The Feasibility of Introducing Dispute Review Board Into UK Alternative Dispute Resolution for...

8/3/2019 The Feasibility of Introducing Dispute Review Board Into UK Alternative Dispute Resolution for Construction

http://slidepdf.com/reader/full/the-feasibility-of-introducing-dispute-review-board-into-uk-alternative-dispute 1/30

PM505 NO.1007862

1

Contents:

Abstract .................................................................................................... 2

Introduction............................................................................................... 2

2. Literature review .................................................................................... 4

2.1 Introduction ................................................................................... 4

2.2 Historical development of alternative dispute resolutions .................. 4

2.3 Limitations of traditional dispute resolution ...................................... 6

2.4 Limitation of existing Alternative Dispute Resolution in UK ................ 8

2.4.1 Procedures and Limitations of Arbitration ................................ 8

2.4.2 Procedures and Limitations of Mediation ............................... 10

2.4.3 Procedures and Limitations of Adjudication ........................... 11

2.5 Introducing DRB as a possible solution for existing limitations ......... 13

2.5.1 Procedures of DRB .............................................................. 13

2.5.2 Critically analyses the strengths of DRB ................................ 14

2.6 Conclusion ................................................................................... 15

3. Methodology ........................................................................................ 16

4. Discussion ........................................................................................... 18

5. Conclusion ........................................................................................... 25

Reference ................................................................................................ 28



PM505 NO.1007862

2

Th e Feasibility of Introducing Dispute Review Board into UK Alternative

Dispute Resolution for Construction

Abstract

Dispute management is the unchangeable challenge for construction industry.

With the development of industry and the increase of people¶s experiences,

more and more people focus on the origins of construction disputes, which

result in the creation of DRB as a greatly effective resolution. This paper

explored the feasibility of introducing DRB into UK construction industry. The

exploration will be conducted by, first comparing the DRB with existing disputeresolutions, second analyzing the performance of DRB during the actual

dispute¶s process, then discussing the attitudes of legal system on DRB to

show the feasibilities. Finally, draw a conclusion to present that the use of

DRB in UK is feasible and necessary.

Introduction

As a huge and complex process, construction projects are always connected

with big input-funding, many participants, complex technologies and

complicated management. Therefore, disputes are unavoidable, and with the

development of construction industry, the quantity and type of disputes are

increasingly developing, the degree of complexity and amount of money

involved are further enhanced. As Brooker & Lavers (1997) stated that ³Over

the past 20 years, loss and expense due to contractual claims have attacked

British construction industry like a cancer´. Moreover, because of the increase

of construction disputes, the contractual relationships between involved

parties have become more and more sensitive (Donohoe, 2006).

Consequently, the effective dispute resolutions are very important for UK

construction industry.



PM505 NO.1007862

3

In UK, many construction disputes were solved by law (Gillie et al, 1991).

Although litigation seems a powerful and effective way to solve construction

disputes, but limitations of litigation are obvious. Litigation as a strict method

mainly focuses on the responsibility payment of disputants and tends to be

very competitive. Furthermore, unacceptable high-costs and time delay duringthe process indicate that litigation is not an appropriate approach for most of

construction disputes. Generally, it will be appropriate as the final resolution,

only when all the other dispute resolutions failed (Steen, 1994).

On the other hand, in UK, there are alternative dispute resolutions (ADR) as a

set of impartial and private method, which perform as the alternative

approaches of litigation during the process of construction disputes (Treacy,

1995). Generally, the characteristics of ADR in construction industry can be

presented as that with a involvement of a less formal and neutral third party

and making binding or nonbinding decision, and with higher effectiveness of

speed and cost and less powerful than litigation, the ADR has been used

widely in situations which litigation is inappropriate (Creighton, 2000). The

mediation, arbitration and adjudication are three mainly available ADR

methods in UK construction industry and the procedures and limitations of

each method will be analyzed in following sections (Donohoe, 2006).

However, with the accelerant development of construction industry and facing

the complex construction projects in global events such as 2012 Olympics, it

is worthy to consider that whether the existing three types of ADR and

litigation are enough for resolving disputes in construction projects, and is

there any gap in the field of construction dispute resolution in UK. Therefore,

this paper will argue that Dispute Review Broad (DRB) as a significantly

effective ADR method should be introduced into UK construction industry.

Generally, DRB tends to solve dispute at early stage, before the problems and

disagreements turning into serious disputes, and focus on the improvement of

contractual relationships (Harmon, 2003). In this purpose, this project will

analyze the Feasibility of drawing DRB into UK construction industry by

analyzing and comparing the advantages and disadvantages between

existing ADR methods and DRB through literatures. In addition, the



PM505 NO.1007862

4

performance of DRB in Model of Dispute Development and Resolution, and

the legal system and the attitude of legal system towards ADR in construction

industry as the environment of DRB are also needed to be analyzed. Finally, a

conclusion will be drawn to show to what extent the DRB should be

introduced as a necessary and more effective method into UK constructionindustry.

2. Literature review

2.1 Introduction

In terms of construction industry in UK, because of the rising of complexity

and involved funding of projects, disputes management and resolution are

increasingly complex and difficult (Brooker & Lavers, 1997). The purpose of

this review is to analyses the feasibility of introducing Dispute Review Board

(DRB) as a more effective and efficient ADR method into UK for construction,

by analyses the limitations of existing methods through those literatures. To

understand what existing resolutions lack of and to know what DRB brings,

this review will be organized as followed. Firstly, historical development of

disputes resolutions will be reviewed as a general knowledge about relevant

field. Secondly, the limitations of existing approaches will be studied

specifically and to find the problems in UK construction dispute resolutions.

Finally, the procedures and strengths of DRB will be critically analysed to

show that it can be an appropriate solution.

