From house renovations to the construction of mega public infrastructure projects such as roads. Disputes are inevitable in construction projects. Contractual disputes in construction projects rise due to various factors owing mainly to differences in human and organizational behavior. These factors include, without limitation, time constraints, environmental issues, project costs, technological issues with the site or equipment, bespoke nature of the project, multi-cultural environments, multiple stakeholders involved and public interest. Most disputes thus relate to delays, payments, workmanship, changes in the scope of work, unsubstantiated claims, and contracts. Disputes mean delays and delays translate to unbudgeted costs or eventual abandonment of the project. One way to mitigate the threat of disputes is the inclusion of multi-tiered dispute resolution clauses (MDRC) within the construction contract. MDRCs provide practical, informal, and affordable dispute resolution methods that enable the contracting parties to determine the nature of their disputes and the preferred resolution procedure.

What Are MDRCs

An MDRC provides for mandatory steps which the parties must take to resolve any dispute before arbitration or litigation. They are sometimes referred to as “escalation” or “multi-step” clauses. MDRCs can be straightforward single-step processes such as negotiations or complex multi-step processes including a combination of processes such as mediation, conciliation and expert adjudication. MDRCs first featured in standard international construction contracts such as the FIDIC and NEC contracts. Parties may include them in smaller non-standard building contracts as well. By including an MDRC parties intend to avoid an adversarial approach to resolving their disputes and wish to escalate the dispute resolution method should the preceding method fail. By creating different dispute resolution stages the MDCR facilitates a rapid and cost effective dispute resolution method.

Why We Should Include MDRCs MDRCs enable parties to resolve disputes between themselves without resorting to traditional dispute resolution methods such as arbitration or litigation. Notably, arbitration may at times be included in an MDRC clause as the last step. By enabling parties to The remainder of this blogpost is available on the Indian Journal of Projects, Infrastructure and Energy Law website