consideration of the bill was postponed indefinitely,³¹⁷ what the bill attempted to accomplish is consistent with what CalPoly prepared and the CalPoly Report.³¹⁸ The CalPoly Report, released on July 7, 2023, not only included some of the same topics that are covered in this digest, but also addressed topics not covered in detail herein – particularly with respect to the details of the DOT’s internal claims processes.

Similar to Table 1, the CalPoly Report has several charts and tables that attempt to categorize what dispute processes a DOT is able to use. In most situations, the report is consistent with the findings presented in this digest. There are, however, a few entries that differ – particularly in terms of the contractor’s recourse in appealing the DOT’s final decision after all of the internal administrative processes have been exhausted. These differences are to be expected. As evident from the state-by-state discussion, the answer to this question for some DOTs is not readily apparent and may be subject to interpretation.³¹⁹

The CalPoly Report also provides valuable feedback from interviews and surveys on partnering, DRBs, and other claims and disputes topics, such as communicating with stakeholders. These are a strong complement to what is covered in Chapter VII of this digest.

V. ARBITRATION PROCESSES USED BY DOTS

As discussed in Chapter IV, 16 DOTs use arbitration to resolve some or all of those construction claims that have not been resolved through the DOT’s internal administrative process or through nonbinding dispute processes. Nine of these DOTs find their authority to arbitrate based upon state statutes. The other seven establish the arbitration process through their contracts or standard specifications and, as discussed in Chapter VII, often do this as a way to preserve good relationships with their contractors and to keep the dispute out of the court system.

This section details the arbitration process for each DOT that has explicit statutory authority or explicit contractual authority to use arbitration. It also discusses the Louisiana Department of Transportation and Development, which has the authority under Louisiana’s general arbitration statute to use arbitration and based on the surveys has done so. Importantly, several DOTs that responded to the survey stated that they have the authority to use binding arbitration but have not done so. For example:

• Kentucky Transportation Cabinet. Based on KYTC’s published literature and a general review of Kentucky law, it was difficult to understand how KYTC has the authority to use binding arbitration. This was clarified during subsequent interviews, when it was explained that Kentucky’s general state arbitration act gives broad authority for any party to enter into a binding arbitration agreement. No state agencies, including KYTC, were carved out from the statute and precluded from entering into arbitration agreements. However, in spite of having the apparent authority to arbitrate with a contractor, the interviewee (who had been with KYTC for over 15 years) stated that KYTC had never done so while he has been with KYTC.
• Minnesota Department of Transportation. Similar to KYTC, the survey response from MnDOT stated that it was authorized to use arbitration, which was not reflected in the MnDOT published literature. It was learned during interviews with MnDOT that MnDOT’s arbitration authority comes not only from Minnesota’s general arbitration act (similar to Kentucky), but also from Minnesota Court Rules. As noted in Chapter IV, these rules mandate that the parties be subject to some form of alternative dispute process once a civil action is filed. Binding arbitration is one of the processes listed (although it is unclear from reading the rules how “binding” the arbitration actually is).³²⁰ Regardless, both the survey and the interviewee stated that MnDOT had not used binding arbitration.

While some other DOTs could apply their state’s general arbitration act to use binding arbitration, this is not a simple decision. For example, as discussed in Chapter IV, Virginia DOT cannot use Virginia’s general arbitration act, as there is a specific Virginia statute that requires any form of ADR, including arbitration, to be nonbinding.³²¹

In light of the above, this section does not discuss KYTC, MnDOT, or other state DOTs that might theoretically have the ability to use binding arbitration under general state law or court rules.

A. General

Table 2 (“DOT Arbitration Processes”) provides a summary of DOT arbitration authority and applicable arbitration rules. A few explanations are in order.

The section labeled “Authority to Use Arbitration” identifies from where the DOT’s arbitration authority is derived—statute or specifications/practice. If there is a specific arbitration statute governing the DOT, we considered that to be “statutory” authority. Note, however, that virtually all of the DOTs subject to those statutes also addressed arbitration in their contracts, standard specifications, and other published documentation—which have been identified in the state-by-state reviews in this section and Chapter IV. Consequently, one should not assume that the DOT is being “forced” to use arbitration because of the statutory requirements. In fact, based on the survey responses and telephone interviews, many DOTs find strong value in using the arbitration process, not only to maintain good relationships with industry, but because they believe the arbitration results have been fair.

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³¹⁷ https://leg.colorado.gov/bills/sb22-048 (last visited October 29, 2023).

³¹⁸ https://leg.colorado.gov/sites/default/files/documents/2022A/bills/2022a_048_01.pdf (last visited October 29, 2023).

³¹⁹ It was not the purpose of either the CalPoly Report or this digest to be the final authority on dealing with appeals, and those needing to know answers more precisely should consult with local counsel.

³²⁰ MINNESOTA COURT RULES, GENERAL RULES OF PRACTICE RULE 114 - ALTERNATIVE DISPUTE RESOLUTION.

³²¹ VA. CODE § 2.2-4366 (Alternative dispute resolution).

The next section, “Arbitrable Issues,” addresses limitations on the ability to use arbitration. These limitations have only been expressed in terms of monetary values, which is a convenient way of communicating the breadth of a contractor’s arbitration rights in a state. There are many other limitations contractors have in using arbitration, some of which are discussed in the detailed DOT reviews set forth and in Chapter IV. The most common limitation/constraint is that the contractor has to exhaust all administrative remedies before being able to demand arbitration. Another is the explicit time periods for when arbitration has to be filed. Yet another is that most DOTs limit what can be presented in an arbitration to what was considered by the DOT in reaching its final decision. It is beyond the scope of this digest to fully examine these processes. Those interested in the precise details associated with each DOT’s claims and disputes process are encouraged to read the applicable documents and statutes.

