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Construction Contracts
Types of Construction Contracts

Types of Contracts according to the scope of the contractors obligations

Design-Bid-Build Contracts
The theory of this process is that any qualified Contractor will produce the same product from the
plans and
specifications, provided the plans and specifications are complete and written properly.
Design-bid-build is the most common Government-used process for construction services. Some
agencies complete the design phase using their own
in-house designers, but most public agencies
contract for design services from an outside architectural or engineering
firm. After he design has
been completed and accepted by the Owner, the Owner will advertise the project and award it to the
lowest responsive and responsible bidder.

Design-Build Contracts
Here the Contractor is engaged not only to construct the works but also to design them. The
advantage of this arrangement for the Owner is that a single party, mainly the Contractor, carries
out the work whereas the traditional arrangement the design and construction are separated. Under
a design and build contract there is only one person to seek redress if the work is badly done. This
not only presents an administrative advantage but also helps the Owner to ensure that the finished
project will fit for its purpose. For the Contractors point of view the design and build method is
attractive because the Contractor can design the works for ease of construction; this not only
facilitates construction but also often produces a cheaper price for the Owner because of the
enhanced efficiency.

Design, build, operate and transfer

This may be used for projects such as athletic arenas, water treatment plants, water purification
facilities, toll highways and other infrastructures. The principle is that the Contractor will retain
some percentage of ownership in the facility, up to 100%, for a specified period of time and
operate the facility for a profit during the time to recoup the capital investment (total plus profit).
The period of ownership by the Contractor may vary from a few years to permanent. During the
period of ownership, the Contractor is responsible for all costs of ownership, and all profits
resulting from the ownership.

Finance, design and build, operate and transfer

In this contract arrangement the Contractor acts essentially as a developer. Normally, the contract
will include a license or a concession for the Contractor to operate a piece of infrastructure and to
charge tolls or other rates in order to recover his initial capital expenditure and to make a profit.

Turnkey
In this contract arrangement the Contractor carries out all engineering, procurement and
construction, providing a fully equipped and ready for immediate use facility.

Fast track
A fast track contract is one which the construction commences before the design is completed.
When an Owner is willing to sacrifice some control over costs in order to shorten the time for
construction, the Owner may enter into a construction contract and call for the commencement of
construction prior to the completion of the design. This usually ensures a completed project at an
earlier date. However, because the Architect and Contractor do not have a completed and final set of
plans when the construction contract is negotiated, it is very difficult for the Owner to enter into a
contract with fair, but guaranteed pricing unless the Owner is willing to give up consideration control
over the design of the project.

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Types of contracts according to the method of remunerations

Lump Sum Contracts

Here the Contractor is paid a fixed price for a fixed piece of work. There will usually be
provisions in the contract whereby the Owner can include variations to the works and here the
Contractor will be paid an additional or reduced sum relative to the original fixed contract sum
depending on the extent to which the variations comprise an increase or decrease in the work to be
done. Lump sum contracts are often used:




Where the extent of the work is reasonably clear standard buildings constructed from
readily available materials using conventional techniques.
Where the Owner wishes to be reasonably sure of the price
Where the Owner wishes to use the design-build format it is usual to agree to a lump sum
remuneration system

Whenever works are likely to provide unexpected surprises such as where a significant work is to
be executed below ground level, lump sum contracts generally require Contractors to accept
greater risk than other types of remuneration, such as cost-plus.

Re-measurement (or Admeasurement or Measurement or Unit-price) Contracts

Here the Contractor refers to rates given in terms of money per unit of work for work which falls
into a particular classification. Unit price contracts are used for work where it is not possible to
calculate the exact quantity of materials that will be required. During the currency of the project
the total units of work in each classification is measured at intervals and payment is made in
accordance with the measured value, which may be a physical measurement on site or
calculations from drawing showing the progress of the works.
Usually the tendering process is conducted on the basis of anticipated quantities of work, thus
producing the tender estimate. But the contract price, that is the actual value of the contract
as it will turn out, is unknown with the outset because the actual quantities of work are
unknown until the project is complete and the measurement process has been finished.
A re-measurement contract requires a Schedule of Rates or Bill of Quantities to be drawn up.
These documents contain lists of agreed prices. In the case of bill of quantities, there is also a list
of quantities. It is usually a term of the contract that if the quantities change significantly from
those in the bill then those rates are rendered inapplicable and the Certifier will need to rerate to determine a new rate. In case of a schedule of rates contract, a list of quantities is not
usually provided. Schedule of rates contracts are typically used for contracts where the scope of
the work is unknown in advance, such as maintenance contracts.

