Construction Dispute Boards

“2024 Dispute Boards International Survey: A Study on the Worldwide Use of Dispute Boards Over the Past Six Years” (the Survey).

kcl-dpsl-2024-dispute-boards-international-survey-report-digital-aw.pdf

The use of construction dispute boards is popular for international construction and infrastructure projects (using, for example, FIDIC contracts) and, in this country, for large infrastructure projects (where NEC, ICE, JCT or FIDIC contracts are often used).

Dispute boards can have certain benefits, including that they can,:

• If appointed at the outset, become familiar with the project and issues as they arise;
• facilitate cooperation and prevent an adversarial attitude developing between the parties;
• provide informal opinions as well as decisions;
• often act quickly; and
• sometimes nip disputes in the bud, reduce their scope or help prevent them arising at all.

The Survey

There were 200 responses to the Survey, including 156 people, 34 entities and 5 funders involved in mediations. They based their responses on 4,019 dispute boards over 6 years.

The responses were largely positive. The cost of using a dispute board commonly ranged up to 0.5% of total project costs (which can be a significant sum on a large scheme and where profit margins are low) but it seems that they often help avoid disputes or reduce their scope or resolve them.

Also, the rate of compliance with decisions of dispute boards is high: litigation or arbitration followed in only about 10% of the cases reported and even then, the ultimate decision of the court or arbitrator rarely departed materially from that of the disputes board.

50.9% of projects reported on by individuals included dispute boards – of those, 31.1% were standing boards and the rest ad hoc (that is, set up when a dispute arose). Most of those surveyed preferred standing dispute boards to those set up ad hoc and ones with three members to those with only one member.

According to individuals responding, the most common causes of references to dispute boards were changes by clients (42%), clients’ lack of information or indecisiveness (30%) and inadequate contract administration (27%).

The most frequent categories of claims were extensions of time, loss and expense and/or damages for delay and/or disruption, and hardship, force majeure and unexpected events.

Dispute Boards in this country

No doubt substantially because of the success of our statutory adjudication procedure, construction dispute boards (which themselves are a form of adjudication) are not so common in this country, except for very large projects.

However, the main contracts do allow for them. For example:

• The NEC4 Engineering and Construction Contract includes an Option W3, which enables the establishment of a dispute avoidance board for projects that are not subject to the Construction Act 1996.
• The NEC has also published a draft Z Clause to enable Option W3 to be used where a contract is subject to the Construction Act.
• The JCT published its Dispute Adjudication Board Documentation in 2021, which, if used, gives the board an adjudication function that complies with the Construction Act.

The Survey reports that dispute boards are also used in energy, transportation, public-private partnerships and IT contracts.

It will be interesting to see if the positive results of the Survey will encourage a broader use of Construction Act compliant dispute boards in the construction industry in this country.