VE-ADR 2012: Emerging Strategies for Successful Construction Defect Expert Witnesses and Consultants

In July 2012, I attended LiMa Solutions’ Value-Engineered Alternative Dispute Resolution conference in beautiful Key West, FL. The goal of the conference: How to improve the construction defect dispute resolution process. Here is an overview of my observations at the conference. After the conference, I spent hours transcribing my notes into a spreadsheet, categorizing the notes based on who might benefit most from the information. The first article I wrote was directed at construction defect plaintiff attorneys. This article is directed towards the various consultants (like myself) and expert witnesses that are integral to construction defect claims. As before, this article reflects my observations only, and should not be construed as legal advice. This is for information purposes only.

In a construction defect dispute, experts play a crucial role. Due to the highly technical nature of these types of cases, it is essential that a person with sufficient knowledge, training and experience explain those technical issues. If a dispute proceeds to trial, parties will often designate an expert witness to provide testimony regarding their opinions of the facts in that case.

Without expert involvement, attorneys would not be able to provide their client with the best representation possible. Without expert testimony, judges and juries would not be able to make informed decisions.

While experts play a significant role in the outcome of construction defect disputes, the relationship between experts and other professionals in the industry can be highly contentious. Or as the saying goes, “Can’t live with them, can’t live without them.”

The construction defect industry is changing, and the volume of cases is expected to decline by 75% over the next five years. In this article, I will try to share some of the information from participants at VE-ADR 2012 relevant to expert consultants and expert witnesses to deliver more value to the clients they serve.

1. Your Fee Is A Big Part of the Problem

Or, it is time to stop partying like it’s 1999…

I remember the good old days. Destructive testing (DT) was really destructive! It wasn’t uncommon to cut hundreds of square feet of drywall, stucco and/or roofing at each unit during testing. I remember complete removal/replacement of entire bathrooms, windows, decks, showers. Back in the day, before mold was excluded in most insurance policies, I remember the thrill of full containment: Tyvek suits, full-face respirators, HEPA scrubbers, alcohol wipes for our cameras – like a scene out of E.T.! The lead expert firm for primary parties on large cases could easily generate billings of hundreds of thousands of dollars. Heck, I remember budgets for trial prep alone in the six-figures for cases involving less than 15 homes.

Those days are over.

And the people that are responsible for paying your bills and mine, are over it as well. Who are those people? For the most part, insurance pays the bulk of the cost associated with expert firms. (There are always exceptions, of course…) Insurance carriers have an obligation to their shareholders to limit their expenses, so a lot of scrutiny has been paid to expert fees over the years.

Here are some tactics that you might want to consider to make your fee more palatable:

The biggest reason I see expert firms losing market share is because they are perceived as expensive. If opposing counsel or the mediator thinks you are expensive, how does that benefit your client?

2. You Aren’t Supposed To Be An Advocate

Somehow, in American popular culture, everyone got it in their head that “the customer is always right.”

Wrong.

When you are a provider of professional services, you need to offer your services to the best of your ability, according to the standards of your industry. Even if your client (or the party you are representing) ask for something else.

It’s called integrity.

The attorney’s job is to be an advocate. As an expert witness, you are required to be impartial – your opinions are based on your experience, knowledge and training, and on the evidence gathered in the course of discovery. Will that lead to conflict? Sometimes. But if you are a professional, and the attorney you are working with is a professional, there should be some way to resolve that conflict.

During the panel discussions at VE-ADR 2012, the “expert as advocate” complaint came up over and over again. In fact, the term “whore” was used by more than one attorney/mediator in reference to expert advocacy.

The second biggest reason that I see expert firms losing market share is that they are perceived as advocates.

I’ll leave it to the lawyers and judges to explain the various laws and legal decisions that apply to experts.

Instead, since interpretation of industry standards is central to the role of an expert, I’d like to point out an applicable standard that few experts seem to be aware of. The document is known as the Recommended Practices for Design Professionals Engaged as Experts in the Resolution of Construction Industry Disputes and was originally published by the Association of Soil and Foundation Engineers (ASFE). This document has been embraced by the Interprofessional Council on Environmental Design (ICED) and has been adopted by 40 professional organizations including the AIA, ASCE, NSPE, ACEC, ASME, ASHRAE, SME, AAES, etc. Therefore, if you are a member of one of those organizations and regularly offer expert services, you would be well-served to review this document.

