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International Procurement and Alternative Dispute Resolution (ADR) - Answers - Hypothetical IV-4

Answers provided by Charles Rumbaugh, J.D. CPCM

Hypothetical IV-4

  • How can the methodology of finding and arriving at a "fair and reasonable" price to both parties be restructured?
  • Is this transaction suitable for ADR?
  • Is this transaction suitable for arbitration?

Similar to IV-3 above, having an effective method to come to closure on a 'fair and reasonable' price can also utilize a 'baseball arbitration' approach. The parties, initially failing to agree on a price, will realize that they will need to 'move' in their position /rationale for a particular price in order to appear reasonable to an arbitrator who can only select one number/price. Accordingly, the parties will usually come to closure on price without resorting to arbitration. Otherwise, an arbitrator will provide that price in a timely manner under a properly drafted ADR clause.

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