RICS: Dispute avoidance saves both time and money
Prevention is better than cure when it comes to construction disputes in the Middle East, says Yasmine Nashawati, DRS Manager (MENA) at the Royal Institution of Chartered Surveyors (RICS)
The construction industry is riddled with disputes. The domino effect of contracting parties becoming embroiled in such disagreements on large-scale projects can be immense. Typically, this chain reaction begins with cost implications, followed by the inevitable late delivery and handover. In some cases, even the quality and scope of projects are called into question.
Disputes on major construction and engineering projects can cause significant harm to long-term relationships between employers and contractors. The effects of such difficulties are amplified when the parties involved are committed to working together for lengthy periods on multimillion-dollar projects.
According to Global Construction Disputes 2015, published by Arcadis, there is $76.1m tied up in construction disputes in the Middle East and North Africa (MENA) region at present, with an average of 15.1 months per dispute. With this in mind, perhaps it is time for the industry to move away from dispute resolution towards a model of dispute avoidance.
Dispute resolution becomes more difficult when a difference of opinion between two parties remains unresolved for a long period. In these circumstances, parties frequently descend into the trenches; their views become rigid and, in many cases, parties become so inflexible that meaningful dialogue is almost impossible. The resultant delay means that working relationships deteriorate and project delivery suffers.
Traditional methods of dispute resolution can be very expensive and inordinately slow. Moreover, the commercial and human consequences of litigation, arbitration, and adjudication are often intolerable. Regrettably, this represents the norm – even when parties succeed in settling their differences before a judgment, award, or decision has been issued.
With major infrastructure projects – particularly those that are publicly funded – there is a growing preference for dispute avoidance as opposed to dispute resolution. This trend is easy to understand when one considers that the Middle East has some of the highest construction spends in the world; key events due to take place during the coming decade have non-negotiable completion dates.
The use of early intervention techniques to ensure the timely settlement of differences between employers and contractors is gaining widespread acceptance internationally, especially when married to contractors’ commitment to a broader collaborative culture.
The Royal Institution of Chartered Surveyors (RICS) Dispute Resolution Service (DRS) was established 40 years ago in the United Kingdom, and has been serving the Middle East for the past five years. RICS offers a range of services designed to encourage the wider collaborative culture that will prove vital if the region is to succeed in reducing the number of disputes, not to mention the time necessary for their satisfactory resolution.
New ways forward
RICS’ DRS employs a wide array of conflict avoidance and early intervention methods, which focus on collaborative negotiations and the identification of solutions, rather than the allocation of blame. The essential ingredients for dispute avoidance are really simple.
Firstly, RICS puts in place a system that identifies problems and issues early, before positions become entrenched and matters begin to escalate to the level of full-blown disputes. The development of a methodology that deals with such issues at an early stage is crucial; ideally, this methodology should focus on the specific issues in question, and involve structured communications equipped to settle disagreements quickly and amicably.
In some cases, this may involve facilitation by a mediator to ensure that parties communicate effectively, their expectations are managed, realism is encouraged, and all stakeholders remain focused on pertinent issues and finding a resolution.
Making conflict avoidance part of the contracting process is all about building sensible dispute avoidance and/or resolution provisions into contract documents, and encouraging people to take ownership and responsibility when it comes to the timely resolution of disagreements.
Encouragingly, RICS’ diverse selection of conflict management and early intervention procedures have grown in popularity during recent years.
Conflict Avoidance Panels (CAPs)
CAPs are contractual mechanisms designed to avoid and control disputes. They work as a preventative technique, and usually include incentives to encourage cooperation.
A CAP can be standing in the sense that it exists throughout the lifecycle of a contract. Alternatively, it can be called on as and when needed as a ‘pay-as-you-go’ conflict management system. A CAP works by early involvement, reviewing issues over which there is disagreement and providing non-binding recommendations.
The recommendations are reasoned, and parties that decline to accept recommendations must explain why. This approach encourages stakeholders to take ownership of issues and resolve them in collaboration, albeit with the assistance of a third-party facilitator.
RICS has been administering a CAP service for Transport for London (TFL) since 2014. Disputes worth $569m (GBP400m) have been referred to the CAP process to date, and all recommendations have been accepted and implemented by the parties involved.
Robust RICS ACRETM Mediation (Amicable Settlement)
Mediation is a hot topic in the MENA region; it is a concept that is widely accepted in traditional society. RICS’ analytical, constructive, restorative, expert (ACRE) approach to training results in mediators who are skilled at helping parties find commercially acceptable – and often innovative – solutions to their problems.
Mediators can encourage parties to test the reality of their stated positions, move away from entrenchment, and explore viable options for settlement.
There is no ‘one-size-fits-all’ solution when it comes to dispute avoidance and resolution, especially in a region where there is no standard form of contract. What’s more, the ability to administer a poorly drafted contract can open the door to even more complex solutions.
More traditional forms of dispute resolution, such as arbitration, are still required, but there is currently a shortage of locally experienced technical arbitrators in the region. In response to this, RICS has recently launched a Diploma in International Arbitration, tailored specifically for the MENA region.
RICS also continues to offer its Expert Witness Accreditation Service (EWAS). This service equips highly qualified professionals with the skills and full understanding of procedures for giving expert evidence in courts or other tribunals.
EWAS also ensures that experts apply high standards in discharging their legal and ethical duties as expert witnesses to the instructing party, the other side, and – most importantly – to the courts or tribunals in which they appear.
RICS’ panel of experts is the only truly independent body that offers MENA-based clients an appointments service specific to the region’s built environment.
Ultimately, the best reasons for using conflict avoidance and early intervention techniques, such as CAP and mediation, are that they save time and money. Businesses that regularly use these processes can function more nimbly because they are able to dedicate capital and employee resources to their actual business needs, instead of getting bogged down in the resolution of long-standing, deep-rooted disputes.
For more information about RICS’ DRS for the MENA region, please contact firstname.lastname@example.org.
For details of other services offered by RICS, visit rics.org.
The above article was written by Yasmine Nashawati, DRS Manager (MENA) at RICS.