2.2 Historical development of alternative dispute resolutions

Alternative dispute resolutions (ADR) originated from the USA, of which the

purpose is to relieve the pressure caused by the sharp increasing cases on judicial system by create a set of alternative methods of litigation (Creighton,

2000). The U.S. government has promoted commercial arbitration since as

early as 1887 (Frederick, 1997). In 1920, American New York state passed

first modern arbitration law, within five years, fifteen other states followed

(Frederick, 1997). After that, to promote use of arbitration, the American



PM505 NO.1007862

5

Arbitration Association (AAA) was founded in 1926 (Treacy, 1995). In addition,

Taft Hartley Act created U.S. Mediation and Conciliation Service in 1947,

which established Alternative Dispute Resolution (ADR) for national

emergency, and successfully prohibited some union activities by ADR

(Creighton, 2000). Therefore, the ADR was first time established as a set of dispute resolutions without litigation, and actually used in business disputes

and national dispute events.

In terms of ADR in construction industry, the Construction Industry Arbitration

Rules was conducted by the AAA in 1966, which means that since 1966 a

specific criterion of arbitration has been established for construction industry

(Treacy, 1995). Base on the arbitration law in 1920, the first complete

construction arbitration institution was built, and rapidly accepted and adopted

by other western countries. Furthermore, in 1974 U.S. Mediation and

Conciliation Service expanded mission statement beyond labor dispute

management to wider fields containing construction disputes management,

which means that the arbitration and mediation as two fundamental methods

of inchoate ADR are both available in solving construction disputes (Gillie et al,

1991). The major funding have been invested for promoting and researching

ADR by Hewlett Foundation in 1984, which signaled the significant advance in

status of ADR in fields of dispute resolution (Cheung et al, 2004).

In UK, the significantly mentionable innovations of ADR for construction

industry are in 1996. Housing Grants Construction and Regeneration Act

1996 was conducted by British courts, which is the first construction

adjudication institution over the world, by which adjudication was completely

formulated as a binding construction dispute resolution and differ from

traditional litigation (Dancaster, 2008). In addition, the 1996 Act was further

specified by The Scheme for Construction Contrasts [England and Wales]

Regulation 1998 (Dancaster, 2008). It is also mentionable that, in 1999,

during the first construction case using adjudication as resolution, the actively

positive attitude of British courts towards adjudication was been determined,

the rapidity and efficiency as natures of adjudication were actively supported

by British judge Dyson and courts (Dancaster, 2008). Thence, adjudication



PM505 NO.1007862

6

was confirmedly added to UK ADR list as a binding technique, furthermore the

use of adjudication have been strongly supported by UK judicial systems,

which have significantly advantages on the promotion of adjudication.

Over the general historical development above, it can be easily found that

within more than 10 years, there are no significant progresses in fields of

construction ADR in UK. Moreover, it is also worthy to consider that to what

extent the existing approaches are suitable enough and whether these

approaches have serious limitations for UK construction industry.

2.3 Limitations of traditional dispute resolution

Litigation, as the oldest and most powerful formal resolution for construction

disputes, its limitations will be critically analyzed as following.

As Gnaedinger (1997) comment that ³ I t is almost impossible these days to

read a newspaper or engineering publication without finding a reference to

problems within the current legal system. ´ Gnaedinger further states that for

construction industry, it has been proved that as a traditional form of dispute

resolution, litigation is especially inappropriate.

Rubin (2003) similarly and more specifically voiced their opinion

³Considering the amount of costly discovery that litigation on large

construction projects can produce, the expense of retaining

consultants and expert witnesses in the preparation of a case for trial,

and the likely inclusion of additional contingency in contractor bids to

cover the risk of time consuming litigation.´

Rubin (2003) explain further that although each construction disputes can be

concluded in types, but every construction disputes have different factors

which depend on differences of the project contexts. Despite litigation have

complete legal procedures and legal institutions, however providing strict

letter-of-the-law instead of professional considerations of relevant project

context, which is at least not appropriate for construction disputes.



PM505 NO.1007862

7

With the development of construction industry, amount of construction

disputes are also raising, meanwhile it put pressure on legal organs. For

instance, according to the court statistics between 1970 and 1998 the number

of civil cases in the USA increased more than tripled. In addition, more than

19,000,000 cases were filed in 1991. Furthermore, the number of civil caseswhich last more than 3 years old within courts rose from 15,646 cases in 1984

to 25,207 in 1990 (Treacy, 1995). The statistics show limitation of litigation

from another aspect, by which the inefficiency and serious time delay of

litigation can be easily identified.

Furthermore, partially problems of litigation in resolving construction disputes

contain uncertain and unacceptable time delays and expense. As early as

1987, the problem has accrued in professional liability insurance dilemma

which can be at least partial result of problems of litigation in construction

industry (Devilling, 2008). It can be understand that when due to construction

dispute, procedure of litigation may be lack of consideration about damage-

control in construction project, it may result in huge amount of time delay and

expense, which seriously harms all disputants.

In addition, the comment by Steen (1998) indicates that legal systems have

reasonably high degree of transparency for public through media, and

litigation procedures are public documents, it is a serious disadvantage for

parties involved, because of the revelation of project secrets and deterioration

in cooperative relationships.

On the other hand,

³English Common Law is an adversarial system which traditionally

produces a ³winner´ and a ³loser.´ The winner is generally awarded

³costs´ which generally results in the loser paying the majority of the

bill for both parties. This has resulted in some cases being more

concerned with who pays the final bill than the legal principles

involved in the case´ (Donohoe, 2006).

The adversary systems not only seriously harm the cooperative relationships

in construction project, but also have significant negative impacts on



PM505 NO.1007862

8

opportunities of further cooperation between parties. To sum up the ideas

above, it can be concluded that litigation is unnecessary in most construction

disputes, only when it is the final choice.

2.4 Limitation of existing Alternative Dispute Resolution in UK

There are two major branches of UK construction ADR methods which are

formal binding methods, and informal nonbinding methods. In UK, binding

ADR methods are arbitration and adjudication, and nonbinding ADR

technique is mediation (Chueng et al, 2004).

