The earlier you get a contract dispute to the office of your entity’s attorney, the better the chances are to resolve the problem without going to court. By encouraging the resolution of civil disputes and the early settlement of litigation through voluntary action, procurement professionals save taxpayers’ money and their own valuable time. Many entities choose alternative dispute resolution (ADR) as a means to avoid costly court appearances.
There are at least six different dispute resolution formats. While each has a unique application, depending on the issues in question, all ADR procedures have basic principles that involve confidentiality. Communications by any ADR participant are confidential. The arbitrator may not disclose to either party information given in confidence. In addtion, the arbitrator may not disclose to anyone, including the court, matters related to the settlement process. Any record made at an ADR session is confidential.
The most common form of ADR is mediation. The outcome of mediation is not binding on either entity or vendor. Generally, lawyers from both sides agree to an arbitrator. Prior to the mediation, the involved parties submit important documents and position papers.
In the actual mediation session, the arbitrator explains the mediation rules and requires all parties to agree to terms of confidentiality. After each party makes an opening statement, the mediator often asks for clarification of issues. At this point, parties divide into separate rooms for a caucusing session. The mediator “shuttles” between the two locations to gain further data, convey non-confidential information, and attempt to resolve the claim or controversy. Shuttle diplomacy continues until the matter is settled or an impasse is declared.
Vendors wish to stay out of court as much as you do. More and more, contracts are written with clauses stating that in the event of a dispute, the vendor chooses to use ADR. These ADR clauses are beneficial to both vendor and entity. Now, the question becomes whether to choose binding or non-binding arbitration.
It is always best to find out who the arbitrator is before agreeing to binding or nonbinding arbitration. If the former is chosen, you must be willing to pay the arbitrator’s fees if you lose. These fees can be costly. In a big case, an arbitrator may receive more than $5,000 per day.
In either case, always go with an experienced mediator. It may be reassuring to know that it is in a mediator’s best interest to be fair and follow the law. If he does not propose fair settlements, he will not be chosen to resolve future conflicts.
Going to court is an intrusive process that wastes resources and limits employees’ ability to perform their jobs. ADR, fortunately, offers a more comfortable alternative.
Still, the best way to escape court appearances and ADR all together is to avoid contract disputes in the first place. Well-drafted contracts will go far to help insure smooth, ongoing relationships between vendors and your entity.
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