Cost-plus Contracts
Here the Contractor is reimbursed for all his or her reasonable expenses and out-goings in
connection with the scheme together with an additional sum representing the Contractors fee.
This scheme of remuneration presents few risks for the Contractor and, in addition, makes the
Owner vulnerable to cost and time overruns.

Target Contracts
Here there is a target out-turn price and a target completion date, If the contractor exceeds
the cost and time target he pays a penalty on his fee. If he performs the work at a keener
price or faster that the target, he receives a bonus on his fee. This induces the contractor
to work as efficiently as possible. However, the Owner must employ his or her own staff

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to ensure that quality is not compromised by the Contractors enthusiasm to achieve
an efficient outcome.

Cost-plus Fixed Percentage Contracts

For certain types of construction involving new technology or extremely pressing needs,
the owner is sometimes forced to assume al risks of cost overruns. The Contractor
will receive the actual direct job cost plus a fixed percentage, and have a little incentive
to reduce job cost. Furthermore, if there are pressing needs to complete the project,
overtime payments to workers are common and will further increase the job cost.
Unless there are compelling reasons, such as the urgency in the construction, the owner
should not use this type of contract.

Cost-plus Fixed Fee Contracts

Under this type of contract, the Contractor will receive the actual direct job cost plus a
fixed fee and will have some incentive to complete the job quickly since its fee is fixed
regardless of the duration of the project. However, the Owner still assumes the risks of
direct job cost overrun while the Contractor may risk the erosion of its profits if the
project is dragged on beyond the expected time.

Cost-plus Variable Percentage Contracts

For this type of contract, the Contractor agrees to a penalty if the actual cost exceeds the
estimated job cost, or a reward if the actual cost is below the estimated job cost. In return
for taking the risk on its own estimate, the Contractor is allowed a variable percentage of
the direct job cost for its fee. Furthermore, the project duration is usually specified and
the contractor must abide by the deadline for completion. This type of contract allocates
considerable risk for cost overruns to the owner, but also provides incentives to the
Contractors to reduce costs as much as possible.

Guaranteed Maximum Cost Contracts

When the project scope is well defined, an Owner may choose to ask the Contractor to take all the
risks, both in terms of actual project cost and project time. Any work change orders from the
Owner must be extremely minor if at all, since performance specifications are provided to the
Owner at the outset of construction. The Owner and the Contractor agree to a project cost
guaranteed by the Contractor as maximum. There may be or may not be additional
provisions to share any savings if any in the contract.

A + B Contracts
A (Cost) + B (Time) contracts are a new innovation imported from Europe. They were developed
by the Department of Transportation to reduce the time highways are under construction and
therefore are restricting traffic flow.. The A part is the sum of the unit prices to perform the
actual work items. The B part is the number of contract days a bid stated were required to
complete the work. The purpose of the A + B contract is to provide a way to compensate the
contractor for the expertise in sequencing and staging to complete the work quickly and efficiently

Standard Clauses in Construction Contract

Scope of work
The statement will describe the scope of the Contractors obligations. It will state whether he is to
be responsible for the design of the works or whether he is to work to a design supplied to him. It
will indicate the size, layout, and other features of the proposed works, usually by reference to
documents or drawings. A specification is also normally included which defines the materials to
be used and the required quality of workmanship. Further, it may deal with ancillary matters such

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as who is to provide various facilities such as power supply, the reinstatement of the site and so
on.

Contract time and access obligations

The time for completion and the time when the Contractor may have access to the site generally or
to specific areas of the site will be stated clearly, perhaps by reference to a drawing or program.
Furthermore, the client will be keen to know exactly who will have access to the site and he might
therefore require the contractor to give notice concerning personnel and Subcontractor attendance
on the site, perhaps with some powers to restrict entry to certain individuals.

Terms of payment
The Contractor and client will wish to ensure that the price is agreed in advance. The Contractor
may also wish to receive advance payments and stage payments. Frequently the contract will also
provide for retention monies, sums to be deducted at the time of payment from the sum which
will become due to the contractor under the contract, the retained monies will be used by the
Owner to ensure the Contractors full compliance with the contract and to cure any defects which
will occur in the works during a specified period after the completion of the works.