2.4.1 Procedures and Limitations of Arbitration

2.4.1.1 Procedures of Arbitration

As a binding ADR method, the decision called an award, which make by

arbitrators, is final and binding for parties (Gnaedinger, 1997). This arbitrator

is selected directly by involved parties or is appointed by an arbitration agency

after disputes emerged. The arbitrator acts as both the judge and the jury in

the process of resolving disputes. After hearing the disputes, arbitrator will

give a final and binding decision. If the award is not accepted by either part,

the issue can be appealed to litigation, however because of the support of arbitration by courts, appeals will be generally useless, except serious

misunderstanding or mistakes (Suen, 2002).

2.4.1.2 Limitations of Arbitration

Broadly speaking, Arbitration, as an alternative and binding method of

litigation, has been widely accepted in many fields all over the world, of which

the purpose is to be more efficient and less costly than litigation and to relieve

the pressure on litigation. Incontestably it has been highly successful in the

past, however, with its development, significant problems were appeared on

its procedures and institutions recent years (Gnaedinger, 1997).

Firstly, decisions conducted by arbitrators are often not the most acceptable

solutions by parties, but rather the previous model-decisions which has been



PM505 NO.1007862

9

used before in the same type dispute precedents (Gnaedinger, 1997). In other

words, situations above can be described as, usually arbitrators will give the

solutions of disputes without the relevant investigation on contexts of

construction projects, but rather follow the decisions in precedents, which

result in the inappropriate decisions and the injustice.

Secondly, as a defect in the procedure of arbitration, arbitrators are selected

after disputes developed, it may cause some unequal behaviors in the

selection process (Gnaedinger, 1997). Many construction contracts will

confirm arbitration in advance as the dispute resolution, but arbitrator is

selected after disputes. If arbitrator can be chose before promotion of project

and write into contract, the opportunity of this dishonest behavior will be

eliminated.

Thirdly, although the arbitrator is the unique neutral decision-maker in the

process of arbitration, but nowadays lawyers are often be employed by parties

and act as representatives of disputants, even though traditionally lawyers are

not necessary in arbitration (Gnaedinger, 1997). In addition, unquiet

comments by Treacy (1995) voiced that the increasing development of

institutions and regulations of arbitration procedures, and increasingly strict for

examination of documents before meetings and hearings, which have made

arbitration more and more like litigation. This problem of arbitration has

similarly been criticized by Treacy (1995) that nowadays arbitration is

becoming as expensive and time consuming as litigation. The main idea

above can be explained that, the origin purpose of establishing arbitration is to

create a more effective and efficient method than litigation for resolving

disputes which can not only avoid limitations of litigation but also give

impartial and relatively powerful solutions to disputants, however these

negative trends and problems will drive arbitration to lose its advantages and

become neither effective nor as equitable as litigation.



PM505 NO.1007862

10

2.4.2 Procedures and Limitations of Mediation

2.4.2.1 Procedures of Mediation

Mediation can be described as a voluntary, nonbinding, consensual and

private disputes resolution technique. In mediation, a neutral third party or

individuals meets with the disputants, after hearing to the issues and

discussing with the parties, then a nonbinding suggestion on how to resolve

disputes will be given. The purpose of these nonbinding suggestions mostly

tends to be the reconciliation. If an agreement between disputants can not be

conducted, then disputes will often be submitted to binding arbitration by a

neutral arbitrator (Gillie et al, 1991).

2.4.2.2 Limitations of Mediation

In spite of mediation has been used in construction industry for hundreds of

years, which is believed much cheaper and faster than arbitration or litigation,

however the non-binding character and the relatively low practicality in

construction practices make it not a effective choice for resolving construction

disputes, especially those severe, big involved and late stage disputes (Lurie,

2006).

One reason has been explained by Lurie (2006) that the purpose of mediation

is to resolve disputes on a negotiation or settlement, however non-binding

advices are not powerful enough in many situations, if the positions of parties

are too strong to meet an agreement at the level of nonbinding suggestions,

success of mediation will be impossible during that case. In addition, similar

comment by Gould & King (2002) state that the nonbinding nature of

mediation directly leads to the lack of confidence and certainty in the

procedures, which seriously reduce the possibility of bringing disputes toconclusions.

The other specifically problem indicated by Teo and Aibinu (2007) presents

that during the process of mediation, mediators usually only directly give the

final suggestions which he (or she) believe to be the best to parties, but do not



PM505 NO.1007862

11

estimate the possible strengths and weaknesses to each parties, which

means that the acceptation of negotiation will only depends on the evaluations

of the suggestion by disputants themselves.

On the other hand, if the mediation process fails, disputants have to submit

their issues to another resolution which is stricter and more powerful to deal

with disputes. As a result, the time and money which have been spent on

mediation will be wasted. It will seriously harm courses of project (Mok et al,

2006).

Claims held by Teo and Aibinu (2007) accurately concluded that only some

specific construction disputes which involved in less complex issue and

smaller funding may be generally suitable for mediation. In other words,

claims above also can be understood as that mediation is not an effective and

appropriate choice for big involved and difficult disputes in construction.

2.4.3 Procedures and Limitations of Adjudication

2.4.3.1 Procedures of Adjudication

Dissatisfaction of litigation, arbitration and mediation has resulted in the

establishment of adjudication which is generally more powerful than mediation

and more efficient than arbitration and litigation (Dancaster, 1997).

Under the Housing Grants Construction and Regeneration Act 1996

mentioned before , the right of using adjudication is implied in every

construction contracts in UK (Dancaster, 1997). Whenever disputes accrued

under formal contracts, disputants only need to submit a written Notice of

Adjudication to an adjudication agency, then the adjudicator will be decided

within 7 days. The supporting documents for each party¶s claims are the only

things needed by adjudicator in the process of adjudication. Generally, the

verdict must be decided within 28 days after the selection of adjudicator,

although time period can be extended, but further time period must be agreed

by both involved parties. Appeals to litigation are available, if the decision by

adjudicator is unacceptable by either party, but it is worthy to mention that

most of the adjudication verdicts will be supported by courts in UK, except any



PM505 NO.1007862

12

obvious errors (Dancaster, 1997). Generally speaking, through the procedure

of adjudication, it can be easily seen that the applications of using

adjudication are convenient, in addition the time and form of documents are

strictly limited to make it efficient.

