F E AT U R E A R T I C L E
GORDON BEVERIDGE
F
or most of those involved in a construction agreement,
arbitration remains the ultimate way to resolve dis-
putes, even if mediation is now encouraged before
turning to formal arbitration. Although the American
Arbitration Association (AAA) has been a leader in this field, it
had been several years since any review of policies and rules had
been initiated, so it was considered desirable to solicit input from
as broad of a base as possible. Functioning under the organiza-
tion’s national [US] construction dispute resolution committee, a
55-member task force was established in June 1994 to review
rules, policies, panels, education, training, and outreach. This
committee developed a mission statement with the goal of
“improving AAA services and helping the AAA to be more respon-
sive to the needs of the construction industry.”
The task force was chaired by Bill Reiner, a San Francisco-
based architect and member of the American Institute of
Architects’ document committee. Other task force members
came from a large cross section of very experienced practitioners
who were divided into subcommittees, as appropriate.
On November 7, 1995, the executive committees of AAA
accepted the final report of the task force, and the recommenda-
tions were implemented in the spring of 1996. This article high-
lights the most salient alterations to the rules contained in the
final report (and now incorporated in the Revised Construction
Industry Arbitration Rules, effective April 1, 1996), together with
recommendations that may affect arbitrator panels, nonbinding
alternate dispute resolution (ADR), and outreach and develop-
ment.
NEW RULES AND PROCEDURES
There are some sweeping changes aimed at speeding up the
process and giving arbitrators more authority. In addition, there
are now three specified categories of cases—fast track, regular
track, and large, complex case track, all of which have separate
procedures.
Fast Track
This is for cases involving claims of less than $50,000
(although even in cases above $50,000, parties are encouraged to
follow these procedures). The highlights of the new rules are
described below.
Cost Engineering Vol. 38/No. 11
• There will be a 60-day “time standard” for case completion,
i.e., settlement or award within 60 days of the confirmation
of the arbitrator’s appointment, unless otherwise agreed.
• A special pool of arbitrators, who are prequalified to serve on
an expedited basis, will be established.
• There is an expedited arbitrator appointment process, with
party input expected.
• Unless otherwise agreed, a mandatory “preliminary tele-
phone conference” with the arbitrator and the interested par-
ties will be held.
• There will be no discovery, “except in extraordinary cases,”
with an exchange of exhibits to take place at least 2 business
days before the hearing.
• There is a presumption that cases involving less than $10,000
can be heard based on documents only; when no party’s
claim exceeds $10,000 (excluding interest and arbitration
costs), the case may be resolved by the submission of docu-
ments only to the arbitrator.
• A hearing within 30 days of the arbitrator’s appointment is
now a requirement.
• In most cases, a single day of hearing is expected.
• An award will be produced in no more than 7 days after the
hearing.
• There will be compensation for arbitrator service, at a standard
rate (to be determined by a regional advisory committee),
although for claims not exceeding $10,000, arbitrators will
customarily serve for 1 day of hearing without compensation.
• There will be restrictions on the response time from the date
of demand for arbitration or counterclaim, which should
speed up the process.
Regular Track
This is for cases involving claims between $50,000 and $1
million. Highlights include the following.
• More party input will be solicited into the AAA’s preparation
of lists of proposed arbitrators.
• Liberal amendment of claims or counterclaims will be per-
mitted; a party may at any time before the hearing increase
or decrease the amount of claim or counterclaim.
• There will be express arbitrator authority to control the dis-
covery process.
• An arbitrator’s authority to control the hearing will be broad
in nature.
NOVEMBER 1996 19
• AAA will provide the arbitrator’s compensation policy with
the biographical information sent to the parties.
• A revised demand form and a new answer form are now pro-
vided that will cross-reference these new rules and be
deemed to be incorporated as part of their arbitration agree-
ment.
• More flexibility and control are provided to the arbitrator to
direct documentary exchange and the identification of any
witnesses.
• The arbitrator is given more authority to expedite proceed-
ings and may control the order of proof or exclude cumula-
tive or irrelevant testimony or evidence. The arbitrator will
entertain motions, including those that dispose of all or part
of a claim.
• The arbitrator will provide a concise, written breakdown of
the award, and if required by the parties before the appoint-
ment, or if the arbitrator deems it appropriate to do so, the
arbitrator will provide a written explanation of the award.
• The arbitrator may be requested to correct the award for any
“clerical, typographical, technical, or computational errors”
and now has the authority to correct technical errors on the
award.
Large, Complex Case Track
This track is for construction cases involving claims of at least
$1 million.
• The use of procedures in cases involving claims of more than
$1 million is now mandatory.
