Bill Barton is director of law firm Barton Legal
Disputes continue to occur with troubling frequency across the construction industry – and remain extremely expensive. Unsurprisingly, the sector is searching for ways to limit their frequency and cost.
“In the lifecycle of a construction project, it’s highly likely that some form of dispute or unforeseen issue will arise”
One solution is to establish dispute boards. These consist of impartial professionals and are established when a mid- or long-term contract is signed or commenced, in an effort to avoid or overcome disagreements or disputes that arise over the course of the contract.
Dispute boards have three basic functions, all aimed at resolving disputes without the parties entering into arbitration or litigation. This may be by encouraging the independent and early resolution of a disagreement by stressing both informal and formal approaches to dispute resolution or, in the event of more entrenched disagreements, by offering assistance to help the parties reach an agreement.
Whether it is providing informal assistance to help parties reach an agreement, or issuing a recommendation or decision following a formal referral process, each function plays an equally important role in minimising the risk and cost of disruption.
Standing vs ad hoc dispute boards
Standing dispute boards exist for the length of the contract and are usually established at the very start – ideally at contract execution. Ad hoc dispute boards, meanwhile, are appointed as and when disputes arise, but a common issue is that they require the agreement of parties already in dispute. This often leads to delays in their formation and agreement of terms of reference.
Setting up a dispute board from the outset is beneficial as it demonstrates to contractor and employer that there is a neutral board to provide guidance and solutions to the many issues that arise during the execution of the project. Further, the implementation of a dispute board from day one can lead to better relations on site by reminding parties of their duty to cooperate and act in good faith.
The active presence of a dispute board also reminds the parties of their obligations under the contract throughout the project, providing a means for disputes to be settled quickly and efficiently without causing further delays to completion. The main benefit of a dispute board constituted at the start of a project is to create awareness between the parties of any potential issues and facilitate communication, helping defuse these issues before they create larger and more complex problems.
What are the benefits of using dispute boards?
In the lifecycle of a construction project, it is highly likely that some form of dispute or unforeseen issue will arise. It may be an issue with the cost or scarcity of materials, adverse weather conditions, the sourcing of labour, or performance.
Ultimately, it is cheaper and quicker to achieve resolution at an early stage. Dispute boards, particularly standing dispute boards, offer a route to this: for instance, providing a way to address the point of discovery, opening up a channel of communication between parties and inviting the contractor to notify the employer at an earlier stage. This also encourages compliance with the contractual terms, further reducing the likelihood of delays, increased costs and disputes.
Of course, the choice is always open to the parties to ignore the contractual requirement to establish a dispute board. Establishing a board is expensive and requires both parties to keep them up to date, stay informed, engage with them and comply willingly with their directions and requests. But the cost in time and money will invariably be lower than engaging in litigation or arbitration, which is also significantly more damaging to relationships.
Ultimately, while not perfect, dispute boards provide a valuable alternative resolution method of which parties to a contract can take advantage. Whether they ultimately do is down to them.
