Dispute avoidance in construction contracts a must

Standing dispute adjudication boards in construction projects should seriously practice their role in dispute avoidance in contracts, said Dispute Resolution Board Foundation (DRBF) Sri Lanka Country Representative Malith Mendis at the DRBF Regional Conference 2018 held recently in Yogyakarta, Indonesia. 

Dispute Resolution Board Foundation Country Representative Malith Mendis

“They should encourage open communication between the parties at meetings and should request that senior off-site personnel from both the employer and the contractor are present at every meeting as ensures that senior personnel hear the other side of every issue, not just that from their own personnel. This is especially important in developing countries where there is intense construction activity which puts pressure on the existing resources, and leads to many disputes.”

Pointing out that the International Federation of Consulting Engineers (FIDIC) has recognised this dispute avoidance role and made great emphasis on this role in the new 2017 Suite of Construction Works Contracts, he said: “The Dispute Board is now called the Dispute Avoidance and Adjudication Board (DAAB). The DAAB (in the case of a three-member DAAB, all three DAAB Members acting together) may give Informal Assistance during discussions at any meeting with the Parties (whether face-to-face or by telephone or by video conference) or at any site visit or by an informal written note to the parties. ‘Informal assistance’ means the informal assistance given by the DAAB to the parties when requested jointly by the parties under the new Sub-Clause 21.3 [Avoidance of Disputes] of the Conditions of Contract. Parties may jointly request (in writing) to the DAAB to provide assistance and/or informally discuss and attempt to resolve any issue or disagreement. The DAAB may also invite the parties to make such a joint request. Both parties should be present at any informal assistance meetings unless they agree otherwise. The DAAB, of course, has the power to establish the procedure to be applied in giving informal assistance.”

He noted that the most important tool for dispute avoidance is communication. “First the clear communication of a claim to the other party which is the factual basis of the claim, including supporting documents where appropriate. The legal basis that supports the entitlement. Secondly the clear communication of the basis for rejection of the claim, any additional or different facts (including documents) and the legal basis that supports the rejection. It also very important that, management of project execution in accordance with the requirements of the contract, which includes sufficient resources, realistic and credible ‘as built’ programs, work completed to the contractually required quality, design documents submitted to the employer, maintaining and managing comprehensive documentation from the start of the tender through the execution of the project will ensure that the best evidence is available to support/defend a claim and familiarity with the contract conditions.”

He recommended the dispute avoidance techniques of inviting senior off-site personnel from both the employer and the contractor are present at every DAAB meeting to ensure that senior personnel hear the other side of every issue, not just that from their own personnel. 

Ask probing questions, particularly if it appears that the parties are not addressing the right technical or legal issues. If it appears that the parties cannot agree on an issue, e.g. a variation, request each of them to prepare a brief position paper prior to the next DAAB meeting. A position paper should state the relevant facts, refer to appropriate documents and articulate the party’s position in respect of the issue, and its opinion of the correct contractual position. If the position papers and subsequent negotiation between the parties do not resolve the issue, they will form the brief for the DAAB to give informal assistance. 

If the parties request the DAAB to give a written (informal) opinion, the DAAB should provide a “without prejudice” opinion, referring to the relevant facts and providing brief reasons for the conclusions it comes to. The parties are not bound to accept an informal opinion, and nor is the DAAB bound by it if a dispute ensues. Unlike a DAAB decision, the recommendation of an informal opinion does not need to be confined to strict contractual rights.