Friday, March 23, 2012

Dispute Resolution

In managing contracts a common activity of a contract manager is attempting to resolve disputes. If a dispute arises the first thing the parties should do is determine what the contract established for a dispute resolution process. In my negotiation blog I included a post “Alternative Dispute Resolution” that describes alternative processes that may be agreed by the parties. If there is no alternative dispute process established, the parties have two options. They can seek to come to mutual agreement or they can decide whether to litigate.

A dispute may exist only because one party has dug in and refuses to move or make any concessions. It may have become a personal issue for them. There may be no rational or logical reason for their actions. When that occurs it is best to have the matter reviewed at higher levels where the matter is no longer personal. You don’t need to have a right to have issues escalated through a formal process in the agreement. If there is a dispute and its not getting resolved either party may seek to escalate the dispute to a higher level. The best way to do that is to escalate the issue to your manager and have them escalate the issue to the other party’s manager.

The value of an escalation is it becomes a review of the facts only. It’s strictly business and will be conducted without the emotion of the day-to-day battles. The fact that either party can request that the the dispute matter be reviewed by a higher level within the other party’s organization adds a subtle pressure to come to agreement or have all their facts in order. Subordinates don’t want to look bad in the eye of their management.

Escalation is the same approach you would use to get past those people whose job it is to tell you no or to place roadblocks in the way of you getting what you want. In business everyone has metrics that they are measured on. If you escalate the dispute to a manager, they frequently are not measured on the same metrics. They can look at the matter from a broader perspective. They can look at the impact as part of the overall business or from the perspective of customer relationships and customer satisfaction as they may want to retain you as a future customer. You have a better chance of reaching agreement.

If they parties continue to disagree, they would need to decide if they wanted to invest the time and expense to proceed to court. If they feel that they have had their matter heard and have been treated reasonably, they are less likely to sue.

As a Buyer the escalation process may buy you critical time you need to complete the work, or to identify alternative sources and plans in the event that the dispute is not able to be settled in a reasonable manner.

If an action proceeds towards litigation the contract manager will need to pull together all the necessary information about the dispute to provide that to the lawyers.

In a dispute you will always need to know:
1.What is the subject that is in dispute?
2.What is the basis for the dispute?
3.What are the applicable documents and specific sections involved with the dispute?
4.At the time the dispute arose what were the terms in effect?
5.Identify any information, instructions, that may have caused the dispute.

As disputes can arise outside of the contract, make sure you can identify the applicable 5W’s & an H.
a)Who was involved?
b)What was the obligation?
c)Where did it occur?
d)When did it occur?
e)Why did it occur?
f)How were each of the parties impacted?

For disputes involving the contract, always refer to the specific section of the contract, specification, drawing etc. that established what was required that wasn’t completed, performed correctly or that remains in dispute.

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