Variations
During the currency of the project, additional work to that originally described in the contract
appears necessary. For instance, the client may wish to have additional works carried out in part of
the site where the contractor already has resources available or the Contractor my uncover
conditions in circumstances where it make sense for the Contractor to rectify the a problem he
encounters and then rather than to get someone else to do the work. Variations to the work are
extremely common in all construction and it is very useful to write a statement concerning
variations into the contract stating the basis on which varies work is to be paid and who is to value
any varied work.

Insurance
This provision in a contract may answer such questions as who is to insure the Contractors
equipment which is left on the premises during the work or who is to insure against damage to
other property, including the works themselves, which is suffered as a result of negligence, bad
work or fire.

Disputes
In the event that disputes arise it is often useful to write into the contract a scheme for dealing with
those disputes. For instance, disagreements may, in the first place, be referred to a named
individual for his or her decision; in this decision is unacceptable to the parties then the contract
may contain an arbitration clause so that the matter may be dealt with by a private tribunal rather
than taking the dispute to the courts.

Subcontractors
Significant subcontracting is used in major projects, in order to control this on behalf of the Owner
there tend to be provisions for allowing, forbidding and nominating Subcontractors.

Forfeiture Clauses
The Owner may wish to have the right to terminate the construction project or the Contractors
involvement in it in certain circumstances, such as when the Contractor becomes insolvent.

Property in Plant/Site Clauses

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In order to safeguard his interests in the event of the Contractor failing to proceed with the work,
the Owner will often insist on provisions in the contract whereby he will take a property right in
the site and material brought onto site for the execution of the works.

Bond Obligations
In order to provide security for the Owner in the event of a default by the Contractor, the contract
often requires the Contractor to obtain a bond in favor of the Owner. This bond is an undertaking
by a third party (usually a bank) to pay the Owner a sum, which is stated in the bond, upon some
specified event. The bond device is efficient for the Owner in that the money is readily and
quickly obtainable even if the contractor goes into liquidation.

Construction Contract Documents

Agreement
The agreement is the document that represents and reflects the legal contract between the Owner
and the Contractor. There is also a contract between the owner and the designer, and between the
General Contractor and the Subcontractors, or between Contractors and the suppliers for those
contracts. The purpose of the agreement is to record in written form those items agreed to by the
Owner and the Contractor. It is a letter that constitutes legal evidence that a contract exists and
forms the basis for its enforcement. The agreement must contain:









Date of the agreement

Names and addresses of the contracting parties
Description of the scope of work
Time limitation
Contract considerations
Payment conditions
Reference to other documents
Signatures

General Conditions
The General Conditions define the responsibilities of the parties involved in the contract. It
describes the guidelines that will be used in the administration of the contract. It must contain the
following:










A definition of the contract documents that lists and gives a brief description of the
documents that form the contract
Document precedence, which clearly states which document will have precedence over
the other in case of discrepancy
Duties and responsibilities of the owner and contractor and other concerned parties
A definition of how a portion of the work can be awarded to a subcontractor and the
working relationships between the subcontractors
The rights of the owner to self-perform construction or to award work to separate
contractors
The time for completion of the work
The mode of frequency of payment or the stage of work that determine when the
contractor will be paid. This section also contains the rights of both parties with respect to
retainage and the definition of completion.
The requirements and penal value of bonds and insurance. This section includes bid
bonds as well as payment and performance bonds.
The condition that constitutes change of work and the steps to be taken when a change
order is required.

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Supplementary Conditions
The Supplementary Condition is sometimes known as Special Provisions or Special Conditions.
The purpose of the Supplementary Conditions is to provide an extension of the General Provisions
of the contract to fit the specific project at hand. They serve as amendments or augmentation to the
General Conditions. Items that may be included in the Supplementary Conditions are:












The system for dispute resolution such as arbitration or mediation must be defined. Also
the rights of each party to terminate the contract must be detailed.
Miscellaneous provisions such as the governing laws, delegation of work, requirements
for inspection and test, approvals during the work and statutory limits.