• There will be a highly-qualified, trained panel that will be
compensated at its customary rate.
• Cases will be heard by either one or three arbitrators, as
agreed to; if the parties cannot agree, then three will hear the
case.
• A mandatory preliminary hearing will be held with the arbi-
trator(s) to identify procedural issues, including uncontested
facts, the extent of discovery, expert witnesses, and a
timetable of the hearing.
• Broad arbitrator authority is provided to order and control
discovery, including depositions.
• There is a presumption that hearings will proceed on a con-
secutive-days or block basis to maximize efficiency.
• The arbitrator is given authority to direct the recording of
hearings, the costs being borne equally by both parties.
ARBITRATOR PANELS
Several recommendations for improving the quality of arbi-
trators were accepted, including having a minimum of 10 years of
construction-industry experience. An attorney panelist must
devote approximately half of his or her practice time to construc-
tion. The changes listed below also were accepted.
• There will be mandatory training for all new arbitrators and
retraining every 3 years for all panelists.
• Panelists’ applications will be approved by regional construc-
tion advisory committees.
20 Cost Engineering Vol. 38/No. 11
• Overall panel quality will be monitored by regional advisory
committees.
• There will be increased efforts to recruit owners as arbitra-
tors.
• A uniform training program with periodic supplemental
training will be established.
• Rates of pay should be sufficient to attract highly-qualified
persons.
NONBINDING ALTERNATE DISPUTE RESOLUTION
The American Arbitration Association will increase efforts to
promote nonbinding ADR, such as partnering, mediation, and
dispute review boards. This will be achieved by the following
actions.
• Research the dispute-prevention and resolution needs and
desires of all participants in the construction process on an
ongoing basis.
• Develop a menu of services that will respond to these needs
in the most just, speedy, and economical manner.
• Identify and train a cadre of neutrals and administrators to
provide these services.
• Use ingenuity to make desirable innovations without an
excessive investment of capital or additional administration.
• Exploit and facilitate the use of computer and online com-
munication technology.
OUTREACH AND DEVELOPMENT
To increase the use of the AAA’s dispute-resolution services,
the following suggestions were proposed.
• A list of neutrals will be published.
• The organization intends to send user surveys to clients as
well as to attorneys.
• The use of regional construction advisory committees will be
expanded.
• Greater participation in industry trade groups will be encour-
aged.
ost of the results of the task force’s report will be
M felt in applying these new rules and procedures.
The recommendations for fast-track cases (less
than $50,000) were aimed at dramatically speed-
ing up the process and now contain a “suggested 60-day time
standard”—a total of 60 days from the confirmation of the arbi-
trator’s appointment to the issuing of an award (extensions of time
will be limited). The task force report addresses many prior criti-
cisms and attempts in many ways to improve the service to users
and to make the process more user friendly by expediting it,
encouraging more written explanations of awards, and obtaining
feedback from participants.
This article has not attempted to identify all of the numerous
editorial modifications made to the rules. However, the net effect
of all of these changes can be summarized as follows:
NOVEMBER 1996
• having a smaller, more select panel of arbitrators with the Standard Arbitration Clause: any controversy or claim
appropriate experience and training; arising out of or relating to this contract, or the breach
• in fast-track cases, a more expeditious procedure will be fol- thereof, shall be settled by arbitration administered by
lowed that takes fewer days and results in a speedy award; the American Arbitration Association under its
• in larger cases, more control and flexibility will be given to Construction Industry Arbitration Rules, and judgment
the arbitrator; on the award rendered by the arbitrator(s) may be
• more written explanations of awards; entered in any court having jurisdiction thereof.
• the mandatory use of procedures in large, complex cases;
• the use of the latest technology, especially e-mail, whenever This clause would ensure the application of the rules identified
possible and appropriate; and above; however, even if an arbitration clause were not included in
• generally, make AAA more user friendly and responsive to an agreement, parties can nevertheless by agreement submit to
industry needs, and provide a service that responds in a “just, resolve any dispute by incorporation of the above rules. Any such
speedy, and economical manner.” revision should be in writing and in a form that is clear and unam-
biguous, samples of which can be obtained from any AAA office.
The Revised AAA Construction Industry Arbitration Rules
(effective April 1, 1996) should be studied in detail by any party
to an arbitration or by those drafting arbitration or mediation Gordon Beveridge is a vice president with Hanscomb Inc. (a
clauses in contract documents. national [US] construction management company) in San
The following suggested clause is extracted from the AAA Francisco, and is a member and panelist of the American
Construction Industry Arbitration Rules (April 1, 1996) for possi- Arbitration Association. He is also a member of AACE
ble inclusion into any agreement: International.◆ Back to Table of Contents

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