The Dispute Resolution Board Foundation International Conference
held in Sydney last Friday was the first international meeting of
its kind to be held in Australia and signals the emergence of
Dispute Resolution Boards (DRBs) as a mainstream and effective
resolution mechanism for major projects in this country.
Of particular importance in large scale projects involving
industry and government, Australian Government agencies should
consider adopting DRBs in major project contracts as a means of
addressing issues over the life of a project.
What are DRBs?
Also known as Dispute Review Boards or simply Dispute Boards,
DRBs first rose to prominence in the early 1990s, though they were
first deployed in the 1970s on major construction projects in the
United States. DRBs are an entirely contractual mechanism, with the
project contract setting out how the DRB is formed and how it is to
DRBs can take any form agreed to by the parties; however the
common model for a two party contract is for the DRB to be
comprised of a panel of three members. Subject to an objection by
another party, each party nominates an independent person
experienced in the work to be undertaken on the project and those
nominees in turn appoint a third person to be chair of the panel.
Despite being nominated by a particular party or fellow panel
members, each panel member operates independently and is not
required or expected to take a particular position. The functions
of a DRB can include identifying areas for potential disputes,
suggesting methods of resolving disputes, providing non-binding
opinions and formally ruling on disputes. For formal rulings of a
DRB it is common for there to be an avenue of appeal to binding
Benefits of DRBs
Despite the name suggesting that DRBs only come to the fore when
a dispute arises, a key element of the DRB structure is that the
panel members are actively involved in the project from an early
stage. This commonly involves periodic meetings and/or inspections
of how the project is tracking and who the relevant decision makers
are. The benefit of this approach is that in contrast to other
resolution methods which are only invoked when a dispute
crystallises, the ongoing role and visibility of a DRB can lead to
disputes being identified and nipped in the bud at a much earlier
stage. Among other things, it is this ability to identify and
address disputes at such a preliminary stage which has led to over
95 per cent of projects for which a DRB has been used resulting in
no litigation or arbitration.
Another key advantage of DRBs is that the parties are the
masters of the design and operation of the process. By negotiating
the terms of a mechanism by which disputes can be avoided and
resolved before the project even starts, the parties have prior
notice of how the system will work. Further, having previously
agreed to the panel members and the process, parties are far more
likely to heed the advice and accept the decisions of a DRB as
opposed to a third party.
A natural consequence of the benefits discussed above is a
considerable reduction in costs. These savings flow from both
avoiding the cost of lengthy litigation and also reducing the costs
that stem from delays and other interruptions to the project
itself. Experience to date has shown that for projects greater than
US$50 million of two years in length and with the DRB meeting four
times per year, the costs associated with DRBs are less than 0.5
per cent of the contract value. When the proven success of DRBs in
preventing disputes from escalating is taken into account, such
expenses represent good value for money.
Current and potential applications of DRBs
Traditionally DRBs have been implemented in large public
construction projects such as the third runway at Sydney Airport,
the Dandelup Dam in Western Australia and the desalination plants
in Sydney and Adelaide. During the DRB conference last week, Nick
Greiner, the former NSW premier and current chairman of
Infrastructure NSW indicated that DRBs are also to be used on the
North-West Rail Link project and the Wynyard Walkway which forms
part of the Barangaroo development in Sydney.
Arguably, the scope of contracts for which DRBs can be utilised
by Australian Government agencies is not limited to merely
construction projects. For example, large Information and
Communication Technology (ICT) projects also span considerable
periods of time and require constant monitoring by qualified
professionals to avoid disputes. With some amendments to the DRB
structure, it is possible that such contracts may also generate
similar benefits to those experienced in the projects above. For
Australian Government agencies looking to reduce the incidence and
cost of disputes in future major projects, the DRB model should be
considered as a potential solution.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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