March 2012 MARYLAND BAR JOURNAL 3 
Mediation and Dispute Resolution 

18 Alternative ADR for Construction Disputes: 
A Litigator’s Perspective 
By Kenneth A. Vogel 

Published bimonthly by the 
Maryland State Bar Association, Inc. 
The Maryland Bar Center 
520 W. Fayette St. 
Baltimore, Maryland 21201 
Telephone: (410) 685-7878 
(800) 492-1964 
Website: www.msba.org 

Volume XLV
March/April 2012 

Alternative ADR for 
Construction Disputes: 
A Litigator’s Perspective 
By Kenneth A. Vogel 
Alternative Alternative Dispute Resolution? It sounds like a typo! 
But it’s not. No building project ever goes exactly according to 
plan. There are always change orders. Changes can result from 
inaccurate, ambiguous, or otherwise incomplete plans and 
specifications. Changes can result from unforeseen site conditions 
which are discovered in the field. Unavailable or escalating costs 
of certain materials can also create changes. An owner’s changing 
his mind about the scope of the work or the sequence of the project 
can affect the cost and the budget, resulting in change orders. To 
adjust to this reality, the construction industry was an early adopter 
of ADR, particularly arbitration. With years of experience, some good 
and some disappointing, the building 
industry is adopting new techniques 
to improve the process. The beauty of 
using ADR in construction disputes is 
that ADR can be fashioned to meet the 
needs of the parties. 

Mediation 

Mediation is the preferred first step 
towards issue resolution. The parties 
have an opportunity to work out 
their differences themselves with the 
assistance of a trained mediator. They 
avoid having a final decision imposed 
on them. The clients are in control of 
whether they settle their dispute on 
mutually acceptable terms. 

Mediation is also good for attorney 
advocates. As a litigator, I don’t 
mind a court battle. But litigation is 
very expensive. Trial preparation is 
a “damned if you do and damned if 
you don’t” dilemma for lawyers and 
their clients. In small and mid-size 
disputes, clients do not want to pay 
for the large amount of trial preparation 
necessary to do a thorough job. 
Saving clients’ money by not taking 
that last deposition or by not hiring 
that expert can later become a problem. 
When I cede to client wishes 
and do abbreviated discovery, perhaps 
in the expectation that the case 
will settle, if it does not settle I regret 
not having gone full bore on the trial 
preparation. Similarly, we’ve all had 
trials that settle on the day of trial 
or had trials postponed due to over-
scheduled court calendars. A full trial 
preparation that turns out to be a dry 
run is expensive and frustrating for 
the lawyers and the parties. 

A skilled mediator can help the parties 
resolve their dispute in a way that 
the attorneys, negotiating between 
themselves, cannot. As advocates, we 
set forth our clients’ positions and 
concede little. We do not want to look 

weak in front of our clients by being 
less than zealous in advocating for 
them. There is nothing worse than 
a client’s wishing that he or she had 
hired the other side’s lawyer. A neutral 
mediator can act as the voice of 
reason. He can speak to the attorneys 
and clients and present offers and 
negotiations in a way that the lawyers 
themselves dare not. 

Mediation, therefore, provides clients 
with a way to settle their cases 
without the considerable expense and 
risk of litigation. For the attorney, a 
mediated settlement avoids the risk 
of an unhappy client, either because 
of the large attorney fees generated or 
because of an unsatisfactory trial outcome. 
Clients rarely remember their 
instruction to their attorney to pull 
out all the stops in fighting their case 
when it comes time for them to pay 
their bill. 

Arbitration 

Arbitration involves the parties’ selecting 
an individual to decide their case 
outside of the court system. The parties 
choose an arbitrator, or a panel 
of arbitrators in larger-dollar complex 
cases, and the arbitrator acts as the 
judge. The advantages are that the parties 
can agree on the rules of the game, 
such as how much discovery to permit; 
the rules of evidence are generally 
relaxed during the arbitration hearing; 
and, most importantly, the parties 
choose their arbitrator. In court, a judge 
randomly assigned to hear the case 
may or may not have subject-matter 