The final section, “Arbitration Rules,” highlights which rules are applicable to the arbitration. With only three exceptions, statutes and specifications that identified applicable arbitration rules based them on the state’s RUAA or rules from the AAA. Several states have “blanks,” reflecting that there were no rules mentioned and that not only the decision to arbitrate would be mutually determined, but so too would be the applicable rules. Readers should note that some statutes gave choices as to what rules could be applicable, while others identified a specific set of rules. Table 2 provides a snapshot of the rules being identified by DOTs. As evident in the detailed write-ups, statutes and specifications often changed the base rules—particularly in terms of how to select the arbitrators. One should read the detailed write-ups and then, if more guidance or details are needed, refer to the source documents to determine how the issue has been addressed.

Table 2. DOT Arbitration Processes

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³²² AS 36.30.627.

³²³ Because DOT&PF did not participate in the survey, there is no information available to discuss how arbitration has worked from a practical matter, including the number of arbitrations that are typically filed over a period of time.

³²⁴ AS 09.43.300 through AS 09.43.595.

³²⁵ ADOT STANDARD SPECIFICATIONS SECTION 105.21 - ADMINISTRATIVE PROCESS FOR THE RESOLUTION OF CONTRACT DISPUTES.

³²⁶ ARIZ. REV. STAT. § 12-1518 (2022).

³²⁷ ADOT STANDARD SPECIFICATIONS SECTION 105.22 - ARBITRATION OF CLAIMS AND DISPUTES.

³²⁸ There is also a process for selecting an alternate arbitrator set forth in the specification.

³²⁹ The reference to this in the ADOT Standard Specifications is ARIZ. REV. STAT. § 12-1512 (2022), which is part of Arizona’s Uniform Arbitration Act. Arizona adopted the RUAA in 2011, which has a similar provision for vacating an arbitration award in ARIZ. REV. STAT. § 21-3023 (2023). This digest does not attempt to define what statutory provision might be applicable for vacating an award on an ADOT project.

³³⁰ https://www.dgs.ca.gov/OAH/Case-Types/PWCA/About (last visited October 25, 2023).

³³¹ https://www.dgs.ca.gov/OAH/Case-Types/PWCA/Resources/Page-Content/PWCA-Resources-List-Folder/Active-Arbitrator-Panel (last visited October 25, 2023).

the PWCA program.³³² While arbitration awards are not on accessible on the website, they are available on request from the Office of Administrative Hearings, which runs the program and is comprised of the lawyers responsible for representing Caltrans. The PWCA website also provides access to the statutes and procedural rules that govern the arbitration process.³³³

The statutory basis for PWCA and the arbitration process is California Public Contract Code §§ 10240 through 10240.13, which makes arbitration the process by which contract claims against state agencies like Caltrans are to be finally resolved.³³⁴ The statute identifies high-level principles and, consistent with the Caltrans Standard Specifications,³³⁵ provides for, among other things, the following:

• The contractor must initiate arbitration no later than 90 days after receipt of Caltrans’ final written decision on the claim (i.e., the district director’s decision).
• The contractor’s failure to exhaust the required administrative procedures is a bar to arbitration, except in the case where 240 days have elapsed since Caltrans accepted the work and a final decision has still not been issued.
• A single arbitrator is to be selected by the parties from the PWCA list.
• The parties can waive arbitration and have the claim litigation in a court of competent jurisdiction.

Importantly, the statute states that, unless the parties otherwise agree in the contract, the arbitration decision is to be written with findings of fact and conclusions of law, with the decision being based on California law and supported by substantial evidence.³³⁶ Failure to do so can result in the arbitration award being vacated.³³⁷

The PWCA has well-defined procedures for the arbitration process that are set out in Chapter 4 (Arbitration of Claims Under State Contract Act Contracts) and based on California regulations.³³⁸ The arbitration rules include procedures for small cases ($50,000) that streamline the process, including having limited discovery. The procedures for all other cases basically follow the California Rules of Civil Procedure (i.e., the rules used in litigation) unless they agree otherwise. This applies to discovery and motion, as well as to the use of experts.³³⁹ The rules do, however, give the parties and the arbitrator some discretion in how to run the hearing and in terms of admitting evidence. Note that while hearsay evidence is admissible, the rules state that such evidence shall not be sufficient in itself to support a finding.³⁴⁰

As part of the outreach and survey process, Caltrans furnished information about its arbitration process for 2022, information which was reported to Caltrans construction industry stakeholders in the first quarter of 2023. It was reported that as of January 2022 there were 19 active arbitration cases with a total claim value of $224.4 million. During 2022: (a) six new cases were filed with a total value of $46,651,340.57; and (b) nine cases were resolved with a total claim value of $10,276,147.41, which included six settlements, two dismissals, and one award. The total payout for 2022 on these claims was $4,058,170.37, which represented an average payout of: (a) 33% for cases that were settled; and (b) 69% for the case that was subject to an arbitration award.

4. Connecticut

Connecticut law gives construction contractors (as well as designers, construction managers, and others) who contract with CTDOT the choice of: (a) filing an action against CTDOT in the Hartford, Connecticut, superior court; or (b) initiating arbitration.³⁴¹ The Connecticut arbitration statute governing this is fairly broad, enabling the arbitration to be filed under the rules of any dispute resolution entity that the contractor and the head of CTDOT (presumably the Transportation Commissioner) agree upon, with the AAA rules being used if the parties cannot agree. Similar to the Arizona DOT discussion above, the statute does contain some prescriptive requirements that are to govern over the rules of the dispute resolution entity, as discussed in the following paragraphs.

