| Date | 7 February 2007 |
|
|
| Judgment | General consideration of Dispute Avoidance |
|
|
| The Issue | Review of some of the mechanisms currently in use to reduce conflict on construction projects. |
|
|
| Implication |
There is a growing awareness in the industry of the need to adopt dispute avoidance techniques which can reduce the risk of disputes occurring and which may prevent disputes escalating into costly formal resolution procedures. |
printDespite the considerable effort that has been made in recent years in the UK construction industry to reduce disputes and to ‘Achieve Excellence’, parties to the construction process continue to work in an environment where conflict is ever present and where costly and damaging litigation is never far away. What is the root cause of this? Disputes are often the consequence of ill considered procurement practices, insufficient preparatory planning and design activity, or poor project and commercial management procedures. Adjudication may serve its purpose to provide a ‘quick fix’ in the event of a dispute, but it does nothing to address these underlying causes. Moreover, the use of tiered contractual dispute resolution mechanisms, involving such methods as early neutral evaluation, conciliation and mediation, have all taken a back seat as adjudication has gained attention. The most fundamental tool for dispute avoidance, talking, may also have suffered. A recent study by Grant Thornton revealed that nearly one-third of in-house counsel in UK businesses plan on increasing their spend on dispute avoidance over the next three years. The survey identified that in-house legal departments are making dispute avoidance a top priority and are now developing systems and processes to reflect this new attitude. Most construction firms already carry out some form of dispute avoidance activity under the general label of 'risk management'. Grant Thornton reported that most popular methods of dispute avoidance in the industry are; early negotiation (97%), pre-contract reviews (90%), risk audits (78%), training (71%), and compliance audits (71%). Dispute avoidance can be split into two types; Management methods aimed at achieving better risk control, and non escalation mechanisms. Management methods aimed at reducing risk include better planning, for example by ensuring that contract documents are clear and precise; utilising project and business structures which lessen the risk of disputes – partnering or integrated project teams are examples; using appropriate procurement methods; and generally emphasising the value of good management. Some commentators have suggested that the selection of the construction contract itself will bring about the success of a project and reduce conflict. In reality, if the procurement processes are such that, for example, an early collaborative regime can be established between those responsible for both design and construction, the contractual relationships can be managed equally well whether under an NEC or a JCT contract. Non escalation mechanisms are aimed at resolving disputes before they escalate; for example – structured negotiation including tiered dispute resolution mechanisms within contracts, the use of dispute boards and project mediation. The most obvious method used to avoid disputes arising is through negotiation. It may be arguable whether negotiation is an example of dispute avoidance or is a form of dispute resolution. Whatever label is put on it, negotiation is certainly aimed at avoiding the full-scale conflict which is involved in both litigation and arbitration. Regrettably, the whole environment of the construction process often works against establishing the frameworks necessary for effective negotiation. Better training is needed to make effective negotiators out of the typical project, commercial and business managers operating in the industry. There seems no doubt also that the involvement of an impartial third party at the onset of any potential dispute can bring real benefits. The independent third party can support relationships and bring a collaborative and creative problem-solving attitude to the project. The third party can be used to facilitate negotiations, discussions, consensus-building and relationship-building or to manage existing or potential difficulties in a wide variety of situations. An example of contractual third party intervention is in the use of dispute boards. It has recently been indicated that the Olympic Delivery Authority, responsible for delivering the facilities necessary for the London Olympics in 2012, will incorporate dispute boards within its construction contracts based upon the third edition of the New Engineering Contract. Dispute boards are increasingly being accepted on large scale projects as an important weapon in the dispute avoidance armoury. The dispute board members are appointed at the outset of a project by the parties as individuals whose views and decisions will be respected. This way, the dispute board is available to the parties at short notice to prevent disagreements from escalating into disputes and to give either recommendations or decisions, depending on the defined role of the board, should disputes arise. A dispute board may create an atmosphere in which the parties are obliged to be more realistic and factual in any representations that they make in the knowledge that sooner or later the board members may be asked to intervene. Project mediation is a variant to dispute boards recently devised by the Centre for Effective Dispute Resolution (CEDR). It provides access to two project mediators on a monthly fee retainer for the duration of the project. At regular intervals one or both of the mediators will attend the project site to discuss progress and identify with the parties any actual or potential communication problems. Outside the site visits, the parties will keep the mediators informed about any issues that might affect contract performance. A project mediation workshop is also arranged prior to contract commencement, and if it is required, where the parties are unable to resolve a conflict through discussions and interventions by the project mediators, the parties may enter into a formal mediation conducted by the project mediators using the CEDR Model Mediation Procedure. It seems to be common sense that the old adage “a stitch in time saves nine” should apply to construction disputes. The growing use of these dispute avoidance techniques indicates that many in the construction industry are already aware of the value of this policy in running their businesses.
CJ-0705
|
|||
|
© Brewer Consulting |
|||
 |
|||