Construction contracts are often negotiated with the expectation that the project will succeed. But when a dispute arises, provisions that received the least attention before signing can become some of the agreement’s most important language.
A well-drafted alternative dispute resolution (ADR) clause provides a clear roadmap for resolving disagreements efficiently. An unclear ADR provision can force the parties to spend time and money litigating procedural issues rather than addressing the underlying claims.
For owners, contractors, subcontractors, design professionals, and lawyers, the goal isn’t simply to include a construction ADR clause. It’s to create a dispute resolution process that works in practice.
Clear Notice Requirements Help Preserve Claims
One of the first questions in a construction dispute is whether the claimant properly preserved the claim. Construction contracts frequently require written notice within a specified period after an event occurs or a party recognizes the basis for a claim.
For example, A201® – General Conditions of the Contract for Construction generally requires certain claims to be initiated within 21 days after the event giving rise to the claim or after the claimant first recognizes the condition.
- What Works: Identifying the triggering event, deadline, recipient, and delivery method. For example, require written notice within 14 days after the claimant first becomes aware of the condition giving rise to the claim.
- What Doesn’t Work: Requiring notice “promptly” or delivery to multiple people without clearly identifying them.
Routine project communication can also be confused with formal contractual notice. A project manager may discuss a delay during three progress meetings, but those discussions don’t necessarily satisfy the contract’s notice requirements.
Provide a Deadline for Each Step of the ADR Process
Construction contracts commonly establish a dispute resolution sequence that includes project-level negotiation, executive negotiation, an initial decision, mediation, and ultimately arbitration or litigation. A structured escalation process provides opportunities to resolve disputes while the project continues and before they incur substantial legal costs.
AIA contract documents provide a familiar example. Under the A201 framework, certain claims may proceed first to an Initial Decision Maker, then to mediation, and ultimately to the binding dispute resolution method selected in the agreement.
- What Works: Giving each step a clear timeframe and a defined path to the next stage. For example, require senior representatives to meet within 10 days after written notice of a dispute. Either party could initiate mediation if the dispute remains unresolved 15 days later.
- What Doesn’t Work: An elaborate process requiring project-manager negotiations, executive meetings, architect review, mediation, and arbitration without deadlines for completing those steps. Instead of encouraging settlement, an open-ended process may give a reluctant party opportunities to delay resolution.
Don’t Let Mediation Be a Barrier
Mediation is particularly useful in construction because the parties may need to preserve an ongoing business relationship or keep the project moving. But when mediation is required before arbitration, the contract should explain what happens if one party refuses to participate or the parties can’t schedule the mediation.
- What Works: Allowing the parties to pursue mediation without unnecessarily delaying arbitration. For example, the contract could require mediation before the evidentiary hearing while allowing arbitration to begin and proceed through administrative steps.
If mediation must occur first, establish a clear deadline. For example: “If mediation has not occurred within 45 days after a written mediation demand, either party may commence arbitration.”
- What Doesn’t Work: Stating that arbitration can’t begin until mediation has “concluded” without defining when mediation is complete or how a party may proceed when the other party won’t
Specify the Arbitration Rules and Process
A surprisingly common problem is a clause that simply states, “Any disputes shall be resolved by binding arbitration.” That identifies the intended forum but leaves important questions unanswered:
- Who will administer the arbitration?
- Which rules apply?
- How is the arbitrator selected?
- Will the dispute be heard by one arbitrator or three?
- Where will the arbitration take place?
The American Arbitration Association (AAA) provides a standard construction arbitration clause that addresses much of this uncertainty by specifying that the AAA will administer the arbitration in accordance with its Construction Industry Arbitration Rules.
- What Works: Identifying the administering organization and applicable rules, then customizing the process when the project requires it.
- What Doesn’t Work: Creating a fully customized arbitration process without addressing what happens if a party refuses to select an arbitrator or the selected arbitrators can’t agree.
Match Arbitrator Qualifications and Panel Size to the Dispute
Arbitrators with construction industry experience can bring valuable knowledge to a dispute. However, qualifications shouldn’t be so narrow that finding an eligible arbitrator becomes difficult.
For example, a requirement that a candidate has 25 years of hospital construction experience, 10 years of arbitration experience, and prior experience with projects exceeding $300 million may describe the ideal candidate. It may also exclude other qualified neutrals.
The number of arbitrators matters, too. Three arbitrators may be appropriate for a major infrastructure dispute involving hundreds of millions of dollars, but that expense may not make sense for a $250,000 payment dispute.
- What Works: Focusing on the expertise that matters and scaling the panel to the amount in dispute. For example, one arbitrator might hear claims under $2 million, while three arbitrators hear claims of $2 million or more.
Keep Discovery Proportional to the Dispute
Parties sometimes choose arbitration for efficiency and then draft discovery provisions that recreate the discovery process in court litigation. Allowing all discovery available under the Federal Rules of Civil Procedure may undermine that objective.
