Is Voluntary Construction Dispute Mediation Necessary?

Most construction contracts make voluntary mediation a condition precedent to arbitration or litigation because of the need to have alternative ways to resolve construction disputes. This study aims to examine if voluntary participation is necessary for its wider adoption. The principal-agent relationship between developers and contractors is subject their asymmetric conditions and opportunism due to high asset specificity and risks uncertainty. In these contexts, this study examines the notion of voluntary mediation for disputants having inherent diverse interests. Construction professionals were invited to provide one mediation case and evaluate the extent of asset specificity, uncertainty, and asymmetric conditions between the disputing parties. Furthermore, the respondents were asked to assess the level of willingness, mediating behaviors and the mediation outcome. Regression analyses were performed and it shows that higher voluntary participation will promote collaborative mediating behaviors and better settlement. Moreover, power asymmetry was found to have no discernible effect on the mediation. Another interesting finding is mediation may only be effective for disputes of lower quantum. The study therefore sheds light on the versatility of voluntary construction dispute mediation.