First, arbitration is not allowed for claims where the contractor has not; (a) given the Transportation Commissioner written notice of the claim and its factual bases for the claim prior to two years after acceptance of the work or contract termination; or (b) filed an arbitration demand on the claim prior to three years after acceptance of the work or contract termination. The demand for arbitration is to include the amount of damages and the alleged facts and contractual or statutory provisions which form the basis of the claim.

After the demand for arbitration has been given, each party is to allow the other to examine and copy any nonprivileged documents which may be relevant either to the claims or to CTDOT’s defenses to such claims. The statute specifically iden-

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³³² https://www.dgs.ca.gov/OAH/Case-Types/PWCA/Resources/Page-Content/PWCA-Resources-List-Folder/List-of-Cases-by-Selected-PWCA-Arbitrator (last visited October 25, 2023).

³³³ PWCA CALIFORNIA PUBLIC CONTRACT CODE AND CALIFORNIA CODE OF REGULATIONS PROCEDURES FOR THE OFFICE OF ADMINISTRATIVE HEARINGS (ARBITRATIONS OF STATE CONTRACT ACT CONTRACTS) (2011), available at https://www.dgs.ca.gov/OAH/Case-Types/PWCA/Resources/Page-Content/PWCA-Resources-List-Folder/Laws-Regulations-and-Statutes-for-PWCA-Program (last visited October 25, 2023).

³³⁴ CALTRANS STANDARD SPECIFICATIONS SECTION 9-1.22 - ARBITRATION; CAL. PUB. CONT. CODE § 10240 (Resolution of Contract Claims).

³³⁵ CALTRANS STANDARD SPECIFICATIONS SECTION 9-1.22 - ARBITRATION.

³³⁶ CAL. PUB. CONT. CODE § 10240.8.

³³⁷ CAL. PUB. CONT. CODE § 10240.12.

³³⁸ See PWCA COMBINED STATUTES AND REGULATIONS, available at https://www.dgs.ca.gov/OAH/Case-Types/PWCA/Resources/Page-Content/PWCA-Resources-List-Folder/Laws-Regulations-and-Statutes-for-PWCA-Program (last visited October 27, 2023).

³³⁹ CAL. CODE REGS. tit. 1, § 1360 - Discovery and CAL. CODE REGS. tit. 1, § 1361 - Motions.

³⁴⁰ CAL. CODE REGS. tit. 1, § 1387 - Evidence.

³⁴¹ CONN. GEN. STAT. § 4-61 (2022), entitled “Actions against the state on highway and public works contracts. Arbitration.”

tifies the potential that the contractor’s bidding documents may be considered trade secrets or confidential and the process for addressing those documents.

Arbitration hearings are to be scheduled in a manner that shall ensure that each party has reasonable time to prepare and present its case, with the caveat that unless the parties agree otherwise, evidentiary hearing on the claim’s merits cannot be held earlier than six months after the demand for arbitration. The statute states that after the hearing, “the arbitrators shall issue in writing: (1) Findings of Fact, (2) a decision in which the arbitrators interpret the contract and apply it to the facts found and (3) an award.”³⁴² The findings of fact and decision are final and conclusive and not subject to review by any forum, tribunal, court, or government agency, for errors of fact or law. However, awards are nevertheless subject to confirmation, modification, or vacation pursuant to the RUAA, which Connecticut adopted in 2018.³⁴³

Based on survey responses and follow-up telephone discussions, there have been approximately 10 arbitrations initiated by contractors against CTDOT over the past 10 years, and about half of those were settled before reaching a final arbitration award. At any given time, one to three arbitrations might be active. The AAA rules are commonly used for the process, and one arbitrator hears the dispute. The awards are published and available upon request from the Connecticut attorney general’s Office. As discussed in Chapter VIII, there have been a number of lawsuits arising out of arbitrations with CTDOT, some of which involved whether the arbitrators properly discharged their duties in drafting the award.

5. Florida

Florida has long had a State Arbitration Board to enable contractors to use arbitration as a way of promptly resolving their claims with FDOT. Based on industry interviews, arbitration before the Board has not been effective for a variety of reasons and, consequently, claims have not been brought to it. This is evident from the board’s website, which contains its last award, issued in 2014. Until the 2014 award, none had been issued since 2007 (when there were two awards). This is in contrast with the situation prior to 2001, when four to eight awards typically were issued per year.³⁴⁴

To rectify this, the board and Florida industry had meetings to address how to make arbitration before the board more effective and desirable as a dispute resolution alternative. This resulted in a major rewrite of the board’s authorizing legislation in 2021. ³⁴⁵ Among other things, the new legislation created both binding and nonbinding arbitration. Binding arbitration is required for all claims up to $250,000. The contractor has the choice of arbitrating claims up to $1,000,000 and, if FDOT agrees, claims up to $2,000,000 can be heard by the board. However, unlike claims that are under $250,000, for these larger claims the board’s award is only final if a party has not requested a trial de novo within a specific time period.³⁴⁶ If a trial de novo has been requested by either party, the court cannot admit evidence that there has been an arbitration proceeding, the nature or amount of the award, or any other matter concerning the conduct of the arbitration proceeding. Testimony given at the arbitration hearing can be used as allowed under the Florida Evidence Code.³⁴⁷

The 2021 State Arbitration Board statute mandates several requirements for the arbitration process, including the following:

• The arbitration request may not be made to the board before final acceptance but must be made to the board within 820 days after final acceptance.
• The board is to schedule a hearing within 45 days after an arbitration request and, if possible, shall conduct the hearing within 90 days after the request.
• The hearing is to be conducted informally, with presentation of testimony and evidence kept to a minimum, and matters being presented to the arbitrators primarily through the statements and arguments of counsel.
• The board is to address the scope of discovery, presentation of testimony, and evidence at a preliminary hearing by considering the size, subject matter, and complexity of the dispute.
• Any party to the arbitration may petition the board, for good cause shown: (a) to issue subpoenas for the attendance of witnesses and the production of books, records, documents, and other evidence at the arbitration; and (b) for orders compelling such attendance and production at the arbitration.
• The board must issue an award within 45 days after the conclusion of the arbitration hearing, and if the award is not unanimous, it can be agreed to by the majority of the board members.