2.4.3.2 Limitations of Adjudication

Although, according to opinions by Dancaster (1997) that the procedure of

adjudication has been limited in 28 days, it is significantly more efficient than

arbitration and litigation, which effectively protect the cooperative relationship

between parties and prevent the projects from superfluously negative impacts

on time and cost. However, Costello (1999) oppositely pointed out that the

limited timetable for adjudicators can cause significant pressures and force

adjudicators to make quick decisions, which may consequently impact the

equity of verdicts especially in some complex and big involved cases. In

addition, the statement by Costello (1999) pointed out that despite decisions

by adjudication are binding to both parties, but unlike situations in litigation

and arbitration, adjudicators have no right to compel the execution of payment

issues, even the principle of adjudication can be indicated as ³pay first, argue

later´. It results in that winning party has to proceed the dispute to litigation for

payment. In other words, whether or not losing party will drive payment

process smoothly, it mainly depends on the value of bills; big bills are

relatively more difficult to be cashed.

Summarily, Costello (1999) presented that despite the strengths of

adjudication are undeniable, however these limitations reflected that the

effectiveness and efficiency of adjudication will be significantly diminished

burning complex and big involved disputes.

Through all above, it can be seen that although UK construction industry hascreated efficient adjudication system for construction disputes, but it has been

described more suitable for relatively small and medium-sized than big

involved construction disputes. Consequently, litigation and arbitration are still

the only choice for those big involving and complex construction disputes. In

addition many serious limitations of litigation and arbitration have been



PM505 NO.1007862

13

critically discussed before, and proved that in most cases they are actually not

appropriate dispute-resolving approaches for construction industry.

2.5 Introducing DRB as a possible solution for existing limitations

2.5.1 Procedures of DRB

The dispute review board is a neutral impartial group which directly get

involved in construction project with three members, two of them are selected

directly by each parties, one by project owner and one by contractor, then the

board chairman as third member will be picked by preceding two board

members, meanwhile three members must be approves and agreed by both

owner and contractor (Menassa et al, 2010). The use of DRB and the board

members should be written into the contract before the promotion of project

(Menassa et al, 2010). In addition, any individual communication between

board members and employees belonging to the contractor or the owner will

not be allowed during the life of DRB, and all communications should be

conducted by the board chairman. Each board member and parties should

acknowledge that board members are not representatives or advocates of the

party that selected them. As the principle of DRB, the whole board must be

objective, impartial and independent, and the members always be considered

as full experienced experts in field of relevant project (Menassa et al, 2010).

During the process of project, board members need to meet periodically with

project manager to review the progresses of project and to keep up to date

with any contract changes, problems and possible disputes. During these

periodical meetings, the project managers as the representive of parties make

a presentation of the project progresses since the last meeting. Possible

changes and problems will be discussed in following informal discussions

(Menassa et al, 2010).

When there is a dispute, a more formal meeting will be conducted. A

presentation will be make by disputant to DRB members and it is followed by

the other party state its argument, and each party has rights of refutation.

Then the board members can ask any questions they may have, and usually



PM505 NO.1007862

14

an informal discussion follows. After a full discussion and hearing, the

members of the board meet privately and make the decision. The decisions of

DRB is nonbinding on either party, however, if the dispute can not be settled

and have to go on to litigation or arbitration, the records from DRB are

available as evidences (Kheng, 2003).

2.5.2 Critically analyses the strengths of DRB

Firstly, according to Thompson et al (2000), ³the American Society of Civil

Engineers has introduced the Dispute Review Board (DRB) as a

complementary provision to standard U.S. construction contracts and

practices.´ In other words, the DRB is conducted specially for construction

industry, which means that it is highly relevant and suitable for resolving

disputes during construction projects with full considerations about the

situations and characteristics of construction industry (Thompson et al, 2000).

In this aspect, it significantly differs from other ADR methods or litigation. With

extensive use in many other fields, other dispute resolutions may lack of

effective methods or targeted procedures for highly complex construction

disputes.

Secondly, the estimate by Harmon (2003) indicates that DRB can highly

confirm the equity of judgments for disputes. It is because that the use of DRB

and the selected members need to be written into the contract before the

promotion of project and selected person should be agreed by both owner

and contractor, which significantly protect the neutrality and equity of the

board. On the other hand, Thompson et al (2000) further stated that with the

high neutrality and equity, the decisions made by DRB are more trustable and

relatively easier for disputants to accept and practice.

Thirdly, the claim by Harmon (2003) voiced that instead of unacceptableexpense and time delay in other resolutions, DRB has significantly

advantages on effectiveness and efficiency for resolving construction disputes.

The periodical meetings can keep board members up to date with any

progresses, changes and possible disputes in project. The familiarity of

project can significantly accelerate the decision-making process, and also big



PM505 NO.1007862

15

disputes can be exchanged into small and early stage ones which are much

easier to deal with. In addition, according to Tompson et al (2000), DRB

members are usually selected for their knowledge and technical expertise in

the relevant type of project. It also strongly supports the effectiveness and

efficiency of DRB.

In another aspect, according to Tompson et al (2000), as same as other

informal ADR methods, DRB is a private informal dispute resolving technique.

In other words, unlike litigation, the documents of dispute and the situation of

project will not be published, which effectively protect the privacy of parties

and business.

In addition, Tompson et al (2000) state that, ³experience has shown that this

method tends to result in more cooperation between the project managers for

both the owner and the contractor, resulting in an old-fashioned team effort.´

Menassa et al (2010) specifically indicate that the use of attorneys is greatly

discouraged in both DRB and dispute presenting meetings, which aims to void

adversarial climate as much as possible. It has significant benefits on

cooperation relationships between parties, especially in some international or

big involved projects, the friendly cooperation experience greatly increase the

opportunities for further business.

Finally, as the disadvantage of DRB, the price of employing DRB is generally

higher than other dispute resolutions, because the salary of experts will be

counted by days (Menassa et al, 2010). Moreover, Tompson et al (2000)

claim that the use of DRB is mainly suitable for large and complex project

such as highways and tunnels.

