Mediation Process for Contract Dispute Resolution in Real Property

This document is applicable for all construction contracts which are subject to GC 8 Dispute Resolution.

The Real Property Branch (RPB) has developed standard guidelines for a generic mediation process to assist project managers (PM) and contracting officers in cases where the mediation process has been accepted as the mechanism of choice for the resolution of disputes but where no mediation process has been pre-established within the contract.

Disputes may arise between PSPC and its consultants and/or contractors on any project regardless of their scope or complexity. The negotiation process remains the optimum choice within RPB to resolve a dispute or claim. Every effort should be made to achieve settlement via negotiation. While much time and effort is required to negotiate a settlement of a claim, it is usually far less than the time, cost and effort involved in properly preparing and presenting a case to a mediator, arbitrator, or the courts. In the event that negotiation is unsuccessful, the next process to be considered (if requested by either party) is mediation. Binding arbitration (rather than litigation) should be considered as a last resort.

The centralized NCA Claims Prevention and Management Unit (CPMU) has developed standard procedures to assist project teams with the mediation process in the resolution of disputes where no mediation process has been pre-established within the contract. In addition a generic Mediation Agreement is available (PSPC-SPAC 134 PDF 524B) (Help with Alternative FormatsThis link is available only to clients with access to Publiservice, the Government of Canada extranet.. Project teams are encouraged to utilize these procedures in an effort to:

  • promote a better understanding of the mediation process;
  • promote the need for better preparation for mediation negotiations;
  • optimize the PSPC position in the mediation process;
  • ensure a consistent interface with private sector firms;
  • safeguard PSPC interests through a systematic process;
  • mitigate against additional risk and liability;
  • reach a fair settlement for all parties involved.

Mediation Process

(Note: For construction contracts under PSPC's Dispute Resolution GC 8, the stipulated steps and procedures of the contract are to be followed).

There can be more than two parties involved in a dispute. It should be noted that a mediator's role is only to facilitate negotiation. A fully qualified mediator need not necessarily be an expert in the area of dispute, however at the discretion of both parties may nevertheless be retained in that capacity.

  • Under the dispute Dispute Resolution clauses in the construction contracts the contractor makes a written request to RPB (in accordance with GC8).
  • Under the Resolution of Disagreements in the Consultant contracts the consultant makes a written request to RPB (in accordance with GC 18) RPB initiates, or court-directed.

The mediation process begins when the parties agree (in writing) to mediate, and ends when any agreed-upon settlement has been duly concluded or can be terminated by the mediator or any of the parties at any time. The mediation process normally includes the following steps:

  • The CPMU can provide a list of potential private-sector accredited mediators which includes their experience, qualifications, availability and fee rates.
  • Project Team (PM/SPM), CPMU and RPC evaluates the experience, qualifications, availability and fee rates of the potential mediators and nominates a minimum of three possible choices as mediator.
  • CPMU or RPC forwards the list of potential mediators including their qualifications and fee rates etc., to the consultant/contractor for final selection.
  • the consultant/contractor can select one or reject all of the proposed mediators, in which case RPB must submit additional potential mediators (in the case of court-directed mediation, where the parties fail to mutually select a mediator, the court may select one).
  • the consultant/contractor provides written notification of their choice of mediator.
  • Project team in consultation with CPMU, legal services and the contract officer prepares three originals of a mediation agreement and distributes them to the contractor/consultant for approval/execution.
  • the contractor/consultant approves/executes the three originals of the agreement and returns them to the CPMU or RPC, who forwards them to the mediator for signature.
  • the mediator signs and returns the three originals of the contract to the CPMU who forwards to the project team for approval. The CPMU then transmits one copy to the mediator and one to the consultant/contractor.
  • PM prepares two originals of a Professional and Technical Services contract between RPB and the mediator specifying a statement of work, terms and conditions, basis of payment for fees and reimbursements as well as any cost sharing agreements (Note: mediators may wish to negotiate specific terms and conditions to their contract). The consultant/contractor must also agree to these terms.
  • PM ensures that the statement of work includes a clause to the effect that the mediator agrees to the terms and conditions as executed in the mediation agreement between RPB and the consultant/contractor.
  • the consultant/contractor prepares and issues their mediation brief to the mediator with a copy to RPB who prepare and issue its mediation brief to the mediator with a copy to the consultant/contractor. Both parties should be prepared to provide additional supporting documentation throughout the proceedings if requested by the mediator. Note: each of the parties is at liberty to engage consultants/experts and/or legal counsel (at their own expense) to prepare the mediation brief and/or assist them in the process. However, these individuals are not to be involved directly in the mediation process.
  • Prior to commencing mediation the PM must:
    • be delegated the authority to make a binding resolution (up to a predetermined level),
    • or be in a position to communicate 'on the spot' with a more senior manager to authorize the proposed resolution (the other disputants must also have similar authority).
  • the mediation session can be terminated if any party or the mediator decides that the mediation session is failing (in such circumstances, the mediator subsequently notifies the participants in writing).
  • where the parties fail to resolve the issues through the mediation process they are at liberty to pursue such other recourse as is available.
  • if a resolution is attained, the parties to the contract in dispute including the mediator prepare, in unison, a settlement agreement (handwritten or electronic), for signature by the parties before leaving the mediation locale.
  • the conditions of the resolution (if any), must be clearly identified and form part of the settlement agreement, and legal counsel may vet this agreement on behalf of their clients, prior to execution, if present at the mediation.
  • following a settlement agreement, and in cases where a contract may be amended as a result of it, RPC must issue an amendment to the contract to cover any costs. A release must be signed at the same time as the payment (if any) is made. Where litigation is involved, the legal advisors are to ensure the courts are duly informed.

Mediation Cost Responsibilities

Costs may vary with every mediation process. The following cost responsibilities identify the existing norms:

  • costs of the mediator and venue are borne equally by RPB and the consultant/contractor, with payment upon receipt of invoices.
  • RPB and the consultant/contractor are responsible for their costs (time, experts, travel, etc.)