The Brightline
West High-Speed Passenger Rail System is a 218-mile high-speed rail line connecting
Southern California to Las Vegas. The project was originally estimated to cost $12
billion but recent estimates have reached over $21 billion. The project was planned
to be completed in 2028 to align with the 2028 Los Angeles Summer Olympics but
is currently scheduled to be completed by late 2028 or early 2029.[iii]
The Francis Scott Key
Bridge Rebuild is a project to build Maryland’s first
highway cable-stayed bridge to replace the steel arch bridge that collapsed after
being struck by the MV Dali, a cargo ship, in 2024.[iv] Original estimates for
the bridge rebuild were approximately $1.9 billion. Current estimates suggest
that the rebuild will exceed $5.2 billion and be completed in late 2030.[v]
Given the astronomical
cost of civil megaprojects and their scale, complexity and extended project
schedule, as well as the high stakes involved, disputes and claims are
inevitable. Based upon a recent review of over 2,000 megaprojects with an
average budget of $1.28 billion in 107 countries, the top 10 contract-level causes
of disputes and claims on civil megaprojects are (1) changes in scope, (2) incorrect
design, (3) late issuance of design information, (4) incomplete design, (5) contract
management or administration failure, (6) poor management of subcontractors and
suppliers, (7) contract interpretation issues, (8) deficiencies in workmanship,
(9) late or restricted access to site work phase and (10) unforeseen physical
conditions. The results of these disputes and claims over the projects surveyed
accounted for total additional time to the project schedules of 994 years (an
average schedule overrun of 16 months, or 66.5% of the plan schedule) and total
additional costs of approximately $84.5 billion (an average 33.2% increase in the
project budget).[vi]
However, these contract-level
disputes do not generally exist singularly, nor are they insulated from other tensions
that can disrupt advancement and collaboration. As we have recently seen,
geopolitical risks, such as national security, political unrest, military
impacts, unanticipated tariffs on construction materials and trade
restrictions, exchange rate fluctuations, changes in global trade and supply
chain logistics, cyberattacks on critical infrastructure, changes in funding policies
and other market conditions affecting viability, also create conflicts about what
party bears the burden of such risks. While such risks increase construction
costs, cause delays and threaten the economic stability of projects, civil
megaprojects continue to be proposed, developed and completed.[vii]
Although parties have attempted to draft favorable language in their contracts to address anticipated tension points and the burdens associated with various foreseeable risks, owners and contractors continue to use robust tiered – progressive dispute prevention and resolution structures in an attempt to quickly and in real-time resolve issues before they negatively affect the cost or schedule of a project.
Parties have used issue resolution ladders to initiate the resolution of an issue at the lowest possible level, successively elevating the dispute from the project field level to the engineer/project manager level, management level, senior management level or higher level until the issue is either resolved or has little impact on cost or schedule.
Parties have also used self-facilitated or third-party-facilitated partnering to improve group dynamics and strengthen collaboration, jointly retained independent experts to opine on discrete technical issues in dispute, and binding and nonbinding dispute prevention and resolution boards with experience in construction, law and engineering to provide advisory opinions or reasoned recommendations.
If these early attempts to resolve issues are unsuccessful, parties have used third-party evaluative mediation to facilitate communication and identify settlement options, followed by arbitration to obtain binding resolutions.
In addition to implementing robust dispute resolution processes,
parties have begun to apply integrated project delivery (IPD) to create
collaborations and reduce disputes among owners, architects, contractors and
subcontractors. IPD fully integrates project teams to take advantage of everyone’s
knowledge to maximize project outcomes. It is the highest form of collaboration
because all three parties (owner, architect, constructor) are aligned by a
single contract. IPD can also integrate and
apply practices or philosophies to more traditional delivery approaches, such
as construction manager (CM) at risk, design-build or design-bid-build (where
the owner is not a party to a multiparty contract). In addition to not having a
multiparty contract, IPD as a philosophy features “traditional” transactional CM at risk
or design-build contracts, some limited risk-sharing (e.g., savings splits) and
some application of IPD principles.[viii]
IPD projects involve
collaborative, integrated teams working to accomplish goals by using building
information modeling (BIM) to integrate information and provide dependability,
consistency and interconnectivity to achieve better designs, better projects
and better value. Decisions are made in real time by consensus, thereby
avoiding conflicts and risks, and performance incentives are shared.[ix]
Although many of these alternative dispute resolution (ADR) processes and IPD philosophies may be used in contracts between the private sector as a matter of agreement, the use of any of these processes in public contracts for megaprojects will be limited by the law in the state in which the project is located.
For instance, with regard to ADR, as of 2024, only 15 state departments of transportation used some form of dispute resolution/review board as part of their dispute resolution process, 18 state departments of transportation were expressly authorized to use mediation and 16 state departments of transportation either had an express ability to arbitrate construction disputes based on their written processes or were required to arbitrate by statute.
Thirty-three departments of transportation and their
applicable state laws provided that contractors can sue in the state’s general
jurisdiction courts, with litigation in the state courts being the exclusive
remedy; 7 other states had created special bodies that hear contract disputes
with state agencies, with proceedings similar to those used in a court of
general jurisdiction;13 departments of transportation used administrative
boards as a means of resolving contractor claims.[x]
As the public contracting
process continues to strive for a more collaborative process, the progressive design-build
(PDB) project delivery system, which is widely used in the private sector, is a
precursor to the IPD delivery method. Currently, 35 states fully or widely
permit the use of the PDB delivery method, authorizing the procurement of the
designer-builder prior to setting an overall contract price. Twelve states permit
the limited use of the PDB method. One state (Pennsylvania) permits the use of the
design-build method, but not the PDB method. Two states (Alabama and Wisconsin)
prohibit the use of both delivery systems.[xi]
As the philosophy
regarding public contracts and the design-build and PDB delivery methods evolves,
it is anticipated that the state statutes regarding the use of ADR processes and the use of IPD will also evolve
to permit public owners to better manage conflicts and share in the risks and
rewards of the project beyond traditional collaborations.
Lisa
D. Love, Esq., FCIArb.,
is an arbitrator, mediator and neutral evaluator with JAMS and a member of
its Global Engineering and Construction Group. She is a commercial transactions
attorney with extensive experience in real estate, construction and finance.
She has worked on most sides of a transaction—including as an owner, lender,
equity investor and public agency representative—and brings a broad real
estate, construction and commercial transactions background to her work as a
neutral.
Ms. Love has served as a neutral
in complex commercial matters and legal disputes involving construction
defects, delay claims, breach of contract, investments, corporate finance,
cryptocurrency, securities, mergers and acquisitions, energy, licensing, franchises,
commercial real estate and antitrust.
[i] Megaprojects Continue to Shape
Construction Industry, Over $500 Billion in Pipeline, ConstructConnect, January
21, 2025
[ii] Hudson River Tunnel Project between
New York and New Jersey, Build America, U.S. Department of Transportation
[v] Maryland Transportation Authority
Releases Updated Estimates for Cost Range and Schedule for Francis Scott Key
Bridge Rebuild, November 17, 2025
[vi] Seventh Annual CRUXInsights –
Changing the Narrative – Analysis and Claims and disputes September 27, 2024
[x]
National Academies of Sciences,
Engineering, and Medicine. 2024. Resolving Construction Disputes: Review of
State DOT Processes. Washington, D.C.: The National Academies Press., Michael C. Loulakis, Contributor
[xi] 2025 Design-Build State Statute, Design Build Institute
of America