2.6 Conclusion

The effectiveness of a dispute resolution depends on whether or not it is

appropriate for the type of dispute, especially in construction industry.

Through those literatures, it has been proved that litigation, as the most

powerful method, is necessarily needed as a final method when all other

processes fail, however it is inappropriate and unnecessary for most



PM505 NO.1007862

16

construction disputes, mainly because of the unacceptable cost and time

delay. As a result, a set of alternative dispute resolution have been created, in

UK for construction, which mainly are arbitration, mediation and typically

adjudication. It can be seen through literatures that, mediation and

adjudication only effective and suitable for relatively small constructionprojects. And arbitration, with its negative development, is more and more like

litigation and have generally similar limitations. Then the gap has been found

that for those complex and large construction projects, there is not appropriate

method in UK for construction. Moreover, costly and time consuming disputes

usually connected with the complex and large projects, and it is significantly

harmful. Therefore in terms of these projects, it is worthy to consider that

higher inputs for effective and suitable resolution brings better outcomes to

dispute and parties¶ interests. After the study on the procedures and strength

of DRB, it can be said that DRB can effectively and appropriately fill the gap of

dispute resolutions for large construction projects in UK.

3. Methodology

The research and the selection of information has begun from April 2011, as a

secondary research, this paper is a gap searching approach, through the wide

reading and study on existing literatures and studies which are based on the

knowledge in the fields of civil engineering management, construction

disputes resolutions, construction contracts, contractual relationships and law,

the topic and thesis were finally decided at May 2011 by the gap of

construction dispute resolutions in terms of the large and complex

constructions in UK.

The method of this project is primarily about the comparison and the feasibility

analyses and combined them together to draw conclusions. As the secondary

comparison and secondary analyses, they are all base on the previous

literatures and researches which are related to traditional dispute resolutions,

alternative dispute resolutions and the condition of UK construction, in

addition, the attitude of UK legal system towards ADR and UK contractual

conditions and relationship between involved parties are also needed to



PM505 NO.1007862

17

analyses as the background of topic and a arguable part of secondary

feasibility analyses.

The sources used in this project are academic articles primarily from civil

engineering journals and statistics by academic groups, because the changes

in relevant fields are slow, as results there is generally no need to search for

up-to-date information through website. And with a widely discussion in

relevant field, the analyses in this project should be critical.

Firstly, the history of the development in dispute resolutions needs to be

studied as a fundamental knowledge of relevant field. Creighton¶s overview of

ADR (2000) gives a general idea about relevant field and useful specific

information on the development of ADR.

Secondly, according to Devilling (2008) and Steen¶s article (1994) the

limitations of litigation on resolving disputes in constructions were critically

specified, although the date of two articles are be separated by more than 10

years, however the opinions are generally similar. Therefore, the older

information and ideas are also useable.

Thirdly, with three available ADR methods in UK construction industry as

followed, the procedures and limitations of mediation, arbitration and

adjudication have been specifically described by Treacy et al (1995),

Gnaedinger (1997) and Dancaster (2008). By combining them together, the

gap in UK construction dispute resolutions was found as no appropriate

method for managing disputes in large constructions.

Finally, the procedures, strengths and weakness of DRB can be studied from

Thompson et al (2000) and Menassa et al (2010). Through the principle and

procedures of DRB, it can be seen that the gap can be generally filled by DRB.

To maintain a critical position of this project, the feasibility of introducing DRBwill be further analyzed.



PM505 NO.1007862

18

4. Discussion

The information above about the comparison information between existing

approaches and DRB, as far as the gaps in the field of dispute resolution in

large construction projects in UK, which leads to the consideration about

introducing DRB into UK construction industry.

In this section, this paper will focus on the performance of DRB in Model of

Dispute Development and Resolution, and the UK legal system and the

attitude of legal system towards ADR in construction industry as the

environment of DRB, and analyses the feasibility of introducing DRB into UK.

Essentially, the primary issue, this paper has talked about in preceding

section and wants to discuss in this section, is mainly about the dispute

management of DRB in complex and large construction projects.

Fundamentally, it is worthy to briefly describe the origin of construction

disputes and to understand how they will influence the projects. In terms of

those large construction projects, they are all long-term transactions with high

degree of complexity and uncertainty, and the prediction of all details during

process of project before the promotion is impossible, as a result, problems

and contractual changes always occur during the process and will not beclearly addressed by the contract, if these problem and changes are not

treated appropriately, then exchange to disputes (Mitropoulos et al, 2001).

These situations bring us three basis factors controlling the occurrence and

development of construction disputes, which are project uncertainty,

contractual problem, and opportunistic behaviors (Mitropoulos et al, 2001).

And there is not one primary factor as the principal cause of disputes, but a

combination of three key factors (Mitropoulos et al, 2001).

More specifically, first, ³uncertainty means that every detail of a project can

not be planned before work begins´ (Mitropoulos et al, 2001), especially

during large construction projects, with a high degree of uncertainty, many

initial plans and specifications have to be changed, and these changes break

the pro-decided balance of interests and relationships, as results, involved



PM505 NO.1007862

19

parties will have to deal with large number of unexpected situations during

projects. Second, ³A Contract is a promise or the set of promises for the

breach of which the law gives a remedy or the performance of which the law

in some way recognizes as a duty´ (Mitropoulos et al, 2001), in which the duty

and job of each participant has been decided specifically has a balancedsystem, but the changes and problems will significantly influence the balance,

where cause disputes (Mitropoulos et al, 2001). Third, as the changes and

problems are unavoidable, any proposal towards the contractual changes

may result in a disagreement by other parties, which because contractual

changes can break the pro-planned balance of interests and harm parties,

and usually no party will abandon or move their positions to fit the interests of

whole project, these selfish protections of self-interests by parties can be

generally named opportunistic behaviors (Mitropoulos et al, 2001). Moreover if

without an appropriate resolution, protection of self-interests by different

parties may drive them far away from settlement (Marcus, 1998). The three

factors combined together and influence projects, and the model of dispute

development and resolution can be presented as Figure 1 shows. Base on

this model, the performance of dispute review board (DRB) will be analyzed.

