Mediation as a Guiding Principle for Change Orders

{3 minutes to read}  My last blog addressed using a contract provision requiring notice, discovery, and mediation as a way to quickly resolve disputes that can arise in almost any business arrangement. In this blog, I will address the use of mediation as a guiding principle when dealing with change orders in construction projects.

Whether it’s a new kitchen or a new 80-story building, things happen that require modification of the original plans:

• You really don’t like the color of those kitchen cabinets.
• The material the architect and engineer agreed would work just right on the balconies turns out to be less weather resilient than the manufacturer assured them it would be.
• There were production delays in China (or maybe tariff-related delays — yikes!); the sub needs to find a new supplier, and the price looks higher than anticipated….

Sometimes changes need to be made with little notice, and an oral agreement must be made on the spot. Even though the underlying contract will typically address change orders — the process and the decision makers for example — situations may arise where the required decision makers aren’t available, or everyone is not on the same page. And sometimes the latter is not clear until after the fact.

One way to deal with addressing potential problems is to make sure a mediation process is part of the change order scheme. If there is no agreement on a potential change, the cost, or appropriateness of a change already made, then the parties go directly to a mediation process. While this may often happen informally, with an architect or engineer being a de facto mediator between a contractor and subs, making mediation explicit in contract will do three things:

1. Let everyone know about it beforehand so no one is taken by surprise.
2. Allow an informal but structured method for resolving the particular dispute, and possibly others that need to be addressed.
3. To the extent it is used, more likely become the norm going forward, whether on a particular project or more generally.

Some sample mediation clauses put together in 2016 by the NYC Bar Association ADR Committee (of which I was a member at the time) can be found at https://www2.nycbar.org/pdf/report/uploads/20073042-CompilationofSampleMediationClausesALTDIS442016.pdf. The clauses cover several legal areas, including construction, and should be used as guides, not just cut and pasted into a contract. If you would like more information on mediation and change orders, please contact me.

Gary Shaffer
Shaffer Mediation
Gary@ShafferMediation.com