Wise counsel

With adjudication getting slammed for allegedly being expensive, lengthy and inaccessible, some industry experts are advocating an alternative approach to sorting out disputes. They say Dispute Resolution Boards (DRBs) can take six months off the time taken to thrash out disputes using other methods and can slash costs incurred by the parties involved by up to £350,000. One fan of the system says it has a whopping 98% success rate.

A DRB usually comprises three “wise men” chosen by the project team. These senior industry experts are there from day one, looking over the shoulders of the client, contractor, QS, architect and so on. Their job is to nip disputes in the bud and prevent the parties having to resort to adjudication and all the time and money it demands.

DRBs have been pioneered internationally by mega clients such as the World Bank and the Asian Development Bank, as well as by the International Federation of Consulting Engineers and the International Chamber of Commerce (ICE), since at least the 1980s.

The World Bank tested the system on the El Cajon hydropower project in Honduras in the 1980s, which resulted in the tallest concrete arch dam in Latin America. All disputes were resolved amicably by the time the dam was completed and the Bank is now understood to be using DRBs on all its projects.

In 2004, DRBs started gaining credence in the UK when the ICE added them to its standard forms contract in July.

QS Daniel Alcon is one of the main supporters for DRBs. He is a member of the Dispute Resolution Board Foundation, chairman of the RICS UAE Group and a senior consultant at Knowles Middle East.

Alcon says the beauty of the DRB is that it provides the parties with an impartial forum, where they can sort out their issues in a “rational and amicable way”.

He adds that the board has intimate knowledge of the particular design and construction issues facing the project. This sets the DRB system apart from mediation, where the mediator has no prior understanding of the project and personalities involved, and is only called in once a dispute has erupted, he argues.

Alcon says: “Because the DRB members have been involved in the project from the start, people find it rather hard to lie to them.

A colleague said to me: ‘When I see those white-haired gentlemen sitting in front of me I feel like I’m facing my father.’”

The DRB process is cheap, according to Alcon, because “differences are put before the DRB in their infancy before escalating into major disputes, so there is rarely any input required from expensive lawyers and hearings are held on site, not in rented rooms”.

A colleague said to me: ‘When I see those white-haired gentlemen sitting in front of me I feel like I’m facing my father.’

Daniel Alcon, senior consultant, Knowles Middle East

Board members are only paid for the time they spend on site and at meetings and their fees are split equally between the project team. Plus, tender costs should also be lower when there is a DRB on board because contractors know the risk of delays is reduced.

One dispute resolution consultant is another fan of DRBs: “Disputes can be resolved quickly. Anything that takes the formality away is a good thing. Once you go to the formal stage you’re already lost because you can no longer talk about things openly.”

But the legal profession appears to be unconvinced. Shona Frame, partner with MacRoberts and a specialist in construction law, says: “If negotiations are possible, they will be achieved whether there is a clause in the contract providing for a DRB or not.”

She is sceptical towards the idea of contractually compelling parties to negotiate: “If you tell parties that there must be mediation, but one of the parties feels there is a point of principle involved and is not prepared to budge, it won’t work. It depends on the personalities involved, but there is no ‘one size fits all’ solution.”

“I have been involved in one case where a DRB meeting was called but it wasn’t successful.”

She also criticises the non-binding nature of agreements reached through the DRB process: “If there is a deal done it must be formalised, at least in the form of letters.”

Alcon at the RICS counters that, although DRB practice provides for recommendations that are not binding, “history shows they are almost always used in reaching a resolution to the dispute”.

“In the few instances where the dispute has progressed to subsequent proceedings, admissible DRB recommendations have carried considerable weight as they were made by independent, experienced professionals, who had knowledge of the events as they occurred.” He adds that recommendations can be made binding, unless dissented to by either party within a certain time period, say 28 days.

Frame admits the DRB approach could play a role in disputes that end up going to adjudication by focusing the dispute on the key issues. She adds: “It could be useful in that it takes disputes out of the hands of the people on the front line and it does at least keep the channels of communication open. Legal costs will also be cheaper, assuming it works.”

So it seems that DRBs could offer a better alternative to adjudication. The next few years will show whether they take off in the UK.