Sources: J ournal of construction engineering and management , p 223-231

FIG. 1. Model of Dispute Development and Resolution.



PM505 NO.1007862

20

Primarily, the main principle of dispute review board (DRB) is to settle dispute

³as soon as possible´ (Tompson et al, 2000). The periodical visiting and

meeting on the project not only help board members to be familiar with the

situations of project and parties and to know where disputes more likely occur,

but also help to build harmonious working relationships between parties. Andthe ³as soon as possible´ is contained one other significance by the creator,

which means to bring a dispute to the DRB as fast as that the involved parties

can not drive a satisfactory agreement (Jones, 2006).

Although the uncertainty as the mainly source of disputes can not be avoided,

however the situations of project which include uncertainties, contractual

problems and opportunism are all clearly understood by relevant

professionals and experts in DRB (Tompson et al, 2000). Even if the problems

occur, this first hand information, knowledge and experience can help board

members to settle the problem soon after they occur instead of submitting

claims to a resolution agency after small problems exchange to serious

disputes (Tompson et al, 2000). Marcus (1998) have similarly stated that,

almost all other ADR concepts address problems underlying the dispute long

after it has surfaced and usually after the project is completed, but the

philosophy of the DRB concept advocates that problems be exposed and

resolved during the proceeding of project.

On the other hand, an unsettled dispute inhibits communication and fosters an

adversarial relationship between owner and contractor, often resulting in even

more disputes (Ellison & Miller, 1995). Oppositely, as Tompson et al (2000)

stated that the existence of DRB in a project can encourage the parties to

consider the differences between each other more objectively and realistically

and to improve the condition of communication between different positions. As

a result, with more objective and unhindered communications, the

agreements will be much easier to achieve. In other words, with the reduction

of disagreement on problem, the likelihood of dispute is significantly reduced.

In addition, the existence of DRB also can imply and encourage parties to

resolving problems themselves and avoiding formal reference to the board

(Menassa et al, 2010). It can significantly improve the relationship between



PM505 NO.1007862

21

parties, make a cooperative team-work effort instead of traditional competitive

climate in construction industry.

It can be clearly seen from above that the principle of DRB base on the

prevention and improvement at beginning of the project as an active method.

The prevention means to prevent the unavoidable problems turning into

serious disputes, and also means to exchange serious disputes to small ones

and easier to settle. Unlike other passive dispute resolutions, get involved in

the situations long after the occurrence of problems, often after many small

problems combine together and become more complicated ones and turn into

serious disputes (Costello, 1999). Moreover, if submit disputes to a

inappropriate dispute resolution, which without a clear understand of the

situation, condition and development of the project and dispute, it will cause

an unacceptable time delay for people to get familiar with the project and

disputes. Often after a long period of preparation of formal documents and

long term hearing and competition, although the final decision is established,

but if the ³loser´ party can not accept the decision, the case is more likely to

be appealed to a more powerful resolution (Costello, 1999). During this

process, time and money have been seriously wasted, and parties have been

driven far away from the goal of whole project, because the climate of

adversary has arisen and harmed both parties and projects. On the other side,as mentioned before, the DRB pay lots of attention on the improvement of

relationship between parties which means to improve the condition and

opportunities for both project owner and contractor to have communication

with higher degree of objective and cooperative (Chan et al, 2009). Essentially,

all construction projects need two or more participants, this situation makes

the characteristic of all project present as a typical teamwork system and will

not change ever. However, most existing dispute resolving system focus

primarily on whose responsibility and who pay the final bills, the competitiveattitude by resolutions significantly drive involved parties away from

cooperation (Costello, 1999). As a result, during process of the project, the

adversary climate between parties negatively affects the settlement of early

problems and increases the possibility of serious disputes. Oppositely, with

the existence of DRB in a project, the periodical meeting will not replace the



PM505 NO.1007862

22

normal project progress meeting (Chan et al, 2009), which gives parties extra

chances to communicate with each other and have opportunities to discuss

any disagreement and possible changes and problems with confident

impartial professionals and experts.

On the other aspect, as informal and nonbinding are still the naturals of DRB,

there are some reasonable considerations about whether the decisions by

board members are compulsory enough for disputants to follow, and doubts

by Donohoe (2006) stated that legal system regards decisions by DRB as

³agreement to agree´ which are considered to be unenforceable in the law.

However, to be realistic, the construction projects have high degree of

complexity, expertise and uncertainty, and it is overly complex for anyone to

get involved to resolve a dispute temporarily. If there are suggestions from

relevant impartial experts and professionals who are also familiar with the

situations of project, it can be said that the previous suggestions are

significantly more convictive than most binding decisions by other formal

procedures. It is because that, firstly, the decision makers have not interests

get involved in the project and the selection of members are decided before

the promotion of project also before the occurrence of disputes, which results

in the completely impartial performance of board members and the high

degree of reliance of parties towards decisions. Secondly, through theperiodical meetings board members are familiar with and have confidence on

the situations of project, and discussions between parties and board members

can help each party clearly understand where will be the problem and where

is the appropriate positions for the advance of project. On the other hand, less

than have to, neither parties want to solve their disputes through litigation

(Steen, 1994). Therefore, although the decisions of DRB are nonbinding, but

the effectiveness, equity and authoritativeness of DRB make the decisions are

compulsory enough for parties to follow.

Through discussions above, basis for the ³Dispute Development and

Resolution Model´, it can be said that DRB tends to focus primary attention on

the origins and early stages of the Model which are uncertainty and problems

during projects, and have significant effectiveness on it. In most cases, the



PM505 NO.1007862

23

prevention and improvement are highly workable and suitable. According to

the pamphlet Avoiding and Resolving Disputes during Construction , the

publication indicated that the experience of dispute review board has proven

greatly successful (Frederick , 1997 ). The California Department of

Transportation and the State of Hawaii used dispute review board on complexprojects (Frederick , 1997).o n the other hand, the existence of DRB have

significantly positive affect the communication conditions between parties

through periodical meetings and impartial involvement, with the unhindered

communications, the possibility of that small problems and contractual

changes exchange into disputes can be significantly reduced. In addition,

because of the effectiveness, equity and authoritativeness of DRB, the

decision from board members are authoritative and highly acceptable for

parties, which make settlements much easier to achieve during the progress

of project. The analyses about DRB according to the dispute Model shows

that DRB as a nonbinding dispute resolution specifically target at construction

project is significantly effective and authoritative.

