Dodging bullets

On major projects, it is important to think from the outset about the best method of resolving disputes. In tall building projects, as was discussed in Cecily Davis’ recent article (27 July, page 52), construction management has become be the preferred procurement route, which has implications for the process for dispute resolution.

In the UK, the shadow of adjudication looms over most construction projects and colours the advice of those involved in shaping dispute provisions.

The consultations that have occurred since the Construction Act came into force have kept well away from any discussion about limiting the scope of adjudication. However, few would disagree that adjudication is best used for simple payment disputes. It was, after all, concerns about cash flow, or the lack of it, that most exercised Sir Michael Latham in his reports on the state of the industry and which, in turn, led to the introduction of the statutory right to adjudicate.

Multiple parties

Adjudication can be more difficult where multiple parties are involved, or where multiple disputes involving more than one party are likely. The sheer volume of parties increases the risk of inconsistent adjudication. One way to mitigate this risk is to allow related disputes to be heard by the same adjudicator at the same time. Provisions of this type, known as joinder, are included in the NEC 3rd edition and, although fraught with difficulties, the risk of inconsistent decisions is so unattractive that they are often seen as a good solution.

Dispute resolution boards, which are popular overseas, and on engineering and infrastructure projects, are becoming more common on complicated construction projects in the UK. They are intended to ensure constant appraisal, thereby reducing the likelihood of full-blown disputes. There is an increasing appetite for the appointment of a dispute adviser as a form of moderator.

Neutral evaluation

With the market so buoyant few have any appetite to consider
disputes before they arise, but their impact can be catastrophic

Commonly, dispute advisers are empowered to introduce procedures to avoid disputes.

They are often engaged to undertake early neutral evaluation (that is, to give a steer as to how a dispute would be resolved were it to go to adjudication or to the courts).

The adviser is retained to attend meetings intermittently so as to keep up to speed with developments. The benefit of this, of course, is that the adviser is in a position quickly to advise on issues and, in fact, to help give an early warning of where problems may arise. They need to be a character in whom all parties have confidence.

There are those that believe that it is impractical on multiparty projects, such as those procured by construction management, to adopt a dispute resolution board, or to appoint a dispute adviser.

However, it is easy to see that projects that involve numerous contracting parties would benefit from such a process. The board or adviser needs to be able to inform themselves of the areas that merit most attention.

In practice, of course, the process is consensual. The right to adjudicate “at any time” ensures this is the case, because a party that is dissatisfied with how the board or adviser is operating is always able to make a referral to an adjudicator. Unless the parties confer upon the board, or adviser, the power to make binding decisions, their opinions may be revisited by an adjudicator, or by a court.

With the construction market at its most buoyant for years, few have any appetite to consider the prospect of disputes before they arise, but their impact can be catastrophic. On major projects engaging an adviser to help keep the parties out of dispute may be money well spent.