In addition to the above, the statute specifies that the board is to be composed of three members: one appointed by the secretary of transportation, one by the contractor, and one by agreement of the party-appointed members.

The State Arbitration Board Procedures are currently out-of-date, having been published in 2007.³⁴⁸ According to interviews with a representative from the board, a substantial rewrite of these procedures will soon be shared with industry, with publication expected in 2024. There will also likely be some rework of the FDOT Standard Specifications and FDOT’s Project Admin-

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³⁴² CONN. GEN. STAT. § 4-61(e) (2022).

³⁴³ CONN. GEN. STAT. §§ 52-407aa through 52.424 (2022) (Chapter 909, Arbitration Proceedings).

³⁴⁴ https://www.fdot.gov/construction/Arbitration/Arbitration.shtm (last visited October 25, 2023). In discussions with the board as part of the interview process, it was confirmed that 2014 was the last award from the board and that all awards are published.

³⁴⁵ FLA. STAT. § 337.185(3).

³⁴⁶ FLA. STAT. § 337.185(4).

³⁴⁷ FLA. STAT. § 337.185(4).

³⁴⁸ STATE ARBITRATION BOARD PROCEDURES (May 11, 2007), available at https://fdotwww.blob.core.windows.net/sitefinity/docs/default-source/construction/manuals/cpam/newcleanchapters/chapter8s8.pdf?sfvrsn=f9878077_0 (last visited October 25, 2023).

istration Manual to address the 2021 State Arbitration Board statute and new procedures.³⁴⁹

6. Louisiana

Unlike the other DOTs discussed in this section, nothing in a Louisiana statute or the LaDOTD published literature directly discusses whether or not LaDOTD may arbitrate construction disputes with its contractors. The survey responses stated that LaDOTD has the authority to arbitrate and in fact has used arbitration on one or two occasions during the past 10 years. The authority to arbitrate appears to be based upon the Louisiana Binding Arbitration Law, which, among other things, makes agreements to arbitrate valid and enforceable.³⁵⁰ While it is beyond the scope of this digest to delve into the nuances of any state’s law, there is a recent Louisiana federal district court decision supporting the premise that Louisiana public entities can agree to arbitrate, as long as the venue for the arbitration is in Louisiana.³⁵¹ As of the date of this digest, the specific rules governing the LaDOTD arbitration process were not known.

7. Maine

The MaineDOT Standard Specifications specifically list arbitration as an option if the contractor and MaineDOT mutually agree in writing.³⁵² Based on the survey, the agency has had one or two arbitrations over the past ten years that resulted in an award. The awards are made available to the public on request. As of the date of this digest, the specific rules governing the MaineDOT arbitration process were not known.

8. Mississippi

Mississippi established the State Transportation Arbitration Board to hear certain disputes arising out of contracts with the Mississippi Department of Transportation (MDT).³⁵³ The board has three members, one of whom is appointed by the Mississippi Transportation Commission, one of whom is appointed by the Mississippi Road Builders’ Association, and the third who is chosen by agreement of the other two members. Each board member serves a four-year term.³⁵⁴ The board elects a chairperson and establishes rules for the proceedings.

The board is called into session by either the commission or the contractor that has a dispute with MDT which is within the jurisdiction of the board. The board’s jurisdictional limit is for claims $750,000 or less, unless the parties agree otherwise.³⁵⁵ The arbitration may be filed at any time prior to final payment being made and accepted by the contractor.³⁵⁶ Absent agreement of the parties, the number of arbitration proceedings regarding monetary issues is limited to three per contract.

All three members of the board are necessary to conduct a meeting. The parties are given the opportunity to present oral and documentary evidence as deemed relevant by the board, with the hearings being transcribed.³⁵⁷ The Rules of Procedure and Practice set forth in the Mississippi Regulations address discovery by requiring that at a minimum of five days before the hearing the parties must disclose exhibits and provide a complete list of witnesses and the general nature of their proof.³⁵⁸ The Rules also describe the process for the hearings and order of presentation. The Board is charged with maintaining the privacy of the proceedings and has the discretion to determine who will attend other than the parties and their representatives.³⁵⁹ Parties have the right to have counsel present at the hearings.³⁶⁰

The statute requires the board to make written findings of fact and conclusions of law, and that it consider only and be bound only by the evidence submitted. When a valid contract is in effect that defines the rights, duties, and liabilities of the parties regarding a matter in dispute, the statute states that: “The Board will determine only the proper interpretation and application of contract provisions involved in a dispute.”³⁶¹ The order is to issued 60 days after the board is called into session and is binding unless appealed and vacated or modified by a circuit court. If the decision is not by a unanimous vote, a majority will constitute the Board’s order.