In terms of UK, the legal system and the attitude of legal system towards ADR

in construction industry as the environment of DRB are also needed to be

analyzed. As mentioned before, although the DRB was created in the USA,

but basically as Loosemore (2009) stated that there are many similaritiesbetween the UK and the USA in the structure of legal systems and also in

how disputes are resolved, as they both accord with the English common law

and the law of precedent. The similar legal structure between the UK and the

USA can be the judicative foundation of using DRB in the UK. In some

aspects, the use of alternative dispute resolution needs to be suitable and

supported by law (Cheung, 1999), it is because that if a decision made by an

informal resolution and without the confirmation by courts or the effectiveness

of the informal resolution without the ratification by legal system, then therewill be no construction choosing this resolution to solving problems, unless the

problems were successfully settled, or it will be the waste of time and money

because the decisions by this resolution helpless and useless in further

approaches or litigation. Therefore, UK and the USA share generally the



PM505 NO.1007862

24

same legal system and principle is very important and beneficial for the use of

DRB in UK.

However, there are significantly different attitudes between UK and the USA

towards the origin of construction disputes (Brooker & Lavers, 1997). Scholars

in the UK believe that the primary root of the disputes in construction projects

is the contracts, they further stated that the improvement of contracts will

cause the better management of project and therefore control disputes

(Brooker & Lavers, 1997). It makes UK scholars pay more attention on how to

improve the structure and the expressions in contractual contracts, instead of

research on dispute resolutions. But fortunately, according to Brooker &

Lavers (1997), the U.K. and U.S. construction agencies have recognized and

paid attention on the same basic problems in construction projects, which are

³adversarial attitudes and disputes arising primarily due to lack of

communication, distrust, misinterpretations of contracts, uncertainties of

project and responsibilities´. These basic problems highly resemble the

situations which the DRB tends to improve. In addition, if introduce DRB into

UK construction, it will not cause any conflicts within existing contractual

institutions in UK (Loosemore, 2009). As a process of reform the management

of disputes and the complement of contrasts, adding the DRB to a project

does not replace any part of the contract or the existing institutions. And thereare only simple modifications on contracts to provide DRB as an additional

process without any changes on the standard of contractual documents

(Menassa et al, 2010). In other words, although the UK and USA have

different considerations on how to deal with the problem in construction, but it

is about generally the same factors. Moreover, towards these factors, the

DRB has proved highly effective through preceding discussions.

In other aspect, although in the past, most decisions made by ADR can not be

accepted by British legal systems (Brooker & Lavers, 1997), however through

some observations on recent construction cases, significant changes in the

attitude of English judiciary towards ADR can be found, and these changes

drive the position of English Law to accept ADR within the civil justice system

(Donohoe, 2006). As Mr. Justice Lightman claimed that ³most ADR methods



PM505 NO.1007862

25

are not in law compulsory, but alternative dispute resolution is at the heart of

today¶s civil justice system´. In addition, according to Donohoe (2006), despite

British law will not enforce the use of ADR on construction projects, but it

strongly encourage parties to choose ADR as the dispute resolution.

Moreover, further stated by Donohoe (2006) that harsh cost punishment byEnglish courts will be pressed on those parties who unreasonably reject the

decisions by ADR before proceeding the case to litigation. This situation gives

a significantly advantageous condition of promoting ADR in UK construction.

As a significantly effective ADR method, the feasibility and necessity of

introducing DRB into UK construction is undeniable.

To sum all the discussions above, firstly, base on the dispute Model and three

basis factors of construction disputes, DRB draw significant attention on the

early stage of disputes, and to improve the condition of communications

between parties, it is proved that DRB can effectively reduce the opportunities

of occurrence of disputes and promote cooperation relationship between

parties, then make authoritative and appropriate decisions. Secondly, with

regards to the UK legal system and its attitude towards ADR, information

shows that the negative attitude of UK legal system towards ADR is positively

changing, and the support of using ADR in construction cases by UK legal

system is strong, which significantly increase the feasibility and necessity of introducing DRB into UK for construction. In addition, through literature review

it has been proved that in large and complex construction project such as

tunnel and highway, there is not an appropriate and effective approach for

dispute management in UK, but this problem can be fixed by introducing DRB

into UK construction industry.

5. Conclusion

In UK construction industry, the existing construction dispute resolutions can

be divided into two mainstreams which are litigation and ADR methods, and

there are three available methods belong to ADR which are mediation,

arbitration and adjudication.



PM505 NO.1007862

26

Through the literature review, it has been shown that litigation as the strictest

and most powerful resolution is not appropriate and necessary for most

construction disputes, not only because it is a costly and time consuming

procedure, but also due to its adversarial nature and the lack of consideration

about the specific project context. In the other aspect, the limitations of litigation in resolving construction disputes lead to the use of ADR methods as

alternatives. Although to some extent the mediation, arbitration and

adjudication are effective in some construction situations. However the

limitations of them have been clearly described by literatures such as

mediation only give nonbinding suggestions and without any evaluation on

decisions which result in very low persuasions towards disputants, and

arbitration have a negative trend of development on increasingly high degree

of routinization and systematism in recent years which result in a clumsy

simulation of litigation and share same limitations with litigation, despite

adjudication is supported by law and have a effective and efficient procedure,

but its effectiveness and efficiency are significantly limited in large and

complex constructions. These descriptions indicate the gap in field of UK

construction dispute resolution that the litigation and arbitration are the only

choice for resolving disputes in large constructions.