The number of copies of contract documents to be received by the Contractor

Survey information to be provided by the owner
Material provided by owner
Changes in insurance requirements
Phasing requirements
Site visits
Start date of construction
Requirement for security and temporary facilities
Procedures for submittals and processing of shop drawings
Cost and schedule reporting requirements
Responsibilities for testing materials

Specifications
Specifications may also be known as Technical Provisions. They are written instruments to be
used in conjunction with the drawings, so together the drawings and specifications fully describe
and define the requirements of the contract, to include the quality that is to be achieved. They
supplement the drawings and provide information that cannot be shown in graphic form, or
information that is too lengthy to be placed within the drawings. They guide bidders in the
preparation of cost proposals as well as field execution of the work. They also guide the
Contractor through the processes of ordering materials and construction and installation of facility.
Specifications provide information regarding:





The quality of materials

The quality of workmanship
Erection and installation methods
Test and inspection requirements and methods

Drawings
Drawings are the means by which the designer conveys the physical, quantitative and visual
description of the project to the Contractor. The drawings are a two-dimensional representation of
the physical structure that meets the objectives of the Owner.

Addenda
Any change to the bid documents after they are released for bidding but before bids are actually
received requires the issuance of an addendum. This formal document changes the original bid
documents and becomes a part of the bid package. Typically addenda may be issued to change the
bid opening date, to modify the original design, to delete or add items or to correct errors.
Addenda may not be issued within about five days of bid opening unless the bid date is also
extended accordingly.

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Subcontracts
A Subcontract is an agreement between a prime or General Contractor (GC) and a Subcontractor
(SC) for the execution of a portion of the contractual obligation of the GC to the Owner. The typical
scheme will entail the Employer letting the work to a main contractor who in turn sublets it to a
subcontractor. A subcontract is as much a contract as is the main contract and is subject to exactly the
same requirements as any other contract Subcontracts are widely used in the construction industry,
particularly for work with a specialist element, such as air-conditioning systems or cladding to
building.
Subcontractors contract directly with the GC and usually do not have any contractual relationship
with the owner. The GC responsible to the owner for the quality of the SCs performance; however,
the GC must ensure the contract between the GC and SC indicates that the GC is not responsible for
the SCs negligence. If the approval of the SC by the Employer is required, the approval must be
obtained before the subcontract is signed.
The practice of subcontracting enables Contractors to maintain a stable work-force because the
GC have the workforce of the Sc available when they are needed, without the requirement to maintain
a huge workforce of their own at all times. Subcontractors are generally able to provide a better-trained
and properly equipped workforce in their area of specialization. Another incentive in hiring
subcontractors is either to reduce cost or mitigate project risks. In this way the GC receives the same or
better service then the GC could have provided by itself at lower overall risk.

Types of Subcontractors
Domestic Subcontractor
A Subcontractor who contract with the General Contractor to supply or fix any materials
or goods or execute work forming part of the main contract

Nominated Subcontractor
Certain contracts permit the Architect or Project Manager to reserve the right of final
selection and approval of Subcontractors. The main Contractor is permitted to make a
profit from the use of nominated Subcontractors on site, but must provide attendance
usually provision of water, power etc., to enable the nominated Subcontractor to do his
job. In effect, the appointment of nominated Subcontractors establishes a direct
contractual relationship between the Owner and the Subcontractor.

Terms of Subcontract
The same rules of contract apply to subcontracts as they do to main contractors because of the
network of contracts on a project subcontracts are often written with specific reference to the main
contract. Often they contain a term which expressly incorporates the terms of the main contract as
these are consistent with the subcontract or some other such phrase. Often the payment provisions
and claims procedures are closely linked such as the pay when paid clauses are. Often it is the
duty of the Contractor to seek to claim on behalf of his Subcontractor.

Employer control of subcontract work.

There are a number of practical ways in which the Owner can provide some degree of control over
subcontract work even though the party undertaking the work and the Owner has no contract.
First, the Owner will normally insist that the main contract provides the Owner or his agent with
a right to object to the appointment of proposed subcontractors. The contract is typically worded
so that the contractor must seek the approval of the Owner or his agent before taking on any

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subcontractor. If the subcontractor is employed without prior approval, the Owner will be entitled
to eject the subcontractor from the site whether or not the subcontractor has breached any term of
the contract, and the subcontractor may be entirely innocent. In this case, the subcontractor will
have to seek a remedy from the contractor based on the contractors breach of contract, as a term
is generally implied into contracts that the contracting parties have authority to enter into the
contract.
Second, the main contract may contain terms authorizing the Owner or his agent to issue
instructions to the contractor on the mode of performance of the contract. If the work is sublet, and
the subcontractor appears to be undertaking the work in such a way that there is a risk that the
contract specification may not be attained, the Owner may issue an instruction concerning the
performance of the work. A failure by the subcontractor to comply with the instructions will be a
breach by the main contractor of his obligations under the main contract. If the corrective action is
not taken immediately, the Owner will be able to stop the works. If the subcontractor continuous
with the works in defiance of these instructions, the Owner is entitled to eject him from the site.
The subcontractors remedy will be against the contractor.
Management Contracts