expertise related to the issues in dispute. 
And juries are the ultimate wild 
card. In my opinion, parties should 
avoid jury demands [Is “demands” the 
right word choice here?] in complex 
construction disputes. A judge or jury 
might not know the difference between 
a rebar and a Hershey® bar. Words are 
terms of art. Practices and procedures 
differ between industries, especially in 
the roles played by the various players 
— owners, architects, engineers, 
general contractors, subcontractors. 
An arbitrator can be anybody that the 
parties select, including non-lawyers. 
For example, if the dispute relates to 
a structural failure, the parties can 
select a structural engineer to act as the 
arbitrator. I caution that the arbitrator 
should not be selected based solely 
on subject-matter expertise. There is 
much more to being as an arbitrator 
than merely showing up and listening 
to the parties. He or she should be 
properly trained as an arbitrator and 
operate under a set of arbitration rules 
and procedures. Construction Dispute 
Resolution Services, LLC, for example, 
conducts regular training programs 
for construction-industry professionals 
and lawyers on how to mediate or arbitrate 
a case. We also have a complete 
set of mediation and arbitration rules, 
forms, and professional standards, as 
well as a code of ethics. I personally 
think it makes sense to select a mediator 
or an arbitrator who belongs to a 
reputable panel, rather than using a 
free-lance person who flies by the seat 
of his or her pants. 

However, arbitration has been 
a disappointment to many participants. 
It promises to be quicker and 
cheaper than litigation. The parties 
select their hearing date with general 
confidence that the hearing will 
really occur on that day. Plus, arbitration 
awards have finality. As a general 
rule, arbitration awards cannot 
be appealed. Arbitration awards are 
binding. Courts will enforce them. 
But for many, arbitration falls short of 
its promises. In court, the government 
pays for the judge. In arbitration, the 
parties pay. There is a huge disparity 
in pricing between arbitration providers, 
both in administrative fees 
and in arbitrator costs. Even the most 
reasonable ADR associations cost the 
litigants more in fees than they would 
otherwise pay in court costs. 

Arbitration for construction disputes 
is best used where litigation 
would provide a risk to an ongoing 
construction project or where the parties 
seek relief that the court may not 
be able to provide. 

Ongoing Projects 

Assume that a project is under construction. 
The owner and the general 
contractor have a disagreement about 
whether some work is included in 
the contract or whether it is an extra. 
Unless the work is done, the project 
grinds to a halt. The contractor refuses 
to do the work unless the owner signs 
an extra-cost change order. The owner 
feels that the contractor is blackmailing 
him. The contractor is afraid that 
he’ll do the work and then the owner 

will refuse to pay for it. But, if the parties 
agree on arbitration, particularly 
if it is in their construction contract 
up front, an arbitrator can do a site 
visit, meet with the parties and the 
consultants, and then decide the matter 
quickly. Dispute resolved; project 
moves forward. 

Alternative ADR means that the 
parties have flexibility. They can structure 
their arbitration however they 
wish. Some possibilities that a court 
system could never offer are: 

Non-binding Arbitration 

The parties have an abbreviated arbitration 
hearing. The arbitrator makes 
a non-binding ruling based on the 
evidence presented. This process 
provides a reality check to the litigants, 
especially the one who might 
not receive the favorable ruling. A 
settlement agreement might follow. 
Or, the parties can agree to treat a 
non-binding arbitration award as if 
it is an Offer of Judgment, similar to 
that found in Federal Rule of Civil 
Procedure 68(d): 

Paying Costs After an Unaccepted 
Offer. If the judgment that the offeree 
finally obtains is not more favorable 
than the unaccepted offer, the 
offeree must pay the costs incurred 
after the offer was made. 

Under a non-binding arbitration, 
if the parties agree to use a Rule 
68(d) model, either party can refuse 
to accept the arbitrator’s non-bind

ing award. A fee shifting occurs such 
that the party who refuses might end 
up paying the other side’s attorney 
fees or other costs if he fares worse 
under a subsequent binding arbitration 
(which, of course, would use a 
different arbitrator). 

