Focus on the issue rather than personal attacks. Organize a meeting to objectively assess the quality concerns raised by the client. Use project specifications and quality benchmarks as a neutral ground for discussion. This approach helps in addressing the root problem without damaging professional relationships, ensuring a more productive and collaborative negotiation.
Focus on Interests, Not Positions
The book’s emphasis on “focusing on interests, not positions” helps avoid the impasse that often occurs when parties become entrenched in their demands. Instead of getting stuck in rigid positions, dive deeper into each party’s interests. What are the core needs and concerns driving each side? Understanding these interests allows you to uncover common ground and explore creative solutions that address everyone’s needs.
Example: There is a standoff over project deadlines. The client demands strict adherence to the initial timeline, while your team needs more time due to unforeseen site conditions.
Resolution: Explore the underlying interests behind each party’s position. The client’s main interest might be opening their new facility on time to meet business goals, while your interest lies in ensuring payment for additional work. Propose alternative solutions such as phased handovers or accelerated workflows that address both parties’ interests, enabling a win-win outcome.
Generate Options for Mutual Gain
Collaboration is critical to resolving construction disputes effectively. The Arcadis report states that the most important factor in mitigation and early resolution of construction disputes is “Owner/Contractor willingness to compromise.” Parties should encourage open dialogue and brainstorming sessions where all stakeholders can contribute ideas for potential solutions. The goal is to expand the range of possible outcomes and find win-win scenarios that benefit both parties. Remember, creativity often leads to breakthroughs in negotiations.
Example: Disputes arise regarding change orders due to additional work not anticipated in the initial contract.
Resolution: Encourage open brainstorming sessions with all stakeholders to generate multiple options for resolving the issue. For instance, you could propose sharing the additional costs, adjusting the project scope, or reallocating resources to meet new requirements. Generating a variety of solutions increases the chances of finding a mutually beneficial agreement.
Use Objective Criteria
When negotiating construction disputes, it is essential to base decisions on objective criteria rather than subjective opinions. This might involve referring to industry standards, contractual agreements, or expert opinions to evaluate the merits of each party’s position. By relying on objective criteria, you can ensure fairness and build credibility in the negotiation process.
Example: There is a conflict over payment milestones, with the client arguing that certain deliverables were not met according to the contract.
Resolution: Base the negotiation on objective standards rather than subjective opinions. Refer to the contract terms, project documentation, and industry standards to assess whether the deliverables meet the agreed-upon criteria. This factual approach helps in making fair and impartial decisions, promoting trust and transparency in the negotiation process.
Build a Golden Bridge
In challenging negotiations, it is essential to find ways to overcome resistance and build rapport with the other party. The authors of “Getting to Yes” suggest creating a “golden bridge” that allows the other party in negotiations to save face while still reaching a mutually acceptable outcome. This might involve acknowledging their concerns and offering concessions or compromises that demonstrate your willingness to find common ground.
Example: There is a dispute over cost overruns due to unforeseen design changes requested by the client. The client is unwilling to bear the additional expenses, while the contractor is adamant about being compensated for the extra work.
Resolution: Instead of getting stuck in a deadlock, seek to build a “golden bridge” that allows both parties to save face and reach a compromise. This might involve exploring alternative payment structures, such as phased payments or performance-based incentives, that align with the project’s objectives while addressing the financial concerns of both parties. By demonstrating flexibility and a willingness to collaborate, a mutually beneficial agreement can be reached that ensures project success while preserving the client-contractor relationship.
Mastering the art of negotiation is a valuable skill for all construction industry members, not just attorneys. By incorporating these principles into your everyday approach to conflicts, you can increase the likelihood of reaching favorable outcomes while preserving relationships. Effective negotiation is not just about winning arguments but about building bridges and finding sustainable solutions that benefit everyone involved.
Importantly, you can begin employing these strategies the moment a disagreement arises. You don’t need to, and shouldn’t, wait until a full-blown dispute develops, the parties are dug in, and each side “lawyers up.” The intent is to avoid time-consuming and costly distractions and nip the problem in the bud. Following these principles and strategies will give you a head start and an excellent chance at resolving the dispute favorably. You, like this author, may also find these strategies work well in your personal life and at home! If they don’t work, there are plenty of construction lawyers out there ready to help.
Here’s to smoother negotiations and successful projects!
When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.