Punchlist Commentary

Resolve Disputes As They Arise By Using a Dispute Review Board

Contractors should consider creating a dispute review board to help with project issues before more serious consequences arise.

By John Jozwick, Esq.

On any construction project, there can be differences of opinion about plans and specification requirements, disputes, change orders, delays and events/issues that require prompt decisions by the owner and contractor. The question is not whether these types of issues will arise, but how they will be resolved when they do.

John Jozwick, Esq. Corporate Counsel Rider Levett Bucknall John Jozwick also manages the Advisory Services division of RLB’s North American practice.

A dispute review board provides a forum and a process to resolve issues that parties cannot settle by themselves. But more importantly, the DRB process allows for timely resolution throughout the construction project rather than having post-contract claims and disputes. No other dispute-resolution process allows for as prompt, real-time dispute resolution as a DRB.

The DRB is typically composed of a panel of three respected and impartial professionals who are experienced in construction and assist project participants in avoiding or resolving disputes. The DRB is selected and approved by both the owner and the contractor and is usually organized before construction even begins in order to maximize its benefit and value.

As the construction project begins, the DRB is regularly updated and kept current with ongoing progress of the work. This allows the DRB to be ready to address problems and disputes as they arise.

Throughout the project, the DRB encourages the resolution of disputes at the job level. However, when issues arise that the parties cannot resolve themselves, the DRB is ready to assist—quickly and in a manner that allows disputes to be decided so the project can continue with a focus on the work rather than on unresolved dispute issues.

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Having a DRB on a construction project encourages ongoing dispute resolution and minimizes end-of-the-contract claims. Early resolution of disputes permits the parties to avoid the high expense and unpredictability of post-project litigation.

There are two types of decisions that the DRB may offer. At the parties’ mutual request, the DRB may provide an informal, nonbinding opinion on a potential dispute (known as an advisory opinion) facilitating real-time solutions to job problems and disputes before they become adversarial.

The dispute-hearing procedure includes an opportunity for each party to explain its position and an opportunity for the other party to respond. The objective is to fully air the dispute and determine the facts in a courteous and professional manner.

The second type of decision is when a dispute is referred to the DRB by either party for a DRB hearing and written report. The hearing is informal, yet professional and business appropriate, allowing the parties themselves to discuss the dispute. The board members’ recommendations are presented in a written report that includes the reasoning that led to each recommendation.

These recommendations may simply address entitlement issues or can range to entitlement with a guideline for how cost and schedule impacts should be viewed, to a full recommendation on entitlement and any cost or schedule impact.

The recommendations are not binding on the parties. This minimizes animosity between the parties so they may take the recommendation and attempt to negotiate or accept the dispute between them.

The DRB process provides benefits to both the participants and the project through claim avoidance and timely resolution of disputes.

Having a readily available dispute resolution process with a panel of mutually selected, technically knowledgeable and experienced neutrals familiar with the project tends to promote agreement on problems that would otherwise be entrenched in arbitration or litigation.

A DRB reinforces and encourages parties to settle claims and disputes promptly. In a best-case scenario, the parties learn to resolve all disputes with none formally referred to the DRB.

While the contracting parties may have a concern over the cost of keeping a DRB panel in place throughout a project, the parties should know that use of a DRB can have a dramatic hidden-cost benefit.