Six Tips to Successfully Implement Dispute Resolution Boards Nationally and Internationally

In the demanding realm of construction, where time and money are paramount, dispute resolution boards (DRBs) stand out as a unique and underused asset. The key to unlocking their full potential lies in dispelling common misconceptions and mastering their application. Successful DRBs have not only swiftly resolved conflicts, but also streamlined project execution and significantly cut legal costs. This article will underscore the distinctive role of well-implemented DRBs in bolstering project management, a role that is fortified by their strategic deployment for maximum impact.

The evidence of DRBs' effectiveness is compelling: They have been used by organizations such U.S. public agencies, the World Bank and many other government agencies and development banks in hundreds of projects, valued at billions of dollars, to prevent and resolve many disputes. Furthermore, the Dispute Resolution Board Foundation reports that recommendations by DRBs are accepted and implemented by the parties in approximately 98% of the cases, and are rarely overturned, underscoring their authority and the respect they command within the industry. This article will delve into best practices for DRB implementation to avoid disruptive disputes and stay on schedule and within budget.

Achieving Optimal Results With DRBs

The effectiveness of a DRB depends on a deep understanding, informed choices and a systematic approach to its setup. It’s crucial to evaluate whether a DRB suits a project’s specific needs, the commitment level of the involved parties and the overall project context. By addressing common misunderstandings and enhancing comprehension of DRBs, projects can reap substantial benefits.

Originating in the United States, DRBs manage conflicts through a team-oriented approach. To create a DRB, each party selects a neutral expert, and together, these experts appoint a chair. The board’s proactive setup and routine site visits help preempt issues and provide nonbinding advisory opinions. DRBs also distinguish themselves by mediating and making decisions, proving their worth in major projects like the Hoover Dam Bypass, the Big Dig in Boston and the Channel Tunnel connecting the U.K. and France, where their adaptability to complex projects was clearly demonstrated.

Navigating Implementation Challenges

Effective deployment of DRBs involves overcoming several hurdles, such as perceptions of high costs and complexity, the risk of overly formalizing the process and introducing inefficiencies. Additionally, variances between European and American implementations due to differing legal and cultural norms can affect their adoption. A balanced and adaptive approach is essential to maintain the DRBs’ collaborative nature while meeting the specific demands of each project.

From my extensive experience as a scholar, board member and process designer, I have developed a deep understanding of DRBs’ operational dynamics. Working closely with industry experts to craft tailored procedures has equipped me with valuable insights, which I will now share to help you leverage DRBs effectively in both national and international projects, enhancing dispute management and project success.

Tip 1: Geography matters.

Some common misconceptions about DRB decisions include that they are uniformly enforced across different regions, their composition needs to be uniform, they are universally used across the construction industry, their procedures are the same everywhere and they function primarily through decision-making. 

Location significantly impacts the implementation of DRBs, influencing enforcement, composition, adoption, procedural rules and the core role of board members. In the U.S., DRB decisions are highly standardized, typically nonbinding but widely respected, often without the need for legal enforcement. Conversely, in Europe, varying civil law traditions may necessitate clearer contractual definitions of DRB enforceability and provisions for legal recourse, reflecting less standardization. Compositionally, European DRBs benefit from diverse legal and cultural perspectives, enhancing cross-jurisdictional understanding. At the same time, U.S. boards usually consist of industry-specific experts who streamline processes.

Adoption rates also vary; DRBs are integral to U.S. construction projects but less common in Europe, where they are more often used in international settings, with a preference for mediation or arbitration. Procedurally, European DRBs must accommodate diverse legal systems, requiring flexibility, whereas American DRBs follow more uniform guidelines. Additionally, while European DRBs often emphasize mediation, American DRBs are geared toward making more decisive expert judgments, often in the form of recommendations, underscoring the need for tailored approaches based on regional practices and project demands.

Tip 2: Keep costs in perspective.

The perceived high costs of DRBs can dampen enthusiasm and deter their use. Yet they are a cost-effective solution in construction. Typically accounting for only 0.05% to 0.3% of total project costs, DRBs offer significant savings compared to traditional dispute resolution methods. In construction, where up to 10% of expenses can go toward legal fees, DRBs serve as a strategic investment akin to insurance that protects against unexpected disputes and reduces overall legal expenditures. In smaller projects, a leaner board can do wonders. 

