November 2, 2021
In the wake of COVID-19 and our Olympics on the horizon, the construction industry has and will continue to face a proliferation of challenges. With every challenge comes the potential for a dispute. Without effective and efficient resolution strategies, these disputes can overwhelm a project and threaten practical completion. Worst case scenario, these disputes outlive the lifespan of a project, forming a mountain of claims that cannot be climbed over. Dispute Avoidance Boards swiftly gets to the heart of issues, proving a powerful antidote against the accumulation of claims and thus worthy of our focus in this week’s article.
Dispute Avoidance Boards
Dispute Avoidance Boards (DAB), sometimes referred to as Dispute Resolution Boards, are effective at balancing power, progressively dealing with disputes whilst a project may continue. The theory behind the implementation of DABs is that early and proactive attention to conflicts serves to prevent and de-escalate disputes. This non-invasive process ensures parties to a construction contract can focus on what is important: achieving practical completion.
A creature of contract, the formation and parameters of a DAB are open to the discretion of the parties. Parties typically elect one or more persons to the board who are equipped to manage and compel the resolution of issues as they arise. A project’s context may inform who is best suited to sit on the board and what issues ought to go before them. During contract negotiations, parties are also open to decide what material may be available to the board during their deliberation; whether the boards decision on an issue is final and binding; and whether that decision is challengeable. It is common for a DAB clause to exist within a suite of issue resolution strategies and relied upon where amicable resolution cannot be reached by the parties independently.
The DAB Process: Results in One Foul Swoop
The procedures for a DAB may be agreed by the parties at the time of entering a contract, though some typical features include:
- Where an issue, or part of an issue, is unable to be promptly resolved, either party may give notice that it is to be referred to the DAB. That notice would include reasonable particulars of the issue referred.
- Both parties make available to the DAB all such additional information, site access and facilities required by the board for the purposes of making a decision on the issue.
- The DAB conducts an informal hearing where parties are able to make submissions in relation to the issue. If the contract allows, the assistance of an expert or external materials may be leaned on here.
- The contract will specify a period within which the DAB must give its decision on the issue. This usually follows in a timely fashion given the board’s familiarity with the project.
- Dependent on the terms of the contract, the decision may be final and binding. In which case, it is to be given effect unless and until reversed, overturned or otherwise changed under the procedure set out in the contract.
- Whether or not a decision made by the DAB is challengeable is dependent on the contract. Where a challenge is allowed, parties are typically directed to alternative avenues for dispute resolution (e.g. expert determination).
Perceived advantages and disadvantages of DRBs
What amounts to effective dispute resolution for one project may prove entirely inappropriate for another. It is important parties consider the advantages and disadvantages of a DAB before enshrining one into contract.
Advantages
- Aimed at dispute avoidance thereby supporting the old adage that ‘prevention is better than cure’;
- The avoidance of formal disputes maintains project relationships and progress of works;
- Rapid real-time decision making; and
- With careful drafting, DAB clauses can finalise issues that may otherwise evolve into claims at the end of a project.
Disadvantages
- If the parties elect to engage a panel of individuals to their DAB, associated costs will be high. This may render the strategy inappropriate/ inaccessible to smaller projects;
- If a DAB decision is defined as binding and final, this may prove disadvantageous if the result is founded on an inadequate interrogation of merits;
- On larger projects where issues are prevalent, parties may require a larger commercial team to facilitate and manage DAB disputes; and
- Should parties lose confidence in the DAB and its members, confidence in their decision will also diminish.
DABs & Construction Contracts
A DAB removes the spectre of large-scale litigation at the end of a project by utilising a process designed to address issues as and when they arise on a final basis. This non-disruptive process allows parties to focus on what is important: achieving practical completion. Acknowledging DABs are not appropriate in every construction contract, we encourage our client’s to be mindful of its advantages when developing their strategy for dispute resolution.
LPC Lawyers
The LPC Lawyers team have a wealth of experience to assist across contractual drafting and dispute processes. Through providing clients support across the duration of a project’s lifecycle, we can assist in ensuring a project’s successful and efficient delivery.
If you have any questions or concerns about your current or future projects, please do not hesitate to contact LPC Lawyers for a discussion on how we can assist.
The contents of this article is for information purposes only; it does not discuss every important topic or matter of law, and it is not to be relied upon as legal advice. Specialist advice should be sought regarding your specific circumstances.
Contact: Peter Lamont or Brigitte McLeod
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