Cleverness isn't enough

It is generally agreed in these post-Latham and post-Egan times that alternative dispute resolution methods are a more cost-effective way of solving differences than litigation or arbitration.

The wave of building contracts that began to appear after about 1995 generally took this view, and introduced some new ways of dealing with disputes. They have followed an evolutionary path in the way that they have done this, with one key feature being the use of a resolution process that proceeds in a series of steps, each becoming progressively more formal.

The first of the new contracts was the Latham-inspired New Engineering Contract – now known as the Engineering and Construction Contract. This was pretty radical at the time: it had the adjudicator named and sitting alongside the project team from the beginning of the project (at least in theory), ready to deal with any disputes that were referred to them.

It is also worth remembering that this contract contains an overriding obligation for the parties to act "in a spirit of mutual trust and co-operation". This would apply equally to adjudication. A nice arrangement, then. The parties co-operate, but if anything crops up that they disagree about, they send it off to be decided by a neutral third party, then get on with the project without disturbing their relationship.

NHS Estates' draft Procure 21 contract calls for a structured dispute resolution process: first, negotiation between senior executives, then possible mediation and then adjudication – again, all within a collaborative relationship. This is a step forward because it introduces an escalating process rather than a single mechanism.

Defence Estates' latest draft of the "prime contract" moves dispute resolution into wholly different territory. It sets down a detailed escalation process that starts with "best endeavours to consult and negotiate with each other". It defines timescales for meeting to discuss the issues. If negotiations fail, the contract kicks in with a dispute resolution board, which takes over the management of the dispute and is able to use a number of options, ranging from mediation through to arbitration.

This is the next step in the evolutionary progression. As well as putting the decision in the hands of a neutral third party, it does the same with the management and running of the dispute. Once more, if this succeeds in taking the issue away from the project and allowing the team to get on with the building, then it is a great thing.

Declaring a dispute is not seen as a way of starting to solve a problem, but as a sure-fire way of losing a client

The latest and perhaps most interesting contract is PPC2000, the so-called partnering contract. This, again, uses an escalating system to resolve the dispute, but is particularly interesting for having a problem-solving hierarchy, which the team members must follow at the very beginning of the dispute. The contract is just a shell ready to accept the actual processes and timescales, which must be developed for each project, but the advance here is the structured early discussion process.

So are escalating resolution processes good? I imagine that most people would agree that they are. Are they always good? Well, that partly depends on whether they are used or not. The point is this: all a contract can ever do is to establish mechanisms for use when a dispute arises. What it cannot do is identify disputes in the first place; only the parties can do that.

However much you develop cunning dispute resolution processes, parties will naturally be reluctant to use them. Advising that something has become a dispute is seen by many not as a way of starting to solve a problem, but as an admission of defeat, if not a sure-fire way of losing a client.

Unless this reaction can be addressed, then the most sophisticated dispute resolution process will achieve nothing.

How can we encourage the use of these processes? Of course, one way would be to put together a really adversarial project team that would not care what anyone thought – but I would not recommend that route!

The sensible way is to create a team where the aim is collaboration and team-working.