Tip 3: Use it as a Swiss Army knife.

Contrary to the common misconception that dispute boards (DBs), like other dispute approaches, have a singular function, they are highly versatile, offering multiple dispute resolution approaches tailored to diverse project needs. Their main objective is to prevent issues from escalating into disputes. Options range from mediation and nonbinding advice to binding adjudication, reflecting their adaptability. For example, the Dutch DRB rules and the International Chamber of Commerce's (ICC) provision for a combined dispute board enable varied approaches within contracts, such as a FIDIC (the International Federation of Consulting Engineers) contract. When a dispute arises, a DB can manage conflicts by conducting hearings and delivering well-reasoned decisions, demonstrating its capability to handle diverse dispute scenarios efficiently.

Tip 4: Tailor the board to the project.

Reaping the benefits of a DRB is closely related to matching the forum to the fuss. Selecting the appropriate DRB functions is crucial for aligning with a project's specific circumstances and cultural dynamics, ensuring efficiency and progress. The choice between different DRB models—such as FIDIC's binding model and advisory opinions that provide a softer approach—depends on party preferences. While influential in the U.S., DRB recommendations lack contractual force unless jointly agreed upon.

Conversely, through a dispute adjudication board (DAB), the European model issues contractually binding decisions unless disputed. This flexibility extends under ICC rules, which allow the combination of both approaches into combined dispute boards (CDBs), enabling customization to project needs and enhancing dispute resolution efficiency. This strategic choice fosters cooperation and successful dispute management.

Tip 5: Create the right environment.

Creating the optimal environment for DRBs is crucial for their success. From the project's outset, DRB members should be well versed in the contract and the project details, and all stakeholders should be armed with comprehensive documents, plans and updates. Appointing a DRB at the beginning of a project enables it to gain deep insights into the project dynamics and the individuals involved, facilitating its ability to monitor progress effectively. 

The environment for DRBs is typically more informal than traditional mediation, involving casual interactions like lunches and discussions to promote open communication and information sharing. This setup helps preempt disputes by addressing issues directly with contracting parties during regular site meetings, where DRBs can offer informal advisory opinions if needed. Embedding a DRB into the contract ensures it is seamlessly integrated and prepared to prevent and resolve disputes throughout the project’s lifecycle.

Tip 6: Pick the right person for the job.

Selecting the right neutral for a DRB is crucial, as their role is central to its effectiveness. Unlike arbitrators, DRB members must have in-depth knowledge of the project and a strong understanding of their neutral role. Typically, the owner and contractor nominate a member for projects over $30 million, sometimes adding more members for larger projects. These members perform site visits, engage with project stakeholders and use their technical and legal expertise to prevent or swiftly resolve disputes, maintaining impartiality and respect. The chairperson's qualities—leadership, consensus-building and a balanced temperament—are critical. Successfully choosing a neutral involves selecting someone respected for their project-relevant experience and contractual knowledge, with both parties agreeing on the DRB's composition.

The statistics and enthusiasm surrounding DRBs in the legal community are undeniable indicators of their success. Tailored to accommodate geographical and cultural differences, DRBs are more than just a dispute resolution tool; they are a cornerstone for building trust and establishing clear roles within projects. With their strategic application of various resolution techniques, neutrals are critical in steering these boards toward successful outcomes.

By dispelling common misconceptions and diving deep into their dynamic capabilities, you can uncover DRBs' true potential. Fostering an environment conducive to their operation enables all parties to forge a path toward more successful, cohesive and efficient project executions. Join the ranks of those who have already realized the immense benefits of DRBs, and lead your projects to substantial success.

Peter Kamminga is a JAMS neutral mediating and arbitrating complex construction and other matters. He is a member of the Dispute Resolution Board Foundation and available worldwide.

Disclaimer: The content is intended for general informational purposes only and should not be construed as legal advice. If you require legal or professional advice, please contact an attorney.