Appeals are to be filed with the circuit court of any county in which the contractor operates or has an office or place of business. They will be heard without a jury and, consistent with other general arbitration statutes, may be made based on these limited reasons: (a) the parties were not given reasonable opportunity to be heard; (b) the Board exceeded its powers; (c) the order is unreasonable in that it is not supported by the evidence; and (d) the order was procured by fraud, collusion, or other unlawful means or methods. The judge is to determine whether one of the preceding grounds was present “to such a degree that the decision of the board should not be allowed to stand.”³⁶² The statute also gives either party the right to appeal to Mississippi’s Supreme Court.³⁶³

9. Missouri

Missouri Department of Transportation (MoDOT) has been required to use arbitration to resolve certain construction disputes since 2003, based on a Missouri statute that established

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³⁴⁹ For example, under the FDOT Administration Manual, either party may request that the claim be submitted to private arbitration. In discussions with the State Arbitration Board, it was stated that this process was not ever used by FDOT and is not intended to be an option for the parties.

³⁵⁰ LA. REV. STAT. ANN. §§ 9:4201-4217 (2022).

³⁵¹ Chennault International Airport Authority v. Starr Surplus Lines Insurance Co., 2023 WL 2637450 (W.D. La. 2023).

³⁵² MAINE DEPARTMENT OF TRANSPORTATION, STANDARD SPECIFICATIONS SECTION 111.1.2 - ESCALATION PROCESS (March 2020) (“MAINEDOT STANDARD SPECIFICATIONS”).

³⁵³ MISS. CODE § 65-2-1 (2020).

³⁵⁴ MISS. CODE § 65-2-3 (2020).

³⁵⁵ MISS. CODE § 65-2-5 (2020).

³⁵⁶ 37 MISS. CODE R. § 401-5.1.A.

³⁵⁷ MISS. CODE § 65-2-7 and MISS. CODE § 65-2-9 (2020).

³⁵⁸ 37 MISS. CODE R. § 401-5.3.

³⁵⁹ 37 MISS. CODE R. § 401-5.4.

³⁶⁰ MISS. CODE § 65-2-7 (2020).

³⁶¹ MISS. CODE § 65-2-13 (2020).

³⁶² MISS. CODE § 65-2-8 (2020).

³⁶³ MISS. CODE § 65-2-817 (2020).

the process.³⁶⁴ The statute governs construction claims against MoDOT where MoDOT has issued a final decision and the claim values exceed $25,000 and are less than $327,000 (adjusted on an annual basis in accordance with the Implicit Price Deflator for Personal Consumption Expenditures under Missouri law).³⁶⁵ The latest MoDOT Standard Specifications have increased the $327,000 to $409,123 in principle relief sought.³⁶⁶

The Missouri statute and accompanying regulations provide some high-level requirements for the arbitration, including that the arbitration be administered by the AAA under its Construction Industry Arbitration Rules that are effective as of the date the arbitration is demanded, as such rules were modified by MoDOT.³⁶⁷ Pursuant to Missouri’s regulations, the AAA’s Fast Track Procedures are to be used for claims between $25,000 and $75,000. Claims in excess of $75,000 are to use AAA’s Regular Track Procedures. In each case, only one arbitrator is to be used.³⁶⁸

The MoDOT Standard Specifications identify each such AAA rule and either state that the rule is unchanged or identify the change made to conform to Missouri law.³⁶⁹ There are only a small number of changes made to the AAA rules, and some of those include the following:

• Arbitrators are to be registered professional engineers for at least 15 years or a construction industry professional with a minimum of 15 years of experience in construction.
• The claim cannot differ from what was submitted to MoDOT for final decision.
• The arbitrator’s form of award is to be a concise, written breakdown of the basis of the award and a written explanation and justification for the award amount.

By statute, judgment upon awards rendered under arbitration are to be entered in the circuit court of Cole County, Missouri.

Based on the surveys and interviews conducted with MoDOT, arbitration has been infrequently initiated and there is no recollection of any arbitration having reached a point where an award was issued. It was noted that because of the monetary values for arbitration, disputes that might fall within the realm of arbitration are typically worked out amicably between MoDOT and its contractors.

10. New Mexico

The NMDOT Standard Specifications authorize NMDOT and the contractor to agree to arbitrate disputes instead of using state court litigation.³⁷⁰ The contractor is to make a request to arbitrate to the Cabinet Secretary, who will decide whether or not to arbitrate. If arbitration is agreed upon, the contractor will have waived its right to use state court litigation. Based on the survey responses, NMDOT has actually used the arbitration process for one to two disputes over the past 10 years.

The process is set forth in the specifications and calls for the arbitration to be conducted in accordance with the New Mexico Uniform Arbitration Act.³⁷¹ Aside from the items discussed, the specifications defer to the arbitration act for the arbitration process. The specifications outline a detailed process for selecting the arbitration panel. It is to consist of three members, with no member being an employee of either NMDOT or the contractor. All party-appointed members are subject to defined experience levels, and must be either a New Mexico resident or have his/her principal place of business in New Mexico. The contractor will first identify its panelist, and the cabinet secretary will subsequently identify its panelist. The two party-appointed panel members are to select the third member, who is to be, among other things, either: (a) a professional arbitrator (e.g., a member of AAA); (b) a retired federal or New Mexico district or appellate judge; or (c) a former employee of FHWA. The panel is required to hold the arbitration hearing in Santa Fe County, unless otherwise approved by NMDOT, no later than 90 days after the panel is selected.

