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In today’s market it is not uncommon to see an arbitration clause in contracts that contractors are required to sign.  It has been said


Conflict / Resolution

many times that the reason the arbitration clause is put into a contract is that it is much faster and less expensive than going the legal system and the boondoggle of going through the court system. Also that it benefits all parties and is a welcome relief in the litigious business of construction.  Few contractors ever object to the clause and if no issues surface during the contract duration it is deemed at worst case scenario as harmless and at best a supposed blessing,

As a subcontractor and not an attorney I have been involved in a number of arbitrations, some relatively small and others in the millions of dollars coupled with the experience of other contractors I know who have gone through arbitration the following observations are made.

The quick and short of it is; if you can get the arbitration clause taken out of the contract, do it.  In my opinion you are much better off going to court because I have found arbitration not only to be not a blessing but in reality a curse.  It is a long and expensive route where even if you are successful the financial benefits are dubious.  While arbitrators might rise up in rebellion and arbitration attorneys sneer at this condemning evaluation, think about my reasoning.

Construction Arbitration is Long and Potentially Painful

The notion that arbitration is a quick method where difficult problems can be resolved is fundamentally erroneous.   Usually arbitration takes a very long time, so long in fact that it is not uncommon that by the time a major conflict is resolved one if not both parties either cease to exist or are financially or emotionally too weak to be concerned about the decision.


The Art of Negotiation

There are numerous reasons for the long and tortuous route of arbitration.  Whether you have a single arbitrator or multiple arbitrators hearing your case it is a good bet most of them are either retired attorneys or judges.  No disrespect but they are way past their prime and lack the energy, drive and attention needed for the task at hand.  In addition few have any construction experience. They all live complicated lives with many commitments and limited energy to champion the rigors of the arbitration ring.  It is hard enough to try and get a single arbitrator to devote consistent time to arbitration; if you are stuck with a panel of them you have entered the world of mission impossible.  Who is sick, who is on vacation, who cannot do it Monday, Wednesday or Friday; who needs long lunches, who needs to start late and quit early, the list goes on and on and all the while the clock keeps going around and around not to mention your attorneys, claim specialist and arbitrators taxi meters.

Coupled with this is that at this point in their lives most of the arbitrators are a bit cranky and are used to having their way 98% of the time.  At best they border on unreasonable.  It’s been a long time since any of them have had to sweat making the rent or keeping the old car one more year.

So now you have an arbitrator or arbitrators who are not on the same wave length you are on and whose comfort zone lies with Straus instead of Bruce Springsteen and somehow you have to reach out to them and make your case.  Isn’t that why you hired your attorney and claim specialist?

Maybe I’m Cynical but Lawyers Love Arbitration Because it’s Long

It is my opinion that most attorneys love arbitration because they know it’s going to be long and they are going to have steady billing for a long time.  If the dollars of the dispute are relatively large they know they are going to have to bring in their specialist to fulfill the never ending requests of the arbitrators.  All of this is going to require legal expertise.  You cannot do it without the experts.

After all they are the experts, or are they?  Arbitration is a specialty and many attorneys have never experienced one in their entire


The Arbitration Meeting

career.  Many years ago when I just opened my business I struggled to get my first contract.  I bid night and day and finally I landed a small Post Office.  As soon as the ink was dry on the contract I advertised to the world my company specialized in Federal Work.  While technically correct with only one Federal job as my only project I was far from a Federal Specialist.  Never the less it helped me land other work and within a year my company was doing multiple Federal Projects.

Real Life Contractor Story – Have an Attorney That is Familiar with Arbitration

In the 1980’s I entered into a contract for the mechanical installation of a major trucking terminal.  In the process I wound up in a dispute with my sheet metal subcontractor that went to arbitration.

I went to my attorney who did have previous arbitration experience and my sheet metal subcontractor went to his attorney who claimed to have arbitration experience.  On the first day of the arbitration my attorney presented a pre arbitration statement to the arbitrator which clearly presented our side of the case.  My sheet metal subcontractor’s attorney did not have anything prepared and that put his client in a very difficult position.  The other side never caught up and combined with other facts eventually lost the arbitration.  So a word to the wise, if you are forced to go to arbitration make sure your attorney had done a number of them before and find out what his batting average is.

Contributed by Ron Pestone Author of THE BOOK OF ELM, COMMON SENSE SUBCONTRACTING WITH ELM JOB COSTING due out in January. You can find him at www.elmpost.com

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