Contact me if you’d like me to send you a copy via email.

3. Focus On The End Result: Resolution

Nobody says, “I want to be an expert witness when I grow up.”

To be an expert, you have to have expertise. Expertise comes from experience. Every so-called expert I know has years – often decades – of experience working in active design and/or construction.

Some came to construction defect litigation because of a chance opportunity. Others came to the business during a slump in the construction industry. Some came for the money.

Regardless, there is a certain optimism or idealism that I find among my colleagues and peers. A notion that we are somehow part of the solution to the ills in the construction industry.

If something is broke, let’s fix it! If it isn’t broke, quit wasting time and money arguing about it.

At the end of the day, the parties we represent and the clients who hire us are simply looking to move on.

There are always going to be cases where resolution may only come about through trial. The vast majority of cases should never go that far.

What are some of the obstacles to resolution that directly involve experts?

  • The Great Divide – The classic scenario where plaintiff experts call for complete destruction and reconstruction, but the defense experts recommend offering little more than pocket change.
  • Excessive Costs – When expert fees are more than the cost of making repairs, something is clearly amiss.
  • Copy Pasta – When every defect list and every report reads exactly like the one in the previous project, it is understandable that suspicions might be raised.
  • Lack of Evidence – In the age of digital photography, the cost of taking additional pictures is negligible. Also, extrapolations should be statistically valid – you’re an expert, not a pet psychic…

4. Communicate Early and Communicate Often

Without a doubt, everyone attending the VE-ADR 2012 conference agreed that communication with experts is of utmost importance.

Plaintiff counsel, developer counsel, subcontractor counsel, mediators, judges, and insurance claims adjusters all advocate early case evaluation is not just prudent, it is an ethical imperative.

When an expert is retained, the sooner they can offer feedback to counsel, the better. Here are some things to focus on:

  • What are the primary issues driving this case?
  • Who are the other players and how will that affect strategy?
  • Will more investigation (including DT) be helpful?
  • Would a meeting between experts representing opposing parties yield a much more expedient resolution?

Communication is a two-way street. If you don’t have the information you need as an expert, ask for it.

5. The Times They Are A-Changing

As mentioned earlier, according to economist Gary London, the volume of construction defect cases is expected to drop by 75% over the next five years. Less cases mean less work for experts. I have watched as a number of firms have downsized or even collapsed over the last several years, and I know many are on the brink.

What can expert firms do to survive, and perhaps even thrive in the coming years?

  • Consider strategic alliances and consolidating resources. This reduces the cost of investigation, and adds significant value for your clients.
  • Re-structure your fees. As I mentioned above, flat-fee or fixed-price service offerings for known and predictable scopes of work are worth considering. Firms that have adopted alternative fee arrangements are seeing massive increases in revenue.
  • The host of VE-ADR 2012 was Ed Martinet’s firm LiMa Solutions. They are taking the concept of neutral expert services to a new level. Could this model become a trend?
  • Ted Bumgardner, of Xpera, pointed out that there are two types of “experts” – those that are more technical, and those that present well. Not every case requires the full-time involvement of a testifying expert. In other words, make better use of more cost-effective technical staff.
  • Expand your service offerings by leveraging knowledge and expertise outside of litigation. (Here is a hint…)
  • Acquire new skills, knowledge and technology. They say you can’t teach an old dog new tricks – the next few years will provide an opportunity to test that theory out.

Conclusion

I have had a lot of fun, learned a whole lot, and met some really incredible people working for and with various experts in the construction defect litigation industry.

Sadly, just like in the rest of the construction industry, a lot of good people are leaving. So much knowledge and expertise will undoubtedly be lost, to the detriment of all.

Dave Stern, of West Coast Casualty Service, said something that really resonated with me:

This [the construction defect industry] is the biggest people business outside of retail.

I agree.

About the picture: This was taken as the sun was setting on the last day of the conference in Key West. The LiMa Solutions staff threw a private party on the terrace of a restaurant overlooking the harbor. I wish I was still there…

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Due to interest, I made a nicely formatted PDF of this article for you to download, share and print, if so desired:

VE-ADR 2012: Emerging Strategies for Successful Construction Defect Expert Witnesses and Consultants (PDF)