When to Mediate, Arbitrate, or Litigate: Pros and Cons

Disputes frequently arise in construction projects. While many steps can help prevent them, construction work is complex, and issues will inevitably occur. Disputes commonly arise around payment issues, delays, defects, or changes in scope. When these issues surface, choosing the right dispute resolution method is essential. Mediation, arbitration, and litigation each serve different purposes, and understanding their strengths and limitations can help save time, money, and business relationships.

Mediation is an agreed-upon process of dispute resolution in which an appointed third-party mediator assists the parties in negotiating a mutually acceptable outcome. It is generally the least formal of the three methods and is often used early in a dispute.

The role of the mediator can vary depending on the situation. The mediator may help facilitate direct negotiations, assist the parties in identifying core issues, or learn the facts and positions of each side and provide feedback. The mediator reviews the facts and offers an assessment or recommendation focusing on helping the parties reach a compromise by identifying bottom lines and aligning priorities. The mediator’s goal is to help the parties compromise toward a central point between their original positions, determine bottom lines, and encourage both sides to reconsider their priorities.

Pros of Mediation

• Cost-effective
• Time-efficient
• Confidential and private
• Helps preserve business relationships

Cons of Mediation

• Often non-binding
• Dependent on both parties’ willingness to compromise

Best Time to Use Mediation

• Early-stage disputes
• Simple miscommunications or change order disagreements
• Scheduling issues
• When parties want to maintain an ongoing relationship

Arbitration is more formal than mediation but less formal than litigation and does not require attorneys, although attorneys are frequently used. Arbitration usually arises from an already agreed upon contract clause, giving the parties some control over selecting the arbitrator and setting procedures. It typically results in a binding outcome and is private, making it appealing for sensitive disputes.

In Washington State, certain disputes qualify for Mandatory Arbitration (MAR), designed to reduce court congestion by streamlining lower-value cases. Specific rules apply depending on case value and county population. A link to Washington’s full arbitration procedures is included at the end of this bulletin.