Construction Management
Construction Management is a process by which an Owner engages an agent, commonly referred
to as the Construction Manager. The Construction Manager then coordinates and communicates
the entire project process which may include project feasibility, planning, design, construction and
project implementation. The primary objective is to minimize time and costs while
maintaining project quality.
The CM has the obligation to serve as if he or she was an employee of the Owner. A CM has the
legal authority to represent the Owner and carry out business dealings in the Owners behalf.
Because of the relationship between the CM and the Owner, the CM has the right to select the
contractors for the Owner and to manage relationships between the Contractor and Owner. Besides
working with the Owner and General Contractor, the CM also has to work with the designs,
testing labs and material and equipment suppliers. On lager projects the Cm may have a group of
inspectors to supervise.

Construction Management at Risk

Construction management at risk, or CM @ risk, enables the Owner to select a Construction
Manager based on qualifications rather than low bid. The Construction Manager works with the
designer during the design phase of the project and acts as the General Contractor during the
construction phase. The purpose of CM @ risk is to reduce the risk of cost overrun and schedule
creep, and to expedite the construction process without compromising quality. The Owner
solicits proposal from a select group of Construction Management firms and checks their work
history, the qualifications of their staff, their system approaches and experience with similar
projects and proposed management structure. The Owner selects the Construction Manager
on qualification, reference and perceived best value.
The Construction Manager becomes an integral part of the project team, providing advice and
counsel to the Owner. As each phase of the design is completed, the Construction Manager solicits
preliminary and final bids from specialty contractors and performs the following services:



Review the design for buildability, including cost, time, quality safety and market trends
impacting the work
Pre-qualifies the subcontractors

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Divides the scope of work for bidding purposes

Recommends award of the subcontracts

The CM then prepares the final cost estimate for the total project including work that has yet been
bid. Based on the above information and the predefined scope of work, the CM submits a final
guaranteed maximum price including indirect costs, bonds, bid and unbid costs and contingency.
Unused contingency funds at the end of the job are either returned to the owner or split between
the owner and the CM, depending on the terms of the contract. The CM manages the construction
as a General Contractor, assuming all the responsibilities for cost, time, safety and quality. The
process is subject to audit by the Owner throughout. The guaranteed maximum price can be
increased only if the architect or the owner changes the scope of work.
There are advantages to the owner from using the CM @ risk approach:








Risk is reduced for the architect and owner

Produces a more manageable and predictable project cost and schedule outcomes
Centralizes responsibilities
The owner benefits from the CMs experience both during design and construction
Allows for an early start to construction by phasing the work
Results in better quality construction because the selection of the Cm is based on record of
performance in the same type
Pricing is fair and there is an atmosphere of trust because the project is open book

The disadvantages that have been experienced in the CM @ risk process include:






It is difficult to award enforceable contract using incomplete design documents

The CM is at risk of having to pay any costs that exceeds the guaranteed maximum price but
that so not result from owner scope changes
The CM must rely on its own estimate because of the incomplete documents
Disputes can arise regarding what was implied but was not in the contract documents at the
time the CM submitted the GMP.
CM @ risk is not suitable to small projects

CM @ risk creates a collaborative and non-adversarial environment that uses the wisdom,
experience and creativity of the architect and the CM. the Cm has the opportunity to review the
design as it progresses and to offer suggestions based on his experience and expertise.

Arbitration
The binding resolution of disputes by one or more neutral persons (usually called arbitrators), as
a substitute for judicial proceedings; may be invoked only by agreement of the parties to the
dispute, but such agreement may be arrived at before there is an actual dispute, as, for example,
through a clause in a contract between them, or after a dispute has arisen. Arbitration proceedings
characteristically are less formal than those in court, and the rules of evidence and most rules of
substantive law that would be invoked by a court are not applied.
Arbitration is a dispute resolution which operates in parallel with the court system. Parties to a
contract may decide that it is more appropriate to have their disputes (existing or future)
adjudicated by a privately constituted tribunal than a public court. In such case, the law enables t
hem to empower one or more arbitrators to rule upon their disputes in a decision which binds them
both.

