Procedures

A Dispute Board is used here to describe the role of an independent neutral expert panel (usually 3 people but increasingly just 1 person) brought into a project to assist the parties to either avoid disputes or if there are to be disputes to seek to reduce the consequences of the dispute.

Dispute Boards are a truly innovative method of seeking to avoid disputes as they arise, to use the jargon “in real time”. The skill of a Dispute Board is to ensure that the parties to the contract are communicating with each other, addressing the allocation of risks and performance issues such that potential disputes evaporate.

Ideally the Dispute Board will go to site regularly and meet with both parties to discuss the project whether there are disputes or not. Communication is as much about listening and responding as it is about speaking. It is through this regular communication and progress reviews that the Dispute Board is able to use its influence and experience to seek to avoid disputes. By asking the right questions and eliciting detailed answers the Dispute Board can show the parties the way.

If a dispute becomes necessary the dispute board is on hand, already versed in the project and able to decide any dispute. It is the speed with which the Dispute board reaches its decision that is the true benefit to the parties in this situation. Most parties prefer a quick decision so that they can move on with the project rather than a final determination that will take years to provide.

The Dispute Board’s decision or recommendation can become final and binding upon the parties and even if disputed by a party it is usually a contractual obligation that the parties have undertaken to comply with the decision at least until the end of the project.

The advantages of Dispute Boards are that they aim to preserve the parties’ relationship. Business relationships take many years to develop and require significant input at a senior level. The first casualty of any dispute is trust and the relationship between the parties. Once lost it is usually lost forever and the business consequences of this are enormous.

Good organisations recognise the need to preserve the relationship whilst also ensuring that the parties receive their proper entitlement. The Dispute Board offers the opportunity to achieve this aim.

A Dispute Board can work with the parties to avoid disputes and arbitration, whilst the project achieves an outcome that is acceptable to both parties.  Arbitration and litigation are slow, expensive methods of achieving commercial goals and come with the risk that relationships will be shattered. Usually one party is severely weakened as a result of the outcome.

A question often posed is to prove the financial benefit of Dispute Boards. There is some data that having a Dispute Board reduces the incidence of disputes that go to litigation and arbitration and from this it is easy to calculate the saving by using a Dispute Board versus the party cost of arbitration or litigation. However, the real benefit to the parties is the relationship. What is that worth in your organisation?

Each particular project will have particular procedures depending upon the form of contract used and the particular terms of that contract. What follows is an outline of a typical procedure.

In order to function as an effective Dispute Board, it is necessary for the Dispute Board to carry out certain standard procedural functions. These include:

  • To become familiar with the project, documents and site.
  • To keep up to date with progress, developments and problems.
  • To encourage the parties to resolve issues early before they turn into full blown disputes.
  • Deal with any disputes referred to it in a professional and timely manner.

The Dispute Board’s powers come from the contract and the Dispute Board Procedure. It is important that the Dispute Board does not exceed its powers. For instance whilst the Dispute Board is to be proactive it does not have the power to investigate matters that have not been brought before the Board and as stated above cannot give advice to the Parties unless expressly asked by both Parties jointly.

The role of the Dispute Board is to help avoid or resolve disputes within the constraints of the contract and the Dispute Board procedure. It is not there to replace the day to day decision making and management exercised by the Contractor, the Project Manager/Engineer or the Employer. For instance the parties may ask the board to decide a dispute over two drawings that contradict each other. The Dispute Board will decide which of the two drawings reflect the contractual obligations of the parties. The Dispute Board will not tell the parties which drawing should be built because once the dispute board has declared the contractual obligation, if the Engineer wants something else building he can instruct a variation.

A standing Dispute Board that is appointed from the commencement of the contract will have as its primary role the avoidance of disputes whereas an ad hoc Dispute Board (also known as a Dispute Adjudication board) will usually be appointed specifically for the purpose of resolving a dispute that has arisen.

The Dispute Board needs to establish procedures and advice the parties how it will go about:

  • Site Visits and Meetings
  • Establish procedures for deciding disputes
  • Conduct of the hearing
  • Take the initiative in ascertaining the facts and the law.

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Meetings and Site Visits

The standing Dispute Board will usually visit the site and meet with the parties on a regular basis depending upon the size and complexity of the project. They will receive regular progress reports and early warning of matters that could become contentious. If this process is adopted the Dispute Board is well placed to work with the parties to avoid or resolve quickly disputes that are developing. However, it is up to the parties to tell the Dispute Board what they want them to know! This can mean that the Dispute Board is blissfully ignorant of a major dispute developing until they are asked to make a decision. This situation is less than ideal and undermines the benefits of setting up a dispute board procedure.

Site visits and meetings should be planned to occur at regular intervals and also when those elements that have the greatest potential to create disputes are occurring. For instance there may be issues about ground conditions so the Dispute Board should visit during the excavation phase of the project.

The Meetings are an opportunity for the Parties to brief the Dispute Board on progress, procurement, design and construction matters as well as potential disputes or matters that are giving either Party concern.

By discussing the matters of concern early with the Dispute Board it is possible to head off disputes informally, or by obtaining the Dispute Board’s opinion before the matter escalates to a full blown dispute.

A minute of the meeting should be made by the Dispute Board and distributed to all present.

Disputes

It is usual in construction contracts to define what constitutes a dispute as opposed to mere disagreements and minor quarrels.

A dispute is referred to the Dispute Board by one Party referring the dispute to adjudication of the dispute board with copies of the referral being served on the other Party and the Engineer.

This triggers the start of the process for the Dispute Board to reach a Decision.

The Referral should include all the contentions, arguments, evidence, expert evidence and submissions of the Referring Party along with a statement of what the Party wants the Dispute Board to decide. For instance that the Employer should pay the Contractor $1m in accordance with the contract. Or that the instruction issued by the Engineer is a variation entitling the Contractor to be paid more money and receive an extension of time for completion of the work.

Referrals need to be drafted with great care and attention so as to refer the dispute in a manner most beneficial to the Referring Party.

The Dispute Board will once they have received the Referral, set a timetable for resolving the dispute. Each timetable will vary but this may include:

Day 0
Chairman receives Referral.
Day 1
Chairman acknowledges Referral.
Day 4
Chairman gives the Parties directions having consulted with the other members.
Day 18
The other Party Responds to the Referral.
Day 25
The Referring Party has a right of Reply. The Dispute Board may then ask the Parties questions.
Day 40
Agenda for meeting and site visit produced.
Day 50
Site visit followed by a hearing.
Day 57
Last submissions from the Parties.
Dispute Board consult and draft a Decision.
Day 80
Dispute Board meets to finalise the Decision.
Day 84
Decision is published.

The Dispute Board’s decision or recommendation can become final and binding upon the parties and even if disputed by a party it is usually a contractual obligation that the parties have undertaken to comply with the decision.

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