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THE APPLE CITY ELEMENTARY SCHOOL CASE

A DISPUTE RESOLUTION EXERCISE



INTRODUCTION

In the fall of 1997 the Betsy Ross Construction Company entered into a contract with the Thomas Jefferson Private School Development Company to construct a 550 student school facility in the county of Oz in Kansas. The amount of the contract was $15 million.

This contract was unique in several ways:

  1. It was the first installation of its kind in oz county in which a facility of this type was to be constructed and owned under a privatization arrangement by which the Thomas Jefferson Development Company (tjdc) would own the school and the county would lease space at a rate which had been pre-approved by the county regulators.
  2. Private capital funding for the project was provided by the share owners of tjdc.
  3. The contract was "lump sum" and there was not a provision for "adds" or "deducts" beyond the quantities identified in the contract.
  4. Betsy Ross and Thomas Jefferson had a long standing relationship on previous work (other than school facilities) and had been very successful in the past.

In November of 1997 work was proceeding on schedule. The weather was fair and there were few problems associated with the project. However, on Monday, November 10th, while excavating for the fuel tanks and foundations, the project superintendent uncovered a significant amount of foreign substance that she had never seen before.

Knowing that Oz county had been the site of several mill-type manufacturing plants a century ago, the superintendent immediately shut the job down and called the state and federal environmental agencies, both of which thanked her for calling, told her that she did the right thing and reminded her that under the law the project must remain shut down until a determination was made as to the identification and origin of the material in question. The superintendent called her office and advised Betsy Ross of the situation.


Two weeks passed, then three, then four, and the contractor had not yet been given permission to proceed with the work. In the meantime, the weather had turned wet and colder and frost had permeated the ground. Finally after the fifth week the state agency called Ross with an apology for not calling sooner and said that they assumed that the federal agency had notified the contractor that they had determined that the material was non-toxic and she was free to continue the work.

At the same time, the cost engineer for the project advised Ross that the total cost of the delay was $10,000/day, two thirds of which was subcontractor costs for equipment, supervision, insurance, etc., for a total cost of $250,000.

After examining the costs which she found to be reasonable and the contract which stated "owner will accept no claims for delays as the schedule is the responsibility of the contractor", Ross realized she was in trouble but had no choice but to submit a claim to tjdc for $250,000 which was immediately rejected in its entirety.

There were no provisions for ADR of any kind in the contract but Jefferson did agreed to: a) talk it over, b) arbitrate, or c) mediate the issue.


Rules of the exercise:

1. Determine how you want to resolve this problem

1a. Negotiate;

2a. Mediate;

3a. Arbitrate.


Negotiate

1a. If you choose to negotiate, find another player and decide which role each of you will assume.

1a/1. The person who represents Ross should click on Ross for further information. Do not look at Jefferson information sheet or any other information sheet at this time.

1a/2. The person who represents Jefferson should click on Jefferson for further information. Do not look at Ross information sheet or any other information sheet at this time.

When each person is ready, negotiate a resolution of this problem, identify the process used and send your solution to eccs@compuserve.com.

At the same time describe the relationship between Ross and Jefferson before and after the negotiations. (1 being poor and 5 being excellent.)


Mediate

2a. If you choose to mediate, find two other players and decide which role each of you will assume.

2a/1. The person who represents Ross should click on Ross .

For further information. Do not look at Jefferson information sheet or any other information sheet at this time.

2a/2. The person who represents Jefferson should click on Jefferson for further information. Do not look at Ross or any other information sheet at this time.

2a/3 the person who serves as the mediator should click on mediator for further information. Do not look at any other information sheet at this time.

When each person is ready, mediate a resolution of this problem, identify the process used and send your solution to eccs@compuserve.com.

At the same time describe the relationship between Ross and Jefferson before and after the mediation. (1 being poor and 5 being excellent.).


Arbitrate

3a. If you choose to arbitrate, find two other players and decide which role each of you will assume.

3a/1. The person who represents Ross should click on Ross for further information. Do not look at Jefferson information sheet or any other information sheet at this time.

3a/2. The person who represents Jefferson should click on Jefferson for further information. Do not look at Ross or any other information sheet at this time.

3a/3 the person who serves as the arbitrator should click on arbitrator for further information. Do not look at any other information sheet at this time.

When each person is ready, arbitrate a resolution of this problem and send your solution to eccs@compuserve.com.

At the same time describe the relationship between Ross and Jefferson before and after the mediation. (1 being poor and 5 being excellent.)


Once we receive a number of solutions(about 4-5 weeks)we'll publish the results and you can compare your solution with the others submitted and draw your own conclusions about the effectiveness of each approach and the probability of future successes on the part of Betsy Ross and Thomas Jefferson.

Also, once you have reviewed the solutions you are free to review the information sheets of the other players (if you haven't already peeked).


Regards,

Dick Coughlin
eccs@compuserve.com


This entire exercise is copyright 1998 Dick Coughlin, All Rights Reserved.

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Copyright 2000 Stephen R. Marsh

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