Dispute Resolution: Mini-Trial or Big Headache?

The Institute for Supply Management’s “Term of the Day” feature recently addressed a contract dispute resolution procedure known as the mini-trial, which immediately got me thinking about the Vested approach to resolving differences between companies and their service providers.

According to ISM, a mini-trial is a contract dispute resolution process “in which each party, usually through its attorney, presents its legal arguments to senior management of the other party where such management has authority to settle the matter; an independent third party may be present and intervene if the parties cannot reach a settlement agreement.”

That sounds pretty cumbersome and well, a little too legalistic when parties feel they must bring in lawyers for a de facto trial. A mini-trial seems like a premature escalation of matters and the sort of activity that should occur when all other avenues have failed.

There is a better and more layered approach to dispute resolution that’s described in The Vested Outsourcing Manual.

Why not create a Vested governance structure that employs a process for managing disputes (and ideas)?

Chapter 7 of the Manual says the Vested governance framework should include a proactive problem-solving and dispute resolution process. By proactive problem solving, I mean a process for channeling problems in a constructive and meaningful way. The idea is to embed a formal problem-solving process into the outsourcing or business agreement that creates a sense of accountability to solve problems in a timely manner using an agreed-upon escalation and decision process. This approach prevents parties from ignoring problems until they get to the point where intervention is needed, such as third-party arbitration or litigation. It’s important to collaboratively establish a clear problem-solving process early-on in the relationship.

Many issues can usually be handled at the day-to-day level of implementation and communication. But because business and events tend to happen with great frequency, problems probably will arise that require internal escalation. In that case establish a problem-solving procedure that employs three components—identifying the situation, determining the situation’s degree of urgency and resolution of the situation.

For example there might be four escalating levels to describe the situation: issue, concern, problem, conflict and finally breach of contract. Each level would carry with it the definition of the degree/impact of the situation and the best way to resolve it.

This cooperative approach allows you to keep the lawyers—and some quasi-legal exercise—at bay for as long as possible. It seems to me that if you have a good business case, a problem-solving procedure and a good board of advisors you won’t need to have a mini-trial.

ISM posts a different Term of the Day on its home page every day, taken from the ISM Glossary of Key Supply Management Terms.

I’m thinking that Vested should have a place in that glossary!

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