11. North Dakota

North Dakota has a statute requiring that all disputes between a construction contractor and the NDDOT be submitted to arbitration.³⁷² It has several conditions precedent to the right of a contractor to demand arbitration, including a requirement that the contractor give the NDDOT Director notice that the work has been completed, or will be completed as of a certain date, and tying the right to institute arbitration to the actual completion of the work.³⁷³

The statute has the arbitration process governed by both the North Dakota Uniform Arbitration Act (which appears to be the RUAA) and, if the contractor submits the dispute to the AAA, the AAA’s Construction Industry Arbitration rules.³⁷⁴ Importantly, the North Dakota RUAA specifically contemplates that the parties may agree to the use of an arbitration organization like the AAA to administer the arbitration, and that the rules of that organization will be used.³⁷⁵

For claims less than $100,000, only one arbitrator will be appointed. For claims exceeding that amount, three arbitrators will be appointed. If the AAA is being used, its arbitrator selec-

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³⁶⁴ MO. REV. STAT. § 226.096 (2021); MODOT STANDARD SPECIFICATIONS SECTION 105.18 - ARBITRATION.

³⁶⁵ MO. REV. STAT. § 226.096 (2021); MISSOURI HIGHWAY AND TRANSPORTATION COMMISSION POLICIES, ARBITRATION AND MEDIATION OF CONSTRUCTION DISPUTES (October 2, 2019).

³⁶⁶ MODOT STANDARD SPECIFICATIONS SECTION 105.18 - ARBITRATION.

³⁶⁷ 7 MO. CODE OF STATE REGS. 7 CSR 10-26-010; MODOT STANDARD SPECIFICATIONS SECTION 105.18.1 - PURPOSE.

³⁶⁸ 7 MO. CODE OF STATE REGS. 7 CSR 10-26-010.

³⁶⁹ MODOT STANDARD SPECIFICATIONS SECTION 105.18.3 - ARBITRATION.

³⁷⁰ NMDOT STANDARD SPECIFICATIONS SECTION 105.20.3.1 - ARBITRATION.

³⁷¹ NMSA § 44-7A-1, et seq. It appears that this act is the RUAA, as New Mexico’s former Uniform Arbitration Act was fully repealed in 2001 and replaced with this statute.

³⁷² N.D. CENT. CODE § 24-02-26 (2022).

³⁷³ N.D. CENT. CODE § 24-02-30 (2022).

³⁷⁴ N.D. CENT. CODE § 24-02-28 (2022).

³⁷⁵ N.D. CENT. CODE § 32-29.3 (2022).

tion process is to be employed. If not, the North Dakota statute requires each party to select an arbitrator in conjunction with the contractor filing a demand, NDDOT filing a response, and the two party-appointed arbitrators selecting the third arbitrator.³⁷⁶ The statute also states that the arbitrators are to determine all controversies between the parties, as follows:

Because the arbitration can be processed under either the AAA rules or the North Dakota NUAA, we will not review here the components of those rules, although they will be addressed to a degree in Chapter VI.

NDDOT conducted a telephone interview (instead of completing the written survey) and elaborated on its experience in arbitration. NDDOT has averaged one active arbitration over the past seven to eight years. All arbitrations have been conducted under the AAA rules and used three arbitrators, which have occasionally, but not always, been drawn from the AAA’s panel of arbitrators. NDDOT’s arbitration awards are available on request.

12. Ohio

As discussed in Chapter IV, the Ohio Department of Transportation (ODOT) allows contractors the option of opting out of the DRB/DRA process and requesting that ODOT have the claim proceed through binding arbitration. ODOT does have the discretion to decline the Contractor’s request. The legal authority for this is based on an Ohio statute that addresses “Binding Dispute Resolution for Contract Controversies.”³⁷⁸

Under the statute, ODOT’s Director may include in any construction contract a provision authorizing a binding dispute resolution method for any controversy. The method may proceed only upon agreement of all parties to the controversy. The term “binding dispute resolution” is defined to mean: “a binding determination after review by a technical expert of all relevant items, which may include documents, and by interviewing appropriate personnel and visiting the project site involved in the controversy.” The statute states that the term “does not involve representation by legal counsel or advocacy by any person on behalf of any party to the controversy.”

The statute also states that there is no appeal from the expert’s determination unless the Court of Common Pleas of Franklin County finds one or more of the following:

• The determination was procured by corruption, fraud, or undue means.
• There was evident partiality or corruption on the part of the technical expert.
• The technical expert was guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy, or of any other misbehavior by which the rights of any party have been prejudiced.

Even though the statute does not use the term “arbitration,” these rights of appeal are consistent with vacating an arbitration award.

During the interview process, ODOT explained that it has in fact used this process on several occasions and considers it to be the “binding arbitration” process referenced in ODOT’s Practice Notes. Importantly, to satisfy the statute, attorneys are not used to represent the parties, and the procedures associated with the process are mutually agreed upon by the contractor and ODOT to reflect what is needed for them to feel comfortable with the process given the particular dispute. When asked why ODOT agreed to use this process, the ODOT interviewee stated, among other things, that arbitration offered a setting where the parties could maintain a good relationship through the dispute. As stated by many other DOTs, ODOT places a premium on having a good relationship with its contractors. In sharp contrast to arbitration, resolving matters through litigation: “puts everyone on edge and makes people angry.”

13. Oklahoma

The Oklahoma Department of Transportation (ODOT) dispute procedure contained on Form 2300, “Contract Dispute Resolution Procedures,” allows ODOT and the contractor to agree to jointly petition for any court to be referred for binding arbitration.³⁷⁹ This procedure appears to be in accordance with Oklahoma’s Dispute Resolution Act, which, among other things, gives the parties, prior to commencement of any dispute resolution proceedings, the ability to agree upon the method by which they will attempt to resolve the issues in dispute.³⁸⁰

As part of the joint court petition, the parties are to stipulate that the arbitration is to be conducted under the most current edition of the AAA’s Construction Industry Arbitration Rules, modified as follows: (a) unless otherwise agreed, the hearings are to be held at ODOT’s building in Oklahoma City, Oklahoma, before a single neutral arbitrator; and (b) the arbitrator shall not award interest, costs of the prosecution, or defense of the claim, or attorney fees. The provision also confirms that the arbitrator’s award is final and non-appealable except as provided in Oklahoma’s Uniform Arbitration Act (which is consistent with the RUAA).³⁸¹

As discussed in Chapter IV, Oklahoma’s attorney general’s office confirmed that ODOT has not had litigation proceedings for the past 15 years, and therefore has not used the option for arbitration set forth above. This interview confirmed that claims

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³⁷⁶ N.D. CENT. CODE §§ 24-02-26 and 24-02-27 (2022).

