Mediation Versus Arbitration, Why Construction Companies are Making the Switch

The complexity of the modern construction contract is astounding. Both the construction project management company and the contracts are struggling to fit legal language into an agreement that puts the other at fault when things go wrong. Navigating these documents isn’t for the untrained eye. That’s where construction mediation can play a significant role in saving your company both time and money.

Arbitration and its Disadvantages

Arbitration is often preached as the go-to solution for contract disputes. It’s very helpful in some situations, but the problem is that arbitration is legally binding without much of an approvals process. That means those agreements are also enforceable. Arbitration can only end when a decision is made, which is another crucial point.

Mediation is almost like a pre-trial phase where both parties work on settling their dispute. Mediation does not require a final decision, but it’s useful as a strategy to avoid litigation. If the example involved construction delay claims, arbitration would look for who is ultimately at fault while mediation looks for an amicable resolution. However, arbitrators hand a decision down that must be adhered to.

That puts a great deal of stress on smaller companies, especially because arbitration still requires discovery, where both parties reveal their documents for review to prove their case.

Success Rates

Arbitration can be argued as always successful simply because there is always a resolution, but mediation offers a better chance at resolving conflict with methods both parties find mutually beneficial. Mediation might mean sharing costs, but it typically preserves relationships. The choice is ultimately yours, but arbitration carries a greater risk of ending the business relationship.

Bio: Lyle Charles is the CEO of Lyle Charles Consulting, a construction mediation and interim project management firm for commercial construction companies.