By: Michael R. Powell, Vice President, AAA Construction Division
Parties select construction arbitrators based on their subject-matter expertise, qualifications, familiarity with the applicable law(s), and reputation. It wasn’t that long ago when industry professional arbitrators (IPAs) served with more frequency in construction claims. In fact, in most large, complex cases with three-arbitrator panels, there was at least one and sometimes two IPAs appointed to the panel. However, by the 2000s, the tide seemed to change and IPA appointments declined.
What accounts for the change? Who selects the arbitrator is an important factor in the choice of IPAs, attorneys, or retired judges to hear the dispute. In the first instance, the clients themselves seemed to have greater decision-making authority in the selection process and pushed for IPAs. As attorneys became more seasoned in the arbitration process and the claims became more complex, they selected the arbitrators, frequently choosing ones who mirrored their backgrounds—other legal professionals. Their reasoning was that the arbitration process had become more litigious, with legal issues framing the disputed claims; therefore, a person with a law degree was preferred to the non-attorney arbitrator.*
Not all construction disputes require a decision-maker with a legal background.
However, hands-on expertise is definitely worth considering in the likelihood of a project site visit--an environment where non-attorney IPAs bring such experience in their evaluation of evidence. Most IPAs have no qualms climbing a ladder or shimmying into an attic to evaluate properly the evidence presented by the parties before rendering a decision on the merits.
A closer look at the non-attorney industry professional arbitrators demonstrates the unique talents they bring to the arbitration process. IPAs represent many disciplines, including architects, engineers, general contractors and subcontractors, project managers and consultants, hearing matters from a few thousand dollars to multi-million dollar claims. There are a myriad of construction-related disputes—for example, home-remodeling disputes involving workmanship and/or contract issues—that may properly be brought before an experienced industry professional arbitrator for final disposition of a claim, typically saving the parties significant time and money.
As noted earlier, IPAs are not new to the marketplace. Historically, the importance of arbitration to resolve construction disputes can be traced back to 1888 when the American Institute of Architects (AIA) language in its Uniform Contract required parties to resolve their disputes in arbitration. These early construction arbitrators were predominantly experts in their fields; i.e., industry professionals.
In today’s construction arbitrations, especially large, complex cases with tri-partite panels, it would be a three-fold benefit to the parties to have at least one or two construction-industry professionals representing process expertise, subject-matter expertise, and technical expertise.
Attributes to remember when considering an IPA for arbitration:
- Strong subject-matter expertise in the building process
- Expert knowledge of roles and responsibilities of all various trade involved
- Insight into relationships among owners, architects, contractors/subcontractors, engineers, and suppliers
- Understanding of current and emerging design and technical complexities
- First-hand knowledge of and practical experience with different project-delivery methods, such as design/bid, and public-private partnerships
These attributes lend themselves in equal fashion when industry professionals serve as mediators, dispute review board members, facilitators, and negotiators. Parties have a choice in the selection of their dispute adjudicator, and they would be well served to consider IPA’s in their deliberation.
*American Arbitration Association survey of construction arbitrator attorneys, 2017
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