Hybrid ADR 

Hybrid ADR is a blurring of mediation 
and arbitration. Hybrid ADR is 
very controversial. Not everyone in 
the ADR community agrees with it or 
offers it. Hybrid ADR typically starts 
out as a mediation. If the parties are 
able to resolve their dispute though the 
mediation, their agreement is memorialized 
in the settlement agreement. If 
the parties are unable to agree on some 
or all items, they then move to binding 
mediation or to Med-Arb. In binding 
mediation, the parties empower 
the mediator to decide the remaining 
issues based on his or her knowledge 
of the issues developed through the 
mediation process and perhaps additional 
discussion between the parties. 
With Med-Arb, if the parties reach 
an impasse, the mediation stops. The 
mediator then becomes an arbitrator. 
Either an arbitration hearing is 
held immediately or the parties will 
reconvene on another scheduled date 
when the mediator-now-arbitrator will 
conduct a formal arbitration hearing 
on the unresolved issues. Using the 
change-order example in our construction 
context, perhaps there are five 
different items for which the contractor 
is claiming extra-charge change 
orders. The owner disputes all five. 
The parties mediate and agree on three 
items. Assuming that they have confidence 
in the mediator, they empower 
the mediator to decide the other two 
items. The mediator then switches hats 
and becomes an arbitrator as to those 
remaining two items. The advantage? 
The parties go through one process and 
at the end resolve all open disputes. A 
person with whom they have developed 
some trust, and who has become 
familiar with the issues, is making the 
decision. They do not have to start 
over with somebody else. It is time and 
cost efficient because, at the conclusion 
of the process, the parties are done. 
Disadvantages? When the mediator 
switches roles and becomes an arbitrator, 
his or her new role might be confusing 
to the parties. Also, the parties 
might have disclosed something in 
candor to the mediator that they would 
not have disclosed to an arbitrator. 

The parties are not limited to having 
the mediator act as the arbitrator. The 
flexibility in the process allows them to 
select someone else to act as the arbitrator. 
The parties may opt for binding 
mediation or Med-Arb either before 
the mediation begins or at the conclusion 
of an unsuccessful mediation. By 
unsuccessful, I mean that not all outstanding 
issues have been settled. 

A topic of controversy in the ADR-
practitioner community is whether it is 
proper for a mediator or an arbitrator 
to switch roles. Also, once the roles are 
switched, should it be a one-way street, 
or can the mediator or arbitrator ever 
return to his or her original role? I will 

not argue either point of view here. I 
am just making the reader aware of the 
debate in case the reader is given the 
option of binding mediation or Med-
Arb during a mediation session. 

Arb-Med is another option. We’ve 
all tried cases that have settled while 
the jury was still deliberating. With 
Arb-Med, the parties go through the 
arbitration hearing. They present their 
case and hear the other side’s case. 
They know their own case’s strengths 
and weaknesses. They then have the 
option to sit down with a trained 
mediator, who is not the arbitrator, 
to try to resolve their dispute. If the 
parties settle, wonderful! If not, the 
arbitrator issues his award. 

Dispute Review Boards (DRBs) provide 
an excellent way to keep projects 
moving. As I wrote at the outset, 
no building project ever goes exactly 
according to plan. In recognition of 
this, and the desire of the parties to 
keep the project moving rather than 
suspend work while the ADR process 
begins and proceeds, a DRB is established 
at the outset. The mediator or 
arbitrator meets with the parties on 
a regularly scheduled basis, or on an 
as-needed basis, in order to resolve 
field and contractual disputes and 
issues on the spot. The ADR specialist 
is familiar with the project, giving 
consistency and competence. This also 
frees the architect from having to be 
the arbitrator of disputes, as is otherwise 
the case. The administrative 
cost to set up a DRB in advance of 
the construction of a large project is 
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negligible. 

Co-Mediation/Arbitration or 
Multiple Mediation/Arbitration is 
available under any mediation scenario, 
including the use of a DRB. 
Generally used in more sophisticated 
projects, these options permit the parties 
to select mediators or arbitrators 
with different expertise to review their 
claims. For example, the parties might 
decide on someone with expertise in 
engineering or in calculating damages 
for delay. These options cost the 
parties more than using a single ADR 
professional, but the technical qualitative 
improvement in the process 
might make their money well spent. 

In summary, the building industry 
has many different options to tailor 
its ADR process to meet the needs of 
projects of different size and scope. 
ADR is at its best when it is flexible 
in meeting the needs of the parties. 
The ideal time for contracting parties 
to consult with an ADR professional 
is before the first shovel hits the 
dirt. Before there is a dispute, when 
the general-and sub-contracts are 
being negotiated, the owner and general 
contractor can devise a plan that 
will anticipate the expected and the 
unexpected change orders between 
themselves and their subcontractors 
and suppliers. They can work out the 
mechanism for a speedy resolution 
of claims and disputes such that the 
construction project will continue to 
move forward without interruption. 

Mr. Vogel is a partner in Metro Legal 
Solutions and the Maryland and DC 
State Director for Construction Dispute 
Resolution Services, LLC.