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The committee on Bills in the Third Reading to whom was referred the petition (accompanied by bill, Senate, No. 2607 ) relative to promoting alternative dispute resolution, reported, recommending that the same ought to pass, with an amendment substituting a new draft entitled "An Act promoting alternative resolution of certain public works disputes" (Senate, No. 2655). Steven M. Brewer, |
Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority of the same, as follows:
SECTION 1.
Section 39Q. (a) There shall be a mandatory alternative
dispute resolution program for contractually-based claims with a value of less
than $10,000,000 in connection with the construction of public works and
capital facilities for the commonwealth and all its state agencies. For claims
with a value of at least $10,000,000, parties shall agree to participate in either
the alternative dispute resolution program established in this section or
mediation. For purposes of this section,
a “state agency” shall be defined as that term is defined in section 1 of chapter
6A. This section shall apply to all public construction contracts awarded by a state
agency. The alternative dispute
resolution procedures set forth in this section shall apply only to claims by
persons, firms, or corporations that have direct contracts with a state agency.
The alternative dispute resolution procedures set forth in this section shall
not apply to claims under section 39F of this chapter and section 29 of chapter
149, and no claims under section 39F of this chapter and section 29 of chapter
149 shall be consolidated with any claims under the procedures in this section.
Each state agency may propose and adopt
its own alternative dispute resolution procedure, provided that the procedure
contains the minimum standards set forth in subsection (b) of this section. If a state agency fails to adopt its own
alternative dispute resolution procedure within 60 days after the effective
date of this act, subsection (c) of this section shall apply to that state
agency. A state agency which has adopted
an alternative dispute resolution procedure containing the standards set forth
in subsection (b) shall include its provisions in any public works or capital
facilities construction-related contract.
If the state agency has not adopted an alternative dispute resolution
procedure, the terms set forth in subsection (c) shall be inserted in every
contract for the construction, alteration, remodeling, repair or demolition of
any capital facility or public work.
Where the terms set forth in subsection (c) of this chapter were
required to be included but are in fact omitted from a contract, those terms
shall be considered to be part of the contract.
(b)
Each alternative dispute resolution procedure adopted under this section
must at a minimum:
(1) Require the opposing party to articulate its
position in writing within 30 days after the dispute is submitted in writing to
it by the party initiating the process;
(2) Produce a decision to be issued within 210
days after the dispute is submitted in writing by the party initiating the
process, unless the parties mutually agree to extend that period, and provide
that failure to issue a decision within this period of 210 days or longer by
agreement of the parties shall be considered to be a denial of the claim,
triggering the appellate rights available under this section;
(3) Permit each party to inspect all documents
supporting the opposing party’s position, including, without limitation,
statements of both percipient and expert witnesses which have been reduced to
writing or orally recorded, without making those documents public records as
defined in clause Twenty-sixth of section 7 of chapter 4 of the General Laws. Attorney-client
privilege and the attorney work product doctrine shall apply to these documents;
(4) Provide for non-binding alternative dispute
resolution before a neutral fact finder,
or a fact-finding panel which shall include an equal number of representatives
of the parties
[JF1]
to the dispute and must include at least
1 disinterested person, with the costs split by the state agency and
contractor;
(5) Allow both parties to agree to enter into
binding arbitration from the outset.
(6)
Require the fact finder to prepare a written record of proceedings
sufficient for purposes of judicial review;
(7)
Permit either party to appeal from the non-binding decision set forth in
the preceding clause and authorize the contractor to elect (i) binding
arbitration to be conducted in accordance with subsection (c) or the rules of the
American Arbitration Association, or (ii) judicial review. The findings of fact and decision of the
neutral fact finder, fact finding panel or the hearing examiner shall be
admissible in any subsequent administrative or judicial proceeding.
(c)
Except as otherwise provided in subsections (a) and (b) of this chapter,
and notwithstanding any previously enacted general or special law to the
contrary, every state agency shall apply paragraphs 1 to 5, inclusive, to the
terms of public construction contracts awarded by any state agency:
(1)
Disputes regarding changes in and interpretations of the terms or scope
of the contract and denials of or failures to act upon claims for payment for
extra work or materials shall be resolved according to either the
administrative, judicial or arbitration procedures in this and the following
paragraphs, which shall constitute the exclusive methods for resolving these disputes. Written notice of the matter in dispute shall
be submitted by the claimant to the chief executive official of the state
agency which awarded the contract or the official’s designee
[JF2]
, or to the chief executive officer of
the contracting company, within a period which commences with
[JF3]
the execution of the contract or the
authorized commencement of work on the contract project, whichever begins
first, and ends when the claim would otherwise be foreclosed by the passage of
time and operation of applicable law.
Acceptance of an amount offered as final payment shall not preclude any
person, firm or corporation from bringing a claim under this section unless the
claim has been expressly released before or upon final payment. All legal defenses except governmental
immunity shall be reserved to the state agency.
Interest on any award shall begin to accrue to a claimant under this
paragraph 60 days after the claimant submits a notice or demand to the state
agency for the unpaid debt upon which that interest is to be based. No person or business entity having a contract
with a state agency shall delay, suspend, or curtail performance under that
contract as a result of any dispute subject to this paragraph. Any disputed order, decision or action by the
state agency or its authorized representative shall be fully performed or
complied with pending resolution of the dispute. No consolidation of arbitration proceedings
shall take place where the state agency is not a party to both arbitration
proceedings before the consolidation.