At the other extreme, prohibiting all discovery may be impractical in a document-intensive construction dispute involving schedules, requests for information (RFI), change orders, BIM data, emails, payment records, and expert analyses.
- What Works: Giving the arbitrator discretion to limit discovery to information reasonably necessary for a fair resolution.
Coordinate ADR Provisions Across the Project
Construction disputes rarely involve only two participants. A defective condition may implicate the owner, general contractor, subcontractor, architect, engineer, supplier, and insurer. If their contracts contain incompatible ADR provisions, the parties may have to litigate one portion of the dispute while arbitrating another.
Consider a project in which the owner-contractor agreement requires AAA arbitration, the contractor-subcontractor agreement requires state court litigation, and the architect agreement requires mediation followed by arbitration under different rules. One building envelope claim could result in three separate proceedings based on substantially the same facts.
- What Works: Reviewing dispute resolution provisions across the project. When appropriate, address compatible procedures and the joinder or consolidation of related proceedings.
Draft an ADR Clause That Works in Practice
An effective ADR clause doesn’t need to be long. It needs to be intentional.
Before signing, project teams should ask:
- Does the clause clearly explain how to preserve a claim?
- Who makes the first decision?
- Is mediation mandatory?
- When can arbitration begin?
- Which arbitration rules apply?
- How will the arbitrators be selected?
- Who may participate in the proceeding?
Project teams should also look beyond the individual agreement. The owner-contractor agreement, subcontracts, design agreements, purchase orders, and other project documents should establish compatible dispute resolution systems whenever possible.
Construction disputes are complicated enough on their own. The ADR clause should provide a roadmap for resolving the dispute, not become another dispute the parties must resolve.
Put Clear ADR Provisions Into Practice
Use a standards-backed foundation for defining claims and dispute resolution procedures on your next project.
Guest Byline
About the Authors
Cooperating Organization 
Jacqueline Vega Cintron
Vice President – Construction, American Arbitration Association (AAA)
Jacqueline oversees the Northeast and Mid-Atlantic region, focusing on strategic growth and expanding the use of AAA’s arbitration and mediation services within the construction industry. She also leads educational initiatives focused on ADR best practices, emerging trends, and industry engagement.
Iman Hyder-Eliz
Managing Director, Secretariat (Formerly Vice President – Construction, AAA)
During her tenure, Iman oversaw complex construction arbitrations, strategic growth initiatives, and industry engagement throughout the Southeast and Midwest.
Frequently Asked Questions
A construction ADR clause should define how parties preserve claims and move disputes through each stage of the resolution process. It should identify notice requirements, deadlines, decision-makers, mediation requirements, arbitration rules, arbitrator selection procedures, the hearing location, discovery limits, and whether related parties or claims may be joined or consolidated.
A201 – General Conditions establishes a structured process for certain claims. Depending on the contract selections and modifications, that process may include an initial decision, mediation, and the binding dispute resolution method identified in the agreement. Project teams should review A201 together with the related owner-contractor agreement to understand the applicable process, deadlines, and decision-makers.
Clear notice requirements specify the triggering event, the deadline, the required recipient, and the permitted delivery method. For example, A201 generally requires certain claims to be initiated within 21 days after the event giving rise to the claim or after the claimant first recognizes the condition. Routine discussions, meeting minutes, or other project communications may not satisfy the contract’s formal notice requirements.
Mediation can help parties resolve disputes while preserving business relationships and keeping the project moving, but it shouldn’t create an indefinite barrier to arbitration. If a contract requires mediation before arbitration, it should set a clear deadline and explain what happens if a party refuses to participate or the mediation can’t be scheduled.
The contract should identify both the organization administering the arbitration and the rules that will govern the proceedings. For example, the parties may select arbitration administered by the American Arbitration Association (AAA) under its Construction Industry Arbitration Rules. Institutional rules provide established procedures for selecting arbitrators and resolving administrative issues.
The panel size should reflect the dispute’s value and complexity. One arbitrator may be more practical for a smaller payment dispute, while three may be appropriate for a major infrastructure or high-value dispute. The contract can establish a monetary threshold, such as one arbitrator for claims under $2 million and three for claims of $2 million or more.
Related disputes may be consolidated when the applicable contracts and arbitration rules permit it. Coordinating dispute provisions across owner, contractor, subcontractor, and design agreements can reduce duplicate proceedings and inconsistent outcomes. However, consolidation may also add cost or delay, so the contracts should address it before a dispute arises.
Clear notice requirements specify the triggering event, the deadline, the required recipient, and the permitted delivery method. The contract should specify a specific timeframe rather than terms such as “promptly.” Project teams should also understand that routine discussions, meeting minutes, or other project communications may not satisfy the contract’s formal notice requirements.