³⁷⁷ N.D. CENT. CODE § 24-02-31 (2022).

³⁷⁸ OHIO REV. CODE § 5525.23.

³⁷⁹ SPECIAL PROVISIONS, CONTRACT DISPUTE RESOLUTION PROCEDURES, FORM CZoo2300 (January 2, 2013).

³⁸⁰ 12 OKLA. STAT. § 11804 (2022).

³⁸¹ 12 OKLA. STAT. § 1851, et seq. (2022).

that have been brought were typically resolved by discussions and negotiations directly between the parties, and at times in mediation.

14. Oregon

The Oregon Department of Transportation (ODOT) Standard Specifications require binding arbitration for all claims that have exhausted ODOT’s administrative processes and are under $50,000.³⁸² The provision is brief. It states that the arbitration will be before a single arbitrator according to the AAA’s Construction Industry Arbitration Rules, unless another arbitration service and rules are agreed upon by the parties.

15. Rhode Island

Rhode Island has a statute known as the Public Works Arbitration Act, which requires that certain disputes with Rhode Island public bodies be arbitrated. This statute has been in place since 1986, presumably with some periodic modifications. The current statute provides that claims with RIDOT that are less than $100,000 are required to be arbitrated, while those greater than that may only be arbitrated if the parties consent.³⁸³ For purposes of the act, the term “claims” does not refer to the aggregate amount sought under the contract or in the arbitration, but refers to each item or matter in dispute for which additional compensation is sought or for each item for which a credit is sought.

The arbitration is commenced by a demand in writing made by a party to the contract within a reasonable time after the dispute, claim, or other matter in question arose, but prior to payment and acceptance of the contract price. The claimant’s demand is to contain: (a) a statement of the question to be arbitrated; (b) a detailed statement of each item or matter in dispute; and (c) the name of the arbitrator appointed by the claimant. The respondent is to give the claimant written notice of its arbitrator, and the two party-appointed arbitrators are to select the third arbitrator, who will serve as chairperson.

The chairperson is to select a time, date, and place for the hearing, with the hearing date to be no more than 15 days after the chairperson has been appointed. The award is to be made “promptly” by the arbitrators and, unless otherwise agreed by the parties, no later than 30 days after the close of hearings, or, if oral hearings have been waived, from the date of the transmittal of the final statements and proofs to the arbitrators. The award is to be a reasoned written award signed by a majority of the arbitrators. The statute also specifies how the award is to be confirmed, modified, and vacated.

The statute is silent regarding discovery, exchange of witness lists, exhibits, or other prehearing matters that are often identified in an arbitration statute. There also does not appear to be anything that gives the arbitrators discretion to consider these matters, or to issue subpoenas for testimony. However, the absence of these processes appears to be consistent with the quick speed at which an arbitration under this statute is to take place and be subject to an award.

16. Washington

The WSDOT has an arbitration provision in its standard specifications that mandates arbitration for all disputed certified claims of $1,000,000 or less.³⁸⁴ As noted in Chapter IV, certified claim amounts over $1,000,000 are to be litigated. Arbitrations are to be administered through the AAA and the AAA’s current version of the Construction Industry Arbitration Rules. For certified claims with an amount less than or equal to $250,000, the rule’s Fast Track Procedures are to be used. For certified claims with an amount greater than $250,000 and less than or equal to $1,000,000, the rule’s Regular Track Procedures are to be used.

The arbitration provision discusses when arbitration may be brought in relation to the completion of the project’s physical work.³⁸⁵ Unresolved disputes that do not involve delays or impacts to unchanged work may be brought to binding arbitration prior to physical completion of all of the work if the contractor certifies in writing that claims for delays or impacts to the work will not result from the dispute. Unless otherwise agreed by the parties, all other unresolved claims that have been pursued through the administrative claims process: (a) must be brought in a single arbitration hearing after physical completion of all of work; and (b) cannot total greater than $1,000,000 to be eligible for arbitration.

The arbitration specification states that the parties and arbitrator can agree to having certain aspects of the arbitration held by video conference. When aspects of the arbitration require the parties to be at the same physical location, the locale is to be a location in the state of Washington agreed upon by the parties, or if agreement is not reached, at WSDOT’s headquarters. As to the arbitrator’s award, the statute states that the arbitrator’s decision and basis for that decision are to be in writing, with the arbitrator using the contract as a basis for decisions. Both parties agree to be bound by the arbitrator’s decision.³⁸⁶

C. Observations about the State Processes

It is beyond the scope of this digest to conduct a “deep dive” into the potential positives and negatives about each state’s arbitration process or to provide a comprehensive comparison of these processes. However, a few high-level observations are appropriate based on the review of these processes. As with other aspects of this digest, we note that there are subtleties and nuances about any disputes process that are not readily apparent in a “cold eyes” review. Consequently, some of these observations may not be consistent with how the state and its

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³⁸² ODOT STANDARD SPECIFICATIONS SECTION 00199.40(D) - STEP 3: ARBITRATION: CLAIMS REVIEW BOARD.