After studying the procedure, principle and performance of DRB, it has beenproved that the gap on dispute resolution in large constructions can be

appropriately filled by introducing DRB into UK. it is because that DRB not

only contain the advantages of existing ADR method such as effectiveness,

efficiency and privacy, but also improve the limitations of existing approaches

such as primarily focus on the early stage of dispute and reduce the possibility

of dispute by improve the relationships and communicated condition between

parties and make efficiently convictive decisions. In addition, the analyses

underlying the Model of Dispute Development and Resolution proved thatDRB is actually effective on resolving disputes in construction and significantly

helpful to maintain a cooperative relationship between parties which is greatly

important for the development of construction industry.



PM505 NO.1007862

27

Finally, the feasibility analyses underlying the British legal system and the

attitude of legal system towards ADR as the environment of DRB shows that

the attitude of legal system towards ADR are significantly positive changing to

support the use of ADR in UK, moreover there are not any conflicts found

between DRB and existing contractual institutions, which extremely increasethe feasibility of introducing DRB into UK.

Although this research has its limitations, but through all these analyses and

discussions, it can be said that DRB is significantly suitable and helpful for UK

construction industry.



PM505 NO.1007862

28

Reference

Cheung, S. et al (2004). Convergent views of neutrals and users about

alternative dispute resolution. J ournal of management in engineering , p 88-96

Chan, W.H. et al (2009). Exploring the Potential for Predicting Project Dispute

Resolution Satisfaction Using Logistic Regression. J ournal of Construction

Engineering and Management , p 508-515

Creighton, L.J. (2000)OVERV IEW OF ALTERNAT IVE D ISPUTE

RESOLUT ION (ADR): A Handbook for Corps Managers. Alternative Dispute

Resolution Series , p1-83

Brooker, P. & Lavers, A. (1997). Perceptions of alternate dispute resolution asconstraints upon use in the UK construction industry. Construction

Management and Economics, 15, 6, 519-526.

Cheung, S (1999). Critical factors affecting the use of alternative dispute

resolution processes in construction. Publisher: Elsevier Sci Ltd, Exeter,

United Kingdom

Costello, E. J. (1999). ADR: Virtue or vice. Dispute Resolution J ournal , 54, 2,

62-70.

Dancaster, C. (2008). Construction Adjudication in the United Kingdom: Past,

Present, and Future. Publisher: American Society of Civil Engineers

Devilling, B.E. (2008). Mediation, Not Litigation. Publisher: Modern Trade

Communications, USA

Donohoe, S. (2006). ³ Is that not horrific?´-or ³You have been warned!´

Burchell v. Bullard anf Implications for English Construction Law. J ournal of professional issues in engineering education and practice , p 258-263

Ellison, S. D. and Miller, W.D. (1995). BEYOND ADR: WORK ING TOWARD

SYNERG IST IC STRATEG IC PARTNERSHlpa. J ournal of Management in

Engineering, P 44-54



PM505 NO.1007862

29

Frederick s. K. (1997). Alternative Dispute Resolution in Government.

J OU RNAL OF MANAGEMENT I N ENG I NEER I NG, p25-28

Gnaedinger, P.J and ASCE, F (1997). Mediation/Arbitration: Alternative

dispute resolution process. J ournal of performance of constructed facilities ,

p150-160

Gillie, P. et al (1991). 'Using mediation to resolve construction disputes.'

Alternative dispute resolution in the construction industry , 153-210

Gould, N. and king, C. (2010). The mediation of construction disputes: recent

research. Publisher: Institution of Civil Engineers

Harmon, K.M.J. (2003). Resolution of construction disputes: a review of

current methodologies. Publisher: American Society of Civil Engineers

Jones, D. (2006). Construction Project Dispute Resolution: Options for

Effective Dispute Avoidance and Management. Publisher: American Society

of Civil Engineers

Kheng, C.O. (2003). RESOLUT ION OF CONSTRUCT ION INDUSTRY

DISPUTES An Overview. Resolution of Construction I ndustry Disputes, p 37-

49

Loosemore, D.J. (2009). Briefing: Challenges to ADR in the UK and

internationally - a personal view. Publisher: Proceedings of the Institution of

Civil Engineers. Management, Procurement and Law

Lurie, M.P. (2006). Mediation: An Engineer's Tool to Control Project Cost.

Publisher: American Society of Civil Engineers

Marcus, D.S. (1998). Goals and Objectives for alternative dispute resolution.

J ournal of performance of constructed facilities , p 2-8

Menassa, C.C. et al (2010). Analysis of dispute review boards application in

U.S. construction projects from 1975 to 2007. J ournal of management in

engineering , p 65-77



PM505 NO.1007862

Mitropoulos, P. et al (2001). Model for understanding, preventing, and

resolving project disputes. J ournal of construction engineering and

management , p 223-231

Mok, M.F. et al (2006). Logistic Likelihood Analysis of Mediation Outcomes.

J ournal of Construction Engineering and Management, p1026-1036

Rubin, A.R (2003). Alternative dispute resolution in U.S. public works:

proposed model. J ournal of professional issues in engineering education and

practice, p 80-83

Teo, L. A. E and Aibinu, A.A (2007). Legal framework for alternative dispute

resolution: examination of the Singapore national legal system for arbitration.

J ournal of professional issues in engineering education and practice, p 148-

157

Thompson, M.R. et al (2000). Innovations to manage disputes: DRB and NEC.

J ournal of management in engineering , p 51-59

Treacy, B.T. et al (1995). Use of alternative dispute resolution in the

construction industry. J ournal of management in engineering , p 58-63

Suen, H.C.H (2002). Fundamentals of alternative dispute resolution

processes in construction. Publisher: American Society of Civil Engineers

Steen, H.R. (1994). Five Steps to Resolving Construction Disputes-- Without

Litigation. J ournal of management in engineering, p 19-21

Date post:	06-Apr-2018
Category:	Documents
Upload:	leven-li
View:	218 times
Download:	0 times

The Feasibility of Introducing Dispute Review Board Into UK Alternative Dispute Resolution for...

Documents