Construction Dispute Boards - Essay Example

Construction Dispute Boards Construction Dispute Boards A dispute board otherwise known as a dispute adjudication board is a job site review arrangement formed to handle potential conflict and offer solutions. The rationale of the formation such an arrangement before project commencement is the common disputes that arise from contractor/owner contracts. More often than not, disputes end up in litigation or arbitration. This exercise will embark on the technicalities and dynamics of construction dispute boards by discussing the personnel involved, processes and even the documentations involved. In addition to that, an examination of traditional alternatives to the construction dispute boards will be highlighted before giving a comparative analysis of the two. Key words Alternative Dispute Resolution (ADR) Dispute Boards (DB) Dispute Review Board (DRB) Dispute Adjudication Board (DAB) Combined Dispute Board (CDB) Dispute avoidance Dispute resolution Introduction Each construction project is distinct and unique from the other in its own right. This is because employers or project owners seek for customized services. Because of potential disputes that are bound to arise, each party nominates one impartial and independent person to form the dispute resolution board. Thereafter, the two nominated parties nominate a chairman with similar qualities to regulate the dispute board. The fundamental obligation of each member of the board is to get independent and original facts from the sites by regular visits and resolve the matter amicably. Through this, verdicts are easier to determine whenever conflicts or issues arise from the situation according to Donald (2009, p1). In unison, the board provides regular communication to their clients when there is a potential area of conflict that they detect. This effort is aim at resolving disputes before they arise and take negative directions. The composition of a dispute board may determine whether the board takes the name of a Dispute Resolution Board (DRB) or Dispute Adjudication Board. The former name is strictly meant to give resolutions and a way forward and the latter provides adjudication positions. The following segments will look at the compositions of the DRBs. Personnel of Dispute Boards In most cases, the members of the DR boards do not exceed five. Unless the project is very large or too controversial such as the Hong Kong Airport project where seven members were used, three members are often the optimum figure. An odd number is chosen because of a need of a majority vote when a controversial standoff may have arisen. For a person to be named as a member, there are four qualities that they must posses and demonstrate. They must have an in depth knowledge with relevant design and construction issues. This means that they must understand areas where potential conflict is bound to arise in construction. Construction being an issue that not only requires experience but actual classroom knowledge, an engineer or construction site designer bets suits this part (Stipanowich 1998, p18). Secondly, they must have proficiency on interpretation of relevant documentations such as blueprints and contractual documents. Contracts are as precise as they are detailed. This means that anybody who is mandated to act on them must understand how they are created and interpreted. Thirdly, a candidate for a dispute resolution board must have excellent negotiation skills. This value according to Hinchey and Schor (2002, p11) is a personal attribute that may not be taught in college but through experience. Dispute resolution involves two parties who believe that their positions are right and hence no room for conceding. Therefore, veteran contactors or advocates are a choice for many project owners. Lastly, track record and experience is a key attribute when nominating a member for a resolution board. Rarely do project owners look for newly commissioned contractors or lawyers to be on their dispute boards. Therefore, the four key aspects are important in selecting a preferred nominee for the DB. The Dispute Resolution Processes As already hinted, DRBs are set up at the beginning of construction projects. The beginning of the processes start with the nomination of members who have the above mentioned qualities. These board members are provided with the necessary documentations, specifications and plans between the contactors and the owners. In addition to that, the DB is provided with their own agreement documents which reflect on their terms of operation and remunerations as reflected in the Ciarb.net ( 2012, p1). The international chamber of commerce (ICC) recommends that these documents should also provide for the address on maters when potential disagreements arise. Procedural Rules and Operation of ADB These rules have a role in formalizing the operations of the DB’s members as representatives of both parties from neutral perspectives. Therefore, the first step of operation is to define these rules and establish their boundaries. The rules are agreed by the contractor, the employer and the board. Hence it is signed in triplicate (Donald 2009, p8). Secondly, it is an obligation for the DB to familiarize with the site and get first hand information. This means that the board members must have a real life experience on the ground and not mere delegation of responsibilities. Regular inspection of the ground is part of the deal because such activities facilitate a situation of dispute avoidance and dispute resolution. This is an objective measure since disputes normally occurs on matters of technicalities and issues that may be seen as trivial. At this point, rules of the DB often direct that members must attend meetings at all times. During the actual resolution of a dispute the main activity of the DB is to provide necessary communication to the parties concerning issues of