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Negotiation
Negotiation is a process in which two or more participants attempt to reach a joint decision on
matters of common concern in situations where they are in actual or potential disagreement or
conflict. It is an interaction of influences. Such interactions, for example, include the process of
resolving disputes, agreeing upon courses of action, bargaining for individual or collective
advantage, or crafting outcomes to satisfy various interests. Negotiation involves two basic
elements: the process and the substance. The process refers to how the parties negotiate: the
context of the negotiations, the parties to the negotiations, the relationships among these parties,
the communication between these parties, the tactics used by the parties, and the sequence and
stages in which all of these play out. The substance, however, refers to what the parties negotiate
over: the agenda, the issues, the options, and the agreement reached at the end.
Negotiation is the least costly and most flexible method of dispute resolution, allowing high
degree of control over issues and time factors. The matter in question can remain confidential, and
the differing parties can focus on the specific technical issues while avoiding legal technicalities.
Negotiation is also the method most likely to preserve the ongoing business relationship of the
parties.

Litigation
Litigation is the process of dispute resolution operated by the state through the courts. In the case
of construction disputes where there is no agreement to arbitrate, the first venue for the dispute to
be heard is the Regional Trial Court for small disputes or the Supreme Court for substantial
disputes.

Mediation
Here a third party brings the parties to a dispute together. The mediator discusses the issues with
them, both in open session and in private discussions with individual parties. The mediator often
acts as a messenger who shuttles between the parties with suggestions. While it is not his or her
function to suggest solutions, for it is important that the mediator is perceived as impartial and
open-minded throughout, he or she is entitled to point out strengths and weaknesses of each
partys case.
Mediation can be a tremendously effective tool in resolving disputes without destroying business
relationships. It allows parties to work toward a resolution out of courts without spending large
sums on legal expenses. Its precepts also ensure that a company will not become trapped in a
settlement that it finds unacceptable. Mediation only works when the parties employing it are
willing to go all out in the attempt to achieve settlement, and that the mediator must be selected
carefully, with an eye toward the critical attributes of neutrality, subject matter and process
expertise, and previous track record. Often it is the last step before litigation, and represents the
efforts of both parties to avoid litigation

Conciliation
Here the third party brings the party endeavors to bring the parties to a dispute together in order to
discuss and to resolve their dispute. The conciliator does not become heavily involved, does not meet
either of the parties in private and it is not his or her function to suggest possible solutions to the
dispute. The conciliator is a catalyst rather than a source of energy.

Partnering
Partnering is a philosophy of construction management, based on trust. Partnering meetings are
held before the project starts in an effort to develop a level of trust between the owner and contractors.
Common goals and objectives are identified. A charter, in which all parties resolve to operate in an

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atmosphere of trust, is written and signed. A dispute resolution framework is put in place to require
problems to be solved in the field within a very limited number of days or elevated to the nest level of
management. Monthly partnering meetings are held to evaluate the partnering process. All meetings
are chaired by an outside facilitator to create a level playing field for the contract partners.
Project Neutral
Project neutral is a new approach to dispute resolution that is being used on very large, highly
technical projects. The project neutral is a person or a team that is hired before the construction
contract is awarded, and who participates in the project throughout the construction period. The
project neutral is technically knowledgeable, and extremely well informed in matters of construction
and the contract requirements. As the name implies, the project neutral does not represent the position
of any of the project parties and does not advocate positions taken by any party. The project neutral is
analogous to an official in an athletic contest providing expert on-the-spot decisions when they are
needed. Typically the project neutral visits the project often enough to remain well informed of the
status of work, and the beginning of any dispute or potential claims. The function of a project neutral is
to reach a solution to disputes. The finality of the decisions made by the project neutral depends on the
provisions of the contract.

Mini-trial
Mini-trial is a short hearing in which each party presents its summary case in an agreed time
(usually two hours or less) with short replies to the other partys then following. The panel who are
addressed during this procedure consists of an independent third party and representatives of both
sides, often senior executives from each disputant who are not connected with the dispute. The panel
retires at the end of the presentations and formulates recommendations which can be accepted or
rejected by executives from each side. The object of the exercise is to allow both sides to prepare their
best points and then to run them Pat senior executives, who are in best position to take commercial
decisions such as whether to pursue the case or to settle