(2) Within 60 days after submission of
the initial notice of the matter in dispute to the chief executive official of
the state agency or the official’s designee, the chief executive official shall
issue a written decision stating the reasons for the decision, and shall notify
the parties of their options for appeal.
If the chief executive official or the official’s designee is unable to
issue a decision within 60 days, he shall notify the parties to the dispute in
writing of the reasons why a decision cannot be issued within 60 days and of
the date by which a decision shall issue. Failure to issue a decision within
the 60-day period or within an additional time period specified in this written
notice, if any, and agreed upon by the claimant shall be considered to
constitute a denial of the claim and shall authorize resort to the appeal
procedure described below. The decision
of the chief executive official or his designee shall be final and conclusive
unless an appeal is taken as provided below.
(3)
Within 21 calendar days after the receipt of a written decision or of
the date a denial is considered to have occurred by virtue of a failure to
issue a decision as stated in paragraph (2), any aggrieved party may file a
demand for arbitration under paragraph (4) and shall thereafter serve copies
upon all other parties in the form and manner prescribed by the rules governing
the conduct of adjudicatory proceedings of the division of administrative law
appeals. The aggrieved party may instead
file an action directly in a court of competent jurisdiction. If an aggrieved party exercises his option to
file an action directly in court as provided in the previous sentence, the 21-day
period shall not apply to the filing and the period for filing this action
shall be the same period otherwise applicable for filing such a civil action in
court.
(4)
A demand for arbitration shall include the amount of damages sought and
the alleged facts and contractual or statutory provisions which form the basis
of the claim. Arbitration of a claim or
claims shall be conducted under the
rules of any dispute resolution entity, approved by this person, firm or
corporation and the chief executive official of the state agency or the
official’s designee and the provisions
of this paragraph, except that if the parties cannot agree upon a dispute
resolution entity, the arbitration shall be administered by the public
construction rules of the American Arbitration Association and this paragraph
[JF4]
, and in the case of a conflict, this
paragraph shall govern. If a demand for
arbitration is made to the chief executive official of the state agency or the
official’s designee, each party shall allow the other to examine and copy any
nonprivileged documents which may be relevant either to the claimant’s claims
or to the state agency’s defenses to these claims. The attorney-client privilege and the
attorney work-product doctrine shall apply to the state agency’s
documentation. All issues not addressed
by this paragraph or by agreement, or by the rules of the mutually-designated
dispute resolution entity or the American Arbitration Association, whichever
shall apply, shall be governed by chapter 251.
Any documents obtained by the agency through discovery shall not be
subject to compelled disclosure under chapter 66 and shall not be disclosed by
the state agency to any person or entity that is not a party to or an agent of
a party to the arbitration. These documents
shall be used only for settlement or litigation of the parties’ claims. The arbitrators shall determine any claim of
privilege or issue as to the relevance of documents after an in camera
inspection. The arbitrators shall seal these
documents during arbitration, and the arbitrators, as well as any other party
obtaining a copy during discovery, shall return the documents to the appropriate
party claimant after final disposition of the claim.
(5) Hearings shall be scheduled for
arbitration in a manner that shall ensure that each party shall have reasonable
time and opportunity to prepare and present its case, taking into consideration
the size and complexity of the claims presented. Unless the parties mutually agree otherwise,
no evidentiary hearing on the merits of the claim may begin less than 30 nor
more than 120 days after the demand for arbitration is filed with the dispute
resolution entity.
The arbitrators shall conduct the hearing
and shall hear evidence of the facts and arguments as to the interpretation and
application of contractual provisions.
After the hearing, the arbitrators shall issue in writing the following:
(i) findings of fact, (ii) a decision in which the arbitrators interpret the
contract and law and apply it to the facts found and (iii) an award. The arbitrators’ findings of fact shall be
final and conclusive, and their decision and award shall be final and binding,
subject, in both cases, to vacation, rehearing or confirmation under section 12
of chapter 251, and under the standards set forth in section 14 of chapter 30. Interest on any award shall begin to accrue 60
days after an initial notice is filed.
(d) The secretary of administration and
finance shall prepare annually a report concerning the construction contract
claims submitted to state agencies during the preceding 12 months, in such form
as the secretary shall prescribe. The
report shall contain, at a minimum, the following information: the number of
claims submitted; the names of all parties to each claim; a brief description
of each claim; the date of submission and of disposition of each claim; its
disposition, whether by settlement, withdrawal, default, written agency
decision, non-binding arbitration under an agency plan approved under subsection
(b), or binding arbitration under subsection (c); and the number of claims
currently pending. The original report
shall be submitted by the secretary of administration and finance to the clerks
of the house and senate by January 15, and a copy shall be filed with the state
librarian and shall be a public document.
The fourth annual report so filed and each report thereafter shall set
forth recommendations concerning the implementation of the alternative dispute
resolution program established by this section, including a recommendation
whether to eliminate the option available to each state agency to adopt its own
program under subsection (b) .