technicality and position. They offer a neutral opinion on whether the dispute is at the level of avoidance or resolution. The decision making process of DB is standardized worldwide and usually is final and binding. When making a decision, they consider correspondence, necessary documents, particular circumstances and the position of the law that provides for such disputes. When they arrive at an agreement, they may issue a binding verdict or a temporary adjudication verdict. This is the core rationale of the existence of DABs according to Woolnoug (2002, p23) who advocates for negotiation. As many would agree these bodies handle the situation well and reduce costs while making the parties observe their roles and responsibility to the letter. Time Frames and Relevant Documentations Usually, the period between the dates of referrals to the day of rendering the written verdict of recommendation or determination is between few days 90 days. This is typically three months of hearing, investigating and resolving/ adjudicating the matter for mega projects. Although this is not the standard time that is bound by law, many experts recommend that time allocated for the members of the dispute board should be sufficient enough. However, longer time frames may inconvenience the parties than shorter periods because cash flows of the project are often stalled. The choice of time frame at all time is aimed to be convenient. Documents in disputes boards are important elements since they serve as evidence and bind the parties that are involved. There are several documents that are offered at the beginning of the contract, others are offered during the progression while others are relevant at the end of the dispute period. At the beginning, the three main documents include the dispute board clause document, procedural rules and the tripartite agreement. Dispute Board Clause document is the formal agreement between the employer and contractor. It shows the details of the agreements, the obligations that each party is supposed to undertake and the limitations of the contract. Experts recommend that provisions for witnesses should be provided in the clause in order to seal the authenticity of the documents. Procedural rules as the name suggests, is a document which absorbs the details with which the dispute board operates. They reflect the mode of calling for meetings, the process of hearing the dispute and the role of each member or chairman in resolution of the dispute. The tripartite documents are also important as the board commences its duties because it is a binding document for all agreements by the three parties namely the employer, contactor and the DB. Progress reports are non-standardized documents which the board receives from the construction site concerning the dispute during the time frame. These documents are important because they verify whatever the board finds during its visits to the sites. Variation instructions documents may also be issued which may not necessarily be binding as the previously mentioned documents. At the end of the dispute a Performance Certificate may be issued to either or both party to show the extent of success. However Notice of Dissatisfaction is a common document that is offered to the board by either party to express their disagreement with the verdict of the board. Traditional Approaches to Dispute Avoidance And Resolution Ever since construction activities became professionalized and commercialized for that matter, there have been several attempts to solve potential disputes. Three modes of such attempts can be categorized into three folds namely negotiation, mediation and adjudication. The two former methods are normally termed as Alternative Dispute Resolution (ADR) while the latter forms the basis of the DB. Negotiations were informal arrangement where expert appraisal was used to bring a consensus to the parties. The opinion of such experts was used as the middle ground as an expert named Groton (1997, p13) teaches. Mediation was a mechanism that used elements of a mini-tribunal to hear and make independent decision without the participation of the parties. Adjudication is where the dispute review board is classified where, neutral representatives are nominated by either party to monitor, hear and resolve the dispute before the end of the contract period. A Comparison of ADR (Such As a Tribunal) to Dispute Board The main advantage of the DB includes the fact that the board is involved in every detail of the contract from inception to conclusion of its mandate. The members are experts who understand the contract, its goals, objectives hence they prevent aspects of dispute growing out of proportion. However, unlike a tribunal a DB is limited to the contract’s life, hence does not survive the nullity of the contract. The following are advantages of a DB. The DB resolves its issues pretty fast as Nicholas (2004, p6) admits. This is an advantage because time in contracts is a basic element which reflects how much money is saved or lost. Tribunals may take several moths of hearing and determination of the case. During this time, legal action will be a likely occurrence. Therefore, the dispute boards operate at a lower cost than the regular tribunal. Lawyers and other unnecessary legal opinion providers are eliminated from the DB since the two members are selected based on a number of professional and personal attributes (Nicholas 2004, p9). This is a further reduction of costs when resolving such matters. Litigation and arbitration that may be a characteristic of a public tribunal may make the process lose its confidentiality. Dispute boards area private affair that the contractor and employer solve within themselves and their representatives and the chairman. Some disputes may arise and get solved without even the spouses of the parties knowing about them. Modern day dispute boards for mega projects are normally used