Federal Ministry recommends out-of-court dispute resolution for major construction projects

“Mastering complexity – cost-effective, on schedule and efficient” – this is the title of a report published by the Federal Ministry of Transport and Digital Infrastructure’s Construction Reform Commission for major projects. The report identifies shortcomings in major construction projects and proposes solutions and recommendations for action to improve cost transparency, efficiency and adherence to schedules in major projects. The report also contains tips and recommendations for out-of-court conflict resolution in major construction projects. For example, the reform commission recommends including an internal and external conflict resolution mechanism in contracts with project participants for major projects. This is because disputes between clients and contractors are characterized by long court proceedings, uncertainty about the outcome and high costs. Reports on current major construction projects in Germany show that the reputation of a company involved in a major construction project can also suffer if conflicts arise.

Practical tip:

Companies involved in construction projects are therefore recommended to set up a conflict management system at the start of the planning phase and integrate it into the implementation of the construction project. The conflict management system should be modular and adapted to the respective construction project. Components of the conflict management system can be exemplary:

• Establishment of a cross-company, interdisciplinary coordination team in the event of conflicts,
• if necessary, training of employees on dispute resolution procedures,
• Formation of mediator and arbitrator pools,
• Development of procedural standards and corresponding integration into contracts,
• Systematic choice of procedure: Mediation, conciliation, adjudication, arbitration, arbitration tribunal, court

The advantages of a conflict management system include

• Conflicts can be resolved amicably in private,
• out-of-court dispute resolution procedures are more favorable,
• the parties can choose the procedure and the mediator, conciliator or arbitrator,
• out-of-court dispute resolution proceedings are shorter than court proceedings.

You can find the Commission’s report here.