Jacob Austin 00:00:17 Hi all, Jacob Austin here from QS.Zone. And welcome to episode 64 of The Subcontractors Blueprint, the show where subcontractors can learn how to ensure profitability, improve cash flow and grow their business. Today's episode is all about mediation and how it can help resolve disputes in the construction industry. If you're new to the show, please subscribe for more user friendly advice on all things subcontracting. So let's start with the question. Why should you, as a subcontractor, care about mediation? Construction projects are complex and disputes are almost inevitable at some point in your subcontracting career. Whether it's an issue over payment delays or the quality of work, disputes can escalate quickly and lead to costly litigation or adjudication. And that's where mediation comes in. A process that offers are less adversarial, faster and more cost effective way to resolve conflicts. Mediation works by bringing the disputing parties together with a neutral mediator who helps to facilitate communication and negotiation. The goal is for both parties to reach a mutually acceptable agreement without the need for a formal court hearing or proceedings.
Jacob Austin 00:01:39 And here's the best part nothing is binding until both parties agree and sign a written settlement. That means that you can explore solutions and take risks during the process, without the fear of being locked into something that you don't agree with. The construction industry is no stranger to disputes, and in fact, time and money are two of the most common reasons that conflicts arise. And these disputes can slow projects down or worse, halt them entirely. So understanding how mediation can resolve these issues quickly and amicably can save your business a lot of time and money and of course, stress. And the great thing about mediation is that it isn't adversarial. It's about working together to solve a shared problem. So let's get into the nuts and bolts of mediation by going over some important terms and definitions from the CIC Model Mediation Agreement. First of all, you'll hear the term Blatner, which stands for Best alternative to a Negotiated Agreement. This is a term that Chris Voss introduced me to in his book Never Split the Difference. And it's essentially your fallback plan, the best course of action you can take if the mediation fails.
Jacob Austin 00:02:55 knowing your partner is crucial because it helps you to decide whether to accept an offer during mediation or walk away and pursue other options, which might be adjudication or litigation. Next, we have the mediator. And of course, this is the neutral third party who is chosen to facilitate the discussions. The role of the mediator isn't to decide what's right or wrong, or who's right or wrong, but to guide the process and help the parties reach a resolution in construction disputes. The CIC, which is the Construction Industry Council, recommends using an experienced mediator from their panel of mediators. These are professionals with at least ten years experience in construction and engineering, so they understand the unique challenges and terminology of the industry. There are a few other key terms to know. The mediation agreement, which is the written agreement between two parties to try and resolve the dispute through mediation. Then you have a settlement agreement, which is the document that formalizes the resolution of the dispute. And once that signed, it becomes legally binding. And then you have the mediation fee, which is the fee paid to the CIC for providing their list of mediators or nominating one.
Jacob Austin 00:04:12 And then in addition to that, there's the fee that is paid to the mediator themselves, which can either be a time based amount or if there's a particularly small dispute, the CIC has a process under which they guarantee that a mediation can occur for a fixed fee of £6,000. Now let's walk through the actual mediation process step by step. Initiating the mediation. This all starts with a mediation request, which comes from one or both parties, who can submit a formal request to the CIC to either provide a list of mediators or nominate one directly from their panel. Once the CAC validates that request, the mediation officially begins. Selection of a mediator. The parties can either agree on a mediator themselves, or ask the CIC to either nominate a panel or nominate one particular mediator that they think will be suitable for this dispute. The mediators put forward will be chosen based on their availability, their experience and qualifications relevant to the dispute, and the CIC also makes sure that the mediator has no conflicts of interest and is neutral, with no pre-existing relationship or bias towards either of the parties.
Jacob Austin 00:05:27 Then, the preparation phase after the mediator is selected, they will discuss with the parties how the mediation will be conducted. This leads to the drafting of a mediation Procedure agreement, which outlines the background of the dispute, the claims and contentions of each party, and the timescale for the mediation. Each party will also need to prepare case summaries, which are succinct documents that explain the key issues and provide any relevant evidence. These documents should be exchanged by the parties at least seven days before the mediation begins. Then we have a mediation meeting or a series of mediation meetings, depending on the complexity of the issues. The mediation itself is private and confidential, with the mediator facilitating discussions between the parties. It typically follows five key stages. An introduction where the mediator sets out the ground rules, makes himself known to both parties, and explains the process. An information exchange where both parties present their case summaries and discuss the issues at hand. Then we have option generation, where the mediator helps both parties to brainstorm potential solutions to the problem, followed by negotiation where obviously the parties with the mediators assistance begin to negotiate terms that work for both sides.
