The following questions are commonly asked about Dispute Boards. A full examination of the process, including setting up a Board, selecting members, administering the DB, and case studies and testimonials are available in theDRBF Practices and Procedures Manual. Click here for access to the Manual.
Does it really work? How effective is it?
DRBs have proved to be exceptionally effective. The International record through 2013 includes over 2,700 projects with a value approaching $300 billion. Over the past 10 years, between 70% and 80% of all projects utilising DBs have had no referrals to the DB, Where referrals have occurred, DB decisions been accepted or led to party to party settlements in 98% of cases, without further dispute resolution processes.
Does the mere presence of a DRB encourage contractor claims and disputes?
No, the experience has been quite to the contrary. The presence of a DB has had a prophylactic effect, deterring the assertion of contractor claims and disputes. The fact that about 75% of projects with DBs have had no referrals to the DB evidences its benefits, The DBs presence and informed comments during their regular meetings with the parties has frequently assisted the parties to find their own solutions to what might otherwise have escalated to serious differences between them. The Australian experience to date covers a much smaller sample size, but the statistics are very similar.
What are the types of DRBs?
The most common DRB usually comprises three persons. The Board members work together as a three member neutral board. Smaller projects may use a single advisor. Both the contractor and owner agree on a single advisor to work as a neutral party to help avoid construction disputes, or resolve them in the event that avoidance is not possible.
Is there a dividing line for the use of 1-person or 3-person Boards?
Single advisor DRBs (commonly called Dispute Resolution Advisors, or DRAs) are becoming reasonably common on smaller projects. One person DRAs have been used in Australia up to $150m, but project complexity (or lack thereof) usually determines suitability. The standard three-person DRB is most common for projects over about $80m. Below that, one-person DRAs are most commonly used.
How much does a DRB cost? Does it add value?
DB member costs for any specific project include travel time and expenses. These can have a significant impact on the DB costs for remote area projects. DB member location relative to any project also has an impact, although this is generally less significant than project location. Thus there is always a reasonably wide spread in the fee % of costs for similar value DBs. Australia has rarely used a 1-person DB on projects above $150m capital value.
Australian experience from 2004 to mid-2014 is tabulated below.
Do DRBs promote acrimony or posturing among the parties?
No. In fact DRBs have proved to reduce acrimony and posturing among the parties. The greatest source of acrimony among the parties to a construction project is festering, long unresolved claims and disputes. This has an escalating effect and makes the resolution of relatively simple issues increasingly more difficult as time progresses. Win or lose, parties find it more productive to resolve issues as they arise, so they can progress the construction without carrying the baggage of unresolved claims and disputes.
Do DRBs interfere with timely completion of the project?
No, they do not. If required at all, DRB hearings are typically conducted at a location convenient to the parties and usually in close proximity to the site. Board members are familiar with the project by virtue of their having attended regular quarterly status meetings and having reviewed monthly progress reports. They were selected in the first instance based upon their experience in construction of similar projects. DRB procedures are informal and simplified in comparison with court or arbitration proceedings. Legal advisors are encouraged not to attend hearings and, if they do attend, they are rarely permitted to make presentations or participate in the proceedings. As a result, DRB hearings are short and do not disrupt construction or adversely impact job progress.
Who pays for the DRB?
Because the cost of routine DRB meetings will be pre-estimated by tenderers, the full cost of routine meetings is effectively born by the project owner. Invoicing procedures for routine meetings vary between clients from all paid by the client, to separate invoices for 50% to each party.
Each party bears half the cost of any referral(s) regardless of outcome, and separate invoices are submitted to each party.
DB time spent on Referrals (Dispute Determinations) is usually dealt with on an hourly rate basis, This cost component cannot be estimated in advance, but several things are certain:
- A determination of a dispute Referral by a DB will cost a small multiple of that by any other ‘conventional’ dispute resolution process;
- only about 25% of DB contracts ever experience a Referral,
- given the above, the budgetary impact on both parties will be very much less than that of other ‘conventional’ dispute resolution processe