³⁸³ R.I. GEN. LAWS § 37-16-2(c) (2022).

³⁸⁴ WSDOT STANDARD SPECIFICATIONS SECTION 1-09.13(3) - ARBITRATION.

³⁸⁵ WSDOT STANDARD SPECIFICATIONS SECTION 1-09.13(3)C - LIMITATIONS ON ARBITRATION RELATED TO PHYSICAL COMPLETION.

³⁸⁶ The arbitration clause refers to “arbitrator” in the singular. However, nothing in WSDOT’s Standard Specifications requires a single or a three-person panel of arbitrators, although the AAA Construction Industry Arbitration Rules do provide guidance on this.

contractors actually practice conducting arbitration when an issue arises.

1. Selection and Neutrality of the Arbitrators

One of the key reasons that parties use arbitration is because they are able to have a voice in selecting who will decide their disputes. This enables them to ensure that the individual or panel that is the “decider” is experienced in the construction process and construction disputes. This clearly came through in each state’s process, as virtually all of them had a detailed process for selecting the arbitrator or panel. In fact, arbitrators on Caltrans disputes must come from a preselected list of individuals with specific experience requirements who had applied to the PWCA program and been vetted and accepted into that program. Likewise, the Mississippi State Transportation Arbitration Board is comprised of individuals who have been thoroughly vetted by both the Mississippi Transportation Commission and the Mississippi Road Builders’ Association.

Most of the processes had each party selecting its arbitrator and the two party-appointed arbitrators selecting the third arbitrator. If they cannot agree, the parties are to go to court and have a judge make the appointment of the third arbitrator. While this process differs from the selection process set forth in the AAA Construction Industry Arbitration Rules, it is a very typical process for construction arbitrations and similar to how most DRB members are selected.

What is somewhat unusual is that most of the published processes did not state whether the party-appointed arbitrator had to be neutral. Oklahoma’s published arbitration process requires that the single arbitrator be neutral, which would likely happen anyway given that the parties jointly select that person. However, in some states where the parties each get to select an arbitrator (e.g., North Dakota and Rhode Island), the statutes are silent on whether these individuals are to be neutral. The Mississippi State Arbitration Board statute does not specifically require neutrality, although one might presume that the members have to be neutral to make the board function properly.

It is typical in the United States that all arbitrators are to be neutral and unbiased. This is stated in both the AAA rules and the RUAA. However, because arbitration is contractually based, it is possible to have non-neutral party-appointed arbitrators, which essentially means that the third arbitrator is the real decision-maker. The AAA specifically allows arbitrators to be non-neutral if the parties have agreed upon that in writing.

While it is highly likely that all of the processes discussed herein envision neutral, unbiased party-appointed arbitrators, we thought it appropriate to raise this, particularly given that so many statutes focused on selecting the arbitrators. We also note that the DOT and industry feedback discussed in Chapter VII highlighted the importance of having confidence in the character and sophistication of the arbitrators in order to conclude that the arbitration process was fair and reached an acceptable result. Several respondents noted that the AAA’s typical “rank-and-strike” approach to arbitrator selection worked better than having the parties each select an arbitrator, as they found that party-appointed arbitrators often acted as advocates rather than neutrals.

2. Monetary Limits

Because the process for most DOTs involves relatively small monetary limits in order for a dispute to be eligible for arbitration, there is a question as to how “available” arbitration is as a remedy to construction contractors. Some of the specifications and statutes gave the parties the ability to use arbitration for higher value claims if they mutually agreed. Others (Rhode Island) did not. Having these limits raises a question of whether the legislatures and/or the state DOTs genuinely believe that arbitration is the best way to resolve construction disputes.

For example, Rhode Island’s statute was effective for contracts entered into after January 1, 1986. While a $100,000 claim might have seemed big at that time, it certainly is not considered big in 2023. Given the cost of arbitrating a dispute, it is highly likely that most claims will either be dropped or negotiated rather than pursued. Yet there has been no change to this by the legislature, suggesting that RIDOT and/or the legislature does not actually want to arbitrate construction disputes.

Private sector construction contracts often have monetary limits of some sort relative to the use of arbitration. The reasoning is often that “big” disputes should benefit from the appeals process associated with litigation. However, the definition of a “big” dispute is in the eyes of the beholder. This is particularly evident from the survey results discussed in Chapter VII, where the range of matters that was appropriate for arbitration spanned from $200,000 to unlimited.

3. Conditions Precedent

As noted earlier, virtually all of the statutes and standard specifications mandate that the contractor exhaust its administrative remedies through the contract before having the right to seek arbitration. Likewise, the issue to be arbitrated was typically limited to precisely the claim that was subject to the final administrative action, both in terms of entitlement and quantum, as well as the supporting evidence for that claim. While this is logical, it could raise questions about how the entire arbitration is to be administered and even whether the dispute is arbitrable. For example, if a witness is offered at arbitration to support a claim, but information from that witness was not submitted as part of the administrative process, can the arbitrator consider that evidence? This subject is highly complex and further discussion of it on a theoretical basis is inappropriate. But it raises a concern as to what evidence can be put before an arbitrator that does not run afoul of the statutes, and how an arbitrator, who can have the award overturned if he/she fails to let in evidence, is to address objections to that evidence.

4. Form of Award and Basis for Vacating Award

Several of the state arbitration requirements address in some respects the form and content of the arbitration award, as well as state what can be used as a basis for vacating the award. This can create some potential challenges. At times, arbitrators do not precisely follow the requirements for the award. Likewise, there are times when the basis for vacating the award differs from what is in the FAA or applicable state RUAA. While it is beyond