Dispute Boards: Preventing Conflicts Before They Escalate

Most forms of dispute resolution are employed only after parties have become entrenched in their positions, making the process adversarial and focused on winning. Even mediation occurs only after a dispute has fully developed.

In contrast, dispute boards (DBs) are designed to prioritize dispute avoidance, preventing problems from escalating.

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Dating back to the 1970s in the United States, dispute boards emerged from a general distrust of the court system. They provide non-binding recommendations, leading to the resolution of most disputes and encouraging parties to address issues without legal action.

On-call Advice

A Dispute Board (DB) consists of one to three experienced members appointed shortly after the contract begins. The DB monitors key documents and project progress, conducting three to four site visits annually to discuss potential dispute issues with the parties involved. It encourages independent resolution of these issues and assists when needed.

The DB is available to provide informal opinions to help the parties. If disputes remain unresolved, the Dispute Adjudication Board (DAB) can issue interim binding decisions. Dispute Boards are increasingly recognized internationally, with some, like the Combined Dispute Board, mainly issuing recommendations unless a formal decision is requested.

Forming a DRB

DBs can be either standing boards appointed at the beginning of a contract or ad hoc boards that meet only when needed. Standing boards are better for dispute avoidance, while ad hoc boards are more cost-effective but less beneficial. Future FIDIC revisions may favour standing boards.

To function effectively, a Dispute Board should have each party select a member, who then chooses a chairperson.

The "bottom-up" approach to forming a Dispute Board (DB) is often seen as the fairest method, but it may be less effective if members haven't worked together before.

Alternatively, a "top-down" approach, where the parties agree on a chairman who selects the other two members, can lead to a more efficient DB, as the chairman can choose a cohesive team.

Impartiality among DB members is crucial. While it may seem obvious, parties often mistakenly view their chosen member as a representative. Board members should be available for regular site visits and spontaneous meetings to help resolve issues and provide informal guidance on disputes.

Ideal board members should have relevant experience, but a diverse range of backgrounds is beneficial for addressing various problems.

There is ongoing debate about including lawyers as board members, but having at least one legally trained individual can be advantageous given the legal implications of most disputes.

Adoption

Dispute Resolution Boards (DRBs) are recognized worldwide for their effectiveness in managing disputes in construction projects, particularly in the U.S. and Europe. While their use in Australia is not as widespread, there is increasing acceptance of their benefits.

Here's a brief overview of DRB adoption in Australian construction projects:

Historical Context and Current Trends: Australia

Early Adoption and Slow Growth: Dispute Resolution Boards (DRBs) were introduced in Australia in 1987 with the Sydney Ocean Outfall Tunnels project, but their adoption was initially slow compared to global trends.

Increasing Acceptance: In the past decade, interest in DRBs has surged due to dissatisfaction with traditional dispute resolution methods, which can be costly and time-consuming, alongside awareness of their international success.

Significant Projects: Notable Australian projects using DRBs include the Sydney Desalination Plant, the Gateway Arterial Upgrade, the Sydney South West Rail Link, and the Brisbane Legacy Way Project.

Government Recognition: Agencies like Queensland Main Roads have integrated DRB concepts into standard contracts, indicating recognition of their effectiveness. New South Wales has also shown strong support for DRBs.

Success Rates: Projects that have used DRBs in Australia have reported high success rates, with many disputes resolved or avoided altogether, demonstrating their effective preventative role.

Benefits Driving Adoption (and why it's growing):

Dispute Avoidance: Dispute Review Boards (DRBs) are effective at preventing conflicts by identifying potential issues early through regular site visits and facilitating informal resolutions.

Cost and Time Savings: DRBs offer a more economical and timely alternative to arbitration and litigation, typically costing less than 0.5% of the project value for projects over $50 million.

Maintaining Project Relationships: By fostering negotiation and real-time problem-solving, DRBs help preserve crucial relationships between parties involved in the project.

Expert Knowledge: DRB members are independent experts with relevant experience, providing informed and impartial recommendations.

Timely Decisions: DRBs focus on quick decision-making to keep projects moving without delays from unresolved disputes.

High Acceptance Rate of Recommendations: Parties usually accept DRB recommendations due to their involvement in selecting board members and their familiarity with the project.

Challenges and Limitations to Wider Adoption:

1. Lack of Awareness: Australian construction industry stakeholders, especially smaller contractors and clients, still have limited understanding of dispute resolution boards (drbs).

2. Perceived Costs: While DRBs are cost-effective over time, the initial costs of establishing and maintaining them may deter some, particularly on smaller projects.

3. Resistance to Change: The industry often prefers traditional dispute resolution methods, even if they are less efficient.

4. Availability of Experienced Members: Finding enough qualified and impartial DRB members across various regions remains challenging, though efforts are underway to expand the candidate pool.

5. Standard Contract Forms: Standard contracts do not automatically include DRBs, requiring specific negotiations to incorporate them.

In conclusion, while Dispute Resolution Boards (DRBs) are not as widely adopted in Australian construction as in some other countries, their acceptance is growing. Evidence of their effectiveness in preventing and resolving disputes is driving this trend, particularly in large and complex projects. As the industry seeks less adversarial dispute management methods, DRBs are likely to become increasingly common in Australia.

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Disclaimer: This information is for general knowledge purposes only and should not be considered legal advice. It is essential to consult with a qualified legal professional for any legal matters or concerns.