Getting Beyond Process to the Roots of Litigation: Changing the Litigious Culture in an Organization and Its Impact on the Construction Industry
Summary of a Presentation by Lester Edelman
Senior Counsel/Senior Advocate, Dawson & Associates
(former Chief Counsel, U.S. Army Corps of Engineers)
Dispute resolution and avoidance programs have proven effective throughout the construction and capital facilities sectors. However, these are merely processes; they are not the solution to our current litigious environment.
Most of the numerous successes of alternative dispute resolution (ADR) occur when the participants truly want to avoid litigation and where the business plans’ key strategy is litigation.
Attitudes toward dispute avoidance fluctuate depending on the state of the economy and on organizational or personal cash flow. For partnering, mediation, dispute resolution boards, standing neutrals, and other ADR practices to work on a sustained basis, organizations must go beyond process and confront the root causes of litigation and the existing litigious mindset.
Also, before two or more organizations can succeed in partnering externally, they must first learn to partner internally. They must also understand the negative effects of litigation on their organizations and on themselves.
MOVING TOWARD ALTERNATIVE DISPUTE RESOLUTION
A 1979 U.S. Army Corps of Engineers case in the federal court system that involved defending major water resource projects illustrates the damaging effects of litigation. Although the Corps of Engineers eventually prevailed in court and in a Congressional appropriation procedure, all participants (the government, the railroads, the waterway navigation interests, the environmental organizations, and the nation) paid a steep price for the bitter and costly litigation. The effort was overwhelming, the involvement of key executives was disruptive, and the amount of money spent was enormous and wasteful. Ultimately, the results exacerbated the already poor long-term relationships of all parties in the process.
The Corps of Engineers Construction Contract Program first appeared to be a good antidote to this situation. However, there was a cultural war underway in the construction world where litigation was an entrenched way of life. All parties talked about the so-called “good old days” while blaming each other for their problems. In the meantime, litigation was taking an increasing toll on resources as claims for additional costs were mounting.
At that period, the Corps was quickly approaching a total of one billion dollars in claims. The administrative boards, contract appeals, and the courts required more and more time to decide cases.
Although administrative boards claimed their goal was to speed dispute resolution, they developed practices which, over time, became indistinguishable from those of the court systems. Corps of Engineers Construction Contract Program personnel were spending enormous amounts of time and
effort for attorney preparation and litigation support. The disruption to management was becoming unbearable.
BUILDING ON SUCCESS
Alternative dispute resolution appeared to be the best solution to this problem. Initial efforts using ADR focused on the mini trial, which enabled disputing parties to present their best cases in abbreviated form to a key decision maker in an organization and then use that information to promote subsequent negotiations.
The mini trial enables decision makers with authority and knowledge of broad organizational goals to settle disputes, review the relevant facts of a case, and determine how the case might fare in court. Thus, decision makers are better prepared and willing to negotiate out of court rather than pursue years of expensive and time-consuming litigation.
As the Corps experimented with ADR processes including facilitation, mediation, dispute resolution panels, and non-binding arbitration, the successes multiplied and the construction industry began to take notice. It became evident that if decision makers were prepared to resolve issues, they could apply the same mindset to avoiding disputes before they occurred.
The Corps of Engineers was fortunate that in early use of the mini trial it received a supportive report from the Department of Defense Inspector General, which led to the continued use of ADR in hundreds of cases. In addition, Congress enacted legislation in 1990 encouraging the use of ADR whenever possible.
From its initial efforts, the Corps of Engineers developed project partnering, a prevention and avoidance strategy where parties come together at the beginning of contract performance to agree on processes for avoiding disputes. This new way of conducting business moved the agency from a traditionally adversarial relationship to a more collaborative ethic of trust, cooperation, and teamwork.
The Corps of Engineers realized that if it were to adopt ADR, it had to change the prevailing culture and mindset of litigation. Managers had to understand the concepts of ADR and change their dispute management strategies. Internal criticism posed a problem for negotiated settlement because there were those who felt that their integrity or experience was in question or that funds and resources were being wasted.
However, the Corps’ early experiences in ADR enabled great strides in promoting collaborative resolution disputes by establishing a multifaceted program designed to institutionalize ADR as part of the agency’s management tool kits. At the same time, the Corps began a program of external communications with people in the private sector. The Clinton administration then supported the program for the entire government.
ADR TRAINING AND DEVELOPMENT PROGRAMS
ADR is most effective when managers are adequately trained to make responsible decisions and resolve disputes efficiently. Therefore, the Corps began organizational transformation with a two-step ADR training program for managers, engineers, acquisition executives, and attorneys. It also supported decision makers and advocated ADR as a management tool for collaborative decision making and enhanced business relationships.
The ADR training program began with the agency’s top level managers and decision makers and was followed by regional training programs for senior and mid-level employees. The regional meeting included a comprehensive five-day, collaborative training session and a problem solving course covering ADR philosophy, methods, and applications. The Corps also offered an additional two-day executive ADR seminar for all Corps executives and commanders and four joint workshops with the Association of General Contractors (AGC), which subsequently adopted partnering as one of its key missions.
The Corps supplemented training with a variety of pamphlets describing all the elements of ADR: partnering methods, mini trials, mediation, and facilitation. It also published several ADR case studies to boost confidence in the process. Other awareness tools included research reports, articles, working papers giving practical guidance at every level of the organization, and expert technical support when necessary.
The Corps leveraged its training program to ensure the industry understood strategies, processes, contracts, new technology and terminology, and the value of challenging the litigious culture of construction. The agency realized it could not force acceptance of ADR practices and so was gratified when the construction industry embraced its proposals.
Cultural change is possible but requires the right circumstances, supportive leadership, and continued reinforcement. Furthermore, there is no one solution that is appropriate for every organization, so ADR must be tailored to existing circumstances and participants’ needs.