Benefiting from a DAB resolution

In his third and final article on Dispute Adjudication Boards (DABs), Hamish Macdonald, of Systech International, discusses their benefits.

Systech Group Limited, COMMENT, Business

In his third and final article on Dispute Adjudication Boards (DABs), Hamish Macdonald, of Systech International, discusses their benefits.

Benefits over the alternative processes

In the first place, DABs are not intended to replace arbitration or litigation but are to be considered as part of a multi-tiered dispute resolution process.

The use of a DAB has been described as an early and intermediary step directed at avoiding the need to resort to other more expensive and more time-consuming procedures such as arbitration or litigation.

 

The costs of the DAB are generally offset by lower bid prices.

Unlike litigation, arbitration and other forms of dispute resolution, the DAB process is aimed at resolving problems and disputes during construction. This aspect is possibly the greatest benefit of the DAB process.

The procedures governing the use of the DAB should facilitate prompt reference of disputes to the DAB as soon as site level negotiations have reached an impasse. Referral to the DAB only after multiple levels of employer and Contractor reviews is inconsistent with the process and counter-productive in terms of time and expense.

In addition, since the DAB typically handles disputes on an individual basis, the accumulation of claims is minimized and there is generally not an ever-growing backlog of unresolved claims or issues creating an atmosphere fostering acrimony and ultimately resulting in a referral to arbitration or the courts, often after the construction works are complete and concerned personnel are dispersed.

For meritorious claims, acceptance of the DAB decision by the parties results in earlier payments to the contractor, easing cash-flow difficulties.

The benefit of this to the contractor is apparent but it is of equal benefit to the employer where the much later settlement of meritorious claims through arbitration or litigation would undoubtedly have significantly increased the ultimate cost of settlement.

Why do DABs work?

The very existence of a readily available, mutually acceptable and impartial body of highly qualified and experienced individuals tends to promote agreement between the parties without even needing to refer many disputes to the DAB.

Experience has shown that the DAB facilitates positive relations, open communications, trust and co-operation normally only associated with partnering.

When a dispute does arise, it is given early attention and addressed contemporaneously. This avoids the commonly encountered situation of the engineer being too busy to address a voluminous claim or, as sometimes happens, his instinctive rejection of the claim in the hope that it might go away.

Because of the DAB's familiarity with the project and the speed with which disputes come up for a hearing, facts are better understood by those presenting and adjudicating the dispute.

The need for reconstruction of historical circumstances is greatly reduced and involved senior personnel are still on hand to offer their first-hand knowledge of the events - a benefit of which judges and arbitrators are often deprived.

Costs and cost benefits

When compared to the likely costs of arbitration or litigation, DABs undoubtedly offer good value. It has been estimated that a three-man full-term DAB can cost between 0.05% and 0.5% of the total project costs depending upon the size of the project.

Clearly the larger the project the easier it is to justify the expense of the DAB but one-man ‘local' boards can be considered for smaller projects at very modest costs.

The parties typically view the expense of a DAB as an insurance premium against more costly dispute resolution procedures. Furthermore, the costs of the DAB are generally offset by the lower bid prices that are known to result when contractors prepare tenders on contracts with DAB provisions.

Perhaps one of the most significant aspects in considering the costs of a DAB is the significant difference in time and effort (and thus costs) in preparing a dispute for a DAB hearing and in assembling the typical voluminous trial documentation to put before an arbitrator or a judge - costs that are rarely ever recovered in full, even by the winning party.

The success of DABs?

As stated in a previous article, the ultimate measure of success for DABs, as an intermediary dispute resolution process, must be how many disputes are finally settled based on the DAB's decision without further referral.

From the available figures it is apparent that the dispute adjudication process has, since its introduction into the construction industry, been extremely effective in avoiding arbitration and litigation and bringing the parties to an early settlement.

Statistics obtained from the Dispute Resolution Board Foundation (DRBF) show that on projects utilizing dispute boards, over 98% of the disputes referred have been concluded by the board's recommendations or decisions without further referral. Success indeed!

Most popular

Awards

CW Oman Awards 2020: Meet the winners
A round of the thirteen winning names at the Construction Week Oman Awards 2020 that

Conferences

Leaders UAE 2020: Building a sustainable, 'resilient' infra
AESG’s Phillipa Grant, Burohappold’s Farah Naz, and Samana's Imran Farooq on a sustainable built environment
CW In Focus | Inside the Leaders in KSA Awards 2019 in Riyadh
Meet the winners in all 10 categories and learn more about Vision 2030 in this

Latest Issue

Construction Week - Issue 767
Sep 01, 2020