March 13, 2006
Author: , P.E.

The president of the construction company for which you are the chief financial officer comes into your office and it is obvious he is in poor spirits. He explains that the North Beach Mall project, which had been plagued with problems from the start, has gotten worse.

The president goes on to describe some of the problems experienced on the project and it sounds more and more like a candidate for the Construction Claim Hall of Fame. The project started off with a soil problem, which the engineer spent three months resolving. Then one of the major tenants pulled out, which required substantial redesign and resequencing of the work. In addition, there were numerous R.F.I.'s, stop work orders, change orders, and slow progress payments.

The project people, with assistance from you, had prepared a Request for a Contract Adjustment totaling $1.5 million, which had been presented to the owner approximately six months ago. At that time, the owner's staff had seemed receptive to paying for their problems on the project and, after receiving the oral and written claim presentation, said they would respond shortly. Having received a response that, at best, would be considered "stonewalling", your president has decided the only option is to initiate litigation.

The president goes on to explain that he is not anxious to litigate, but he sees no other option. His reluctance to litigate is partly based on the company's recent litigation experience. The company had pursued a $1.0 million claim through the legal system. It took almost eight years to get to trial, and the trial itself took twelve weeks. The company recovered $980,000 at the trial, but the legal fees were in excess of $600,000. When in‑house support costs were included, the net "recovery" was practically nil. Based on this experience, the president is not sure if he can afford too many more "legal victories".

You ask the president why this litigation took so much time and was so expensive. He shrugs his shoulders and says the whole process was like trying to construct a building without a set of plans or any type of schedule.

Although the trial ended with a good verdict for your company, it appeared to be an evolutionary process. The attorneys did not start the trial with a clear set of goals as to the issues to be presented and the key points that needed to be driven home. It was somewhat like going out to a jobsite each day and putting up a wall, and seeing if the client liked it. If they did, you would leave it in place and start the next activity. At the end, the client would be happy with the house and you would get paid. Likewise, at the end of your trial the jury was happy and you got paid. The problem is that it was very expensive.

The other concern the president had was the eight years it took to get to trial. The time it took to get to trial greatly reduced the value of the award, despite the interest component of the award, and also increased the cost of the litigation. The president wonders why the legal system is not able to accomplish the ultimate decision in less time.

Hearing the president's concerns reminds you of a seminar that you attended several months ago. Two of the speakers, one a construction lawyer and one a construction claims consultant, talked about steps that should be taken to control the time and cost of litigation. They actually used the analogy of building a house; having a detailed plan of what the final house would look like, and then developing a schedule to complete the house on time.

Since the last expected activity in the litigation process is a presentation of your position (at trial, arbitration, or mediation), the first step should be the preparation of a detailed outline of what will be presented. You explain to the president that the presentation outline needs to consider the following items:

Issues ‑ The outline must include all of the points and issues that need to be presented at the trial, arbitration or mediation. The "issues list" obviously includes all of the positive issues that have been identified, but there also needs to be a candid discussion about the weaknesses of the case. Do you raise these "weaknesses" in your affirmative presentation or deal with them when the other side raises them? The worst case is to stick your head in the sand and hope the negatives "just go away".

Presenters ‑ The outline needs to address who will present the various points and issues described above. The availability and location of these "witnesses" needs to be resolved. The need for expert witnesses to support positions also needs to be determined at this time.

Time ‑ The amount of time for the presentation should be considered. If the plan is to move the case to mediation the amount of presentation time will probably vary from two to eight hours. If the case is moving toward arbitration or litigation, the amount of time may appear to be "unlimited". However, the judge, jury or arbitrator usually prefer a "crisp" and timely presentation, as compared to a long drawn out presentation that eventually covers the issues and points that need to be referenced.

Preparation of the case outline early in the claim process forces the team to focus on these points from the outset. In many cases, the outline will change as more facts are determined or the availability of witnesses changes, but the overall goals will remain consistent. The point is, you will know where to focus your efforts to establish the facts that support your presentation?

The president had mentioned earlier that the key to completing a construction project on time was scheduling every aspect of the process. You explain the same thing should be true when you're "building your case". There should be a schedule for every step in the litigation right through the final presentation.

You go on to explain that, just as a construction schedule has to be somewhat fluid to accommodate unknowns such as bad weather, late deliveries, or problems with the original design (change orders), the same type of flexibility has to be incorporated in the litigation schedule. For example, the opposition may file a surprise motion which can delay progress for months, or you may not find the necessary documents to support the original outline. Changes in the litigation schedule are almost guaranteed, but that does not preclude the need for a schedule to try and control the flow of the litigation.

One of the reasons for scheduling a construction project is to get the parties to communicate about their responsibilities, what they expect of others, and when things need to be done in order to meet the end date. You explain the same benefits will be derived from a litigation schedule. For instance, the schedule will bring into focus when depositions should be held and who should be deposed.

The president ends the meeting by saying he's not anxious to pursue this litigation, but sees no alternative. However, he understands how effectively the company manages the construction process and now sees the similarities between managing construction and managing litigation.