to stay clear of the media and competition. In the same breath, dispute boards are flexible and move towards a solution which is not only acceptable but accommodating. Lastly, the process of DB provides an environment where business relationships are maintained. Unlike court cases which in many cases elicit mistrusts and hatred, DB aim at resolving the disputes from a humanitarian and professional manner hence maintenance of the business relationship. This is the reason why long time business partners prefer DBs to ADR. With all these attributes, many researchers have agreed that dispute board verdicts are more satisfying to the parties than other ADRs which have been happening in the past. The speed, processed and quality of verdicts have an accommodating factor that is agreeable by not only the parties but the board members too. However, there are those who feel that dispute resolution boards have their own weaknesses. First, some countries have not recognized the elements of DB. This means that some of the rules may not be enforceable by the prevailing constitution. Construction Dispute Tribunal Construction disputes sometimes can get out of hand and mistrust becomes inevitable. Therefore, parties may opt to go for a court ordered process of forming a dispute tribunal of independent parties they may choose an out of court hearing. This process is commonly reoffered to as arbitration as explained by Dugan and Rubins 2005, p8). Although in some cases, the arbitration may take a negotiation or intercession perspective, construction disputes requires a more binding process. Larger cases which involve mega construction may be set out to be solved by specially appointed judges or independent parties. These arrangements have features that may prove to be advantageous or disadvantageous. Unlike normal court processes, construction dispute tribunals require fewer individuals and take the normal procedure of a court case in a quicker manner. This arrangement comes when either of the parties, namely the contactor or employees, files a complaint to the dispute body seeking a redress on matters arising from breached contract. Arbitration as an ADR can either be public or private depending o the agreement of the court or the two parties (Lynch, 2001, p18). Therefore, procedures for these arrangements may or may not be available for third parties. They hold other advantages such as the fact that their verdict can be enforced by the law unlike the DB. In addition to that, it may take informal proceedings because of the details that are required. However, there are serious disadvantages that may be associated with this kind of ADR. First, the involvement of lawyers and other legal experts largely make the proceedings very complicated. Unlike the DB which experts normally give their opinions on facts and circumstances, lawyers may give their verdicts from technicalities. These arrangements are mandatory and binding hence may spoil the gentlemanly agreement and relationship of the business. Therefore, arbitration can be a disservice to business relationship. Conclusion This exercise has discussed the technicalities and dynamics of construction dispute boards. The composition of a dispute board (DB) as discussed may be a Dispute Resolution Board (DRB) or Dispute Adjudication Board. Normally members of the DR boards do not exceed five and an odd number is chosen because there need to be a majority. The four qualities for a DB member include, in depth knowledge, they must have a knowhow on interpretation, have excellent negotiation skill and lastly track record and experience. Procedural rules and operation of ADB include regular inspection and standardized decision making process. When making a decision, they consider correspondence, necessary documents, particular circumstances and temporary adjudication verdict. Time frames of DBs are not limited but may last from a few days to 90 days. Documents in disputes boards are important elements since they serve as evidence and may include dispute board clause document, procedural rules and the tripartite agreement. Others include progress reports, performance certificate and notice of dissatisfaction. Ultimately a comparison between an ADR and the DB became the point of discussion. It was clear that although the former is more binding and effective, it may be bad for flexibility and business relationships. References Donald, C., 2009, Dispute Boards and Construction Contracts [online] Available at http://www.buildingdisputestribunal.co.nz/site/buildingdisputes/files/BuildLaw/Issue%207/DISPUTE%20BOARDS%20AND%20CONSTRUCTION%20CONTRACTS.pdf [Accessed 7 December 2012] Nicholas, G. 2004, Dispute Resolution in the Construction Industry: An Overview Construction Law Seminar: Introduction to the Basics. 9(8) p.6 Stipanowich, T. 1998. Reconstructing Construction Law: Realities And Reform in a Transactional System Wisconsin Law Review, 2(1) p.18 Dugan, C., and Rubins, N., 2005. Investor-State Arbitration New York: Oxford University Press Ciarb.net, 2012, Dispute Boards Are Often Used in Major Projects, and Construction Lawyers need to understand them [online] Available at http://www.ciarb.net.au/blog/introduction-dispute-boards [Accessed 7 December 2012] McMillan, D. and Rubin, A., 2005, Dispute Review Boards: Key Issues, Recent Case Law, and Standard Agreements Contract Drafting / Alternative Dispute Resolution 2(8) p 1-78 Hinchey, J. and L, Schor. 2002, The Quest for the Right Questions in the Construction Industry. Dispute Resolution Journal, 8(02) p.10-20. Woolnough, R. 2002, If you’re In a Dispute with a Partner You Really Don’t Need to Seek Solution in Court Enterprise, 9(1) p. 46. Groton, J. P. 1997. Alternative Dispute Resolution in the Construction Industry Dispute Resolution Journal, 4(9) 49-57. Lynch, J. 2001. ADR and Beyond: A Systems Approach to Conflict Management. Negotiation Journal, 17(3), p. 213. Read More