Jacob Austin 00:06:51 Finally, there's a conclusion. If an agreement is reached, it's formalized in a written settlement agreement. And if not, the mediator may offer a non-binding conclusion summarizing what was discussed and suggesting potential solutions for future negotiations. Now, let's focus on the actual role of the mediator themselves in this process. In construction mediation, the mediator isn't just a passive observer. They play an active role in facilitating communication and reality checking each party's position. Think of the mediator as a master navigator. They aren't there to make decisions and tell you where you're going to end up, but they are there to help both the parties explore all the possible decisions and solutions, and guide them along the path that they choose. They will challenge assumptions, ask probing questions, and encourage both sides to think creatively about resolving the dispute. They'll also ensure that emotions don't escalate, keeping the conversation focused on reaching an agreement that works for both parties. A good mediator will also help the parties establish their banner. And also the converse to this the Wagner.
Jacob Austin 00:08:03 The worst alternative to a negotiated agreement. Understanding these alternatives helps you evaluate whether the agreement being discussed is better than the alternatives available. If the mediation fails. For example, if your partner is going to court and spending months in litigation with high legal fees, the option of a mediated settlement starts to look a lot more attractive. The mediator will help you weigh up these options throughout the process. One of the reasons why mediation is such an effective tool for resolving disputes is the confidentiality that comes with it. According to the CIC model mediation procedure, The entire mediation process is confidential, meaning that anything discussed during mediation cannot be used in court or adjudication if the process fails. Even the fact that mediation is taking place is private, and this allows parties to speak freely and allows them to consider offers without fear of these discussions being used against them. Later, the mediator will hold private meetings or discussions with each party, and anything shared during these sessions remain confidential unless the party giving the information gives explicit permission for it to be shared with the other side.
Jacob Austin 00:09:23 Confidentiality also extends to the settlement agreement itself, unless the parties agree otherwise, the terms of the settlement are completely private, although they can be shared with insurers, legal advisers or accountants under strict confidentiality agreements. This means that both parties can settle the dispute without risking public embarrassment or damage to their reputations. Now let's talk about costs, something every contractor and subcontractor is naturally concerned about. The good news is that the CIC offers a fixed fee mediation for construction disputes, where the amount disputed is under £100,000, and that fixed fee is £6,000, excluding expenses for larger sums of money. The mediation is typically charged on a time based fee, and the parties will agree a duration of the mediation in principle, so that the amount being argued about is known upfront. And of course, £6,000 might seem like quite a significant sum, but the fact that this fixed fee is what it is fixed does provide cost certainty, which is important in an industry where disputes can spiral into costly legal battles. And you have to consider that it's a drop in the ocean compared to the alternative of litigation and potentially adjudication, coupled with the long delays, particularly in the court system, often just to get a court date which can spin the whole process out and further strain your business's resources.
Jacob Austin 00:10:57 So what happens when the mediation process ends? Well, ideally, both parties will reach a settlement and that will be drafted up into a settlement agreement that resolves the dispute to their mutual satisfaction. This agreement is legally binding, and once signed, it brings an end to the dispute. However, if the parties are unable to reach that agreement, the mediator may provide a non-binding conclusion, which includes their set of recommendations that could help the parties to continue negotiating on their own. It's also important to remember that mediation doesn't suspend any statutory or contractual deadlines unless they are explicitly stated in the mediation request. So if the mediation process is ongoing and no settlement has been reached, you still need to be aware of any approaching deadlines or limitation periods for taking legal action. However, a sensible approach if you and the other party agree, maybe to pause these deadlines whilst mediation is ongoing, which can then give you the breathing space to hold your negotiations effectively without the pressure of a ticking clock. And that is basically it in a nutshell.
Jacob Austin 00:12:08 So mediation offers you a meaningful way to settle your construction disputes whilst avoiding the adversarial and lengthy procedures of litigation, and is even quicker and more cost effective than the construction industry's preferred method of dispute resolution adjudication. And now that you know what it's all about, go forth and mediate. My mission with the Subcontractors blueprint is to help the million SME contractors working out there in our industry. If you've taken away some value from today's episode, I'd love it if you'd share the show and pass that value on to somebody else who'd benefit from hearing it. And of course, subscribe yourself if you haven't already. And thanks for tuning in. If you like what you've heard and you want to learn more, please do find us at www.QS.Zone where you can subscribe to our training and support system for like minded subcontractors. In there you'll find templates, how to videos, interviews, and more. It's less than the price of a cup of coffee per day and you can cancel any time. Also, we're on all your favourite socials at @QS.Zone.
Jacob Austin 00:13:14 Feel free to drop me a line, tell me what you want to hear about next or give me some feedback on the show. Thanks again! I've been Jacob Austin and you've been awesome.
