Gerald McEniry, Eng., Senior Consultant, Revay and Associates Ltd, Montreal, Canada
Despite efforts over the years to introduce alternate dispute resolution techniques, Canadian contractors and owners are still frustrated with the time and expense required to resolve construction disputes. Gerald McEniry believes DRBs can be a valuable compliment to the dispute resolution process. In this extract of a more detailed article available on-line as a pdf download at www.revay.com, McEniry cites three project DRBs in Canada to make his case.
- Only nine Canadian projects are reported as having employed a DRB since record keeping by the Dispute Resolution Board Foundation (DRBF) started in 1996. In light of the fact that construction disputes seem just as common in Canada as anywhere else, this is a surprisingly low number. Seven of these projects were related to the expansion of the Toronto Transit Commission (TTC) subway from 1996 to 2002. As such, one owner (TTC) and five Canadian contractors were exposed to the DRB process. The other two projects listed in the DRBF database involve two current tunnel projects: one in Niagara Falls for the Ontario Power Generation (OPG) and the other for the Greater Vancouver Water District (GVWD). These contracts however, were awarded to non-Canadian contractors.
- In addition to the projects listed that engaged a DRB, there are a few others not listed in the DRBF database. These are the Confederation Bridge (1993-1997), and the north-south route of the New Brunswick Highway (2006-2007). At present, the New Brunswick DOT is setting up a DRB for a 55km section of the four-lane Route 1 Gateway project and the TTC is considering optional participation in the DRB process for several major contracts on the York-Spadina Subway extension project to be tendered in the near future.
Example of foam soil conditioning
- The few cases of a DRB application in Canada allow us to delve more deeply into some of the lessons learned from these disputes. Many of the seven TTC projects involved the construction of subway stations as well as tunnel sections. DRBs were not mandatory on the TTC projects; rather they were an option that could be exercised by the contractor and the TTC if both were in agreement. The DRB process appears to have helped since only three disputes of the seven projects (two of which were on the same project) went to a formal DRB hearing. These disputes were settled after the DRB hearings, but one of the TTC cases came very close to litigation.
- Sheppard Subway twin tunnels
A claim for a differing subsurface condition (DSC) was initially submitted to the TTC. The $4.4 million claim was for additional trucking costs to dispose of high slump tunnel muck, alleging that this condition was the result of the higher than anticipated usage of foam to condition the tunnel spoil during excavation. Its tunnel subcontractor was required to haul the liquid-like muck to an inconvenient and expensive disposal site at a cost far beyond what was included in the contractor's bid. The contractor argued the use of foam was much higher than could have been anticipated by the contract documents.
- The TTC responded that there was no entitlement. After preliminary settlement discussions were unsuccessful, the parties agreed to bring the matter before a formal hearing of the DRB. The DRB panel was comprised of three very experienced engineering consultants with substantial underground expertise. Shortly after the formal hearing, the DRB released a comprehensive written 'recommendation' unanimously rejecting the contractor's claim stating that it "has not made a reasonable case for extra compensation based upon arguments that lay within the four corners of the contract". The DRB panel felt the problem was a risk assumed by the contractor, but the contractor rejected the DRB's non-binding recommendation and commenced litigation. The case then followed the expensive and time consuming litigation route. After some 2.5 years it settled before trial when it became clear that the DRB recommendation would be available to the court, and that the unanimous recommendation of the three experts rejecting the claim would be a formidable obstacle to overcome at trial.
- This case underlines the important principle that in preparing its recommendation the DRB must respect the terms of the contract, no matter how harsh or unfair. The DRB cannot rewrite the terms of the contract to provide a seemingly more equitable adjustment to one party. This case also makes clear that although the DRB generally provides a non-binding 'recommendation' it must be given respectable weight by the parties. In fact, in many cases such a recommendation can be discovered in subsequent legal proceedings.
- Niagara DRB result
The contractor put the owner on notice alleging several differing subsurface conditions (DSC) which required changes to its means and methods. After initial discussions between the parties, no agreement was reached with regard to entitlement for any DSC. The owner alleged that the excessive overbreak was the result of the contractor's decision to change its means and methods, not the result of any DSC. After excavating only 2,000m to 3,000m of tunnel (some 20-30% completion), the project was facing a significant schedule overrun and an unsupportable expected increase in cost for the contractor to complete the work.
Shotcrete supported overbreak at Niagara
- The parties eventually agreed to put the matter before a formal hearing of the DRB, which responded with a comprehensive recommendation examining each alleged DSC. The DRB rejected many of the contractor's claims but did recognize some shared responsibility with regard to the difference between anticipated overbreak quantities and expected rock support types in the geotechnical baseline report (GBR) versus the actual overbreak quantities and rock support type that was installed. Interestingly, although neither party fully accepted the recommendation of the DRB (neither party got what it wanted) these recommendations formed the basis of negotiations between the parties to revise the lump sum design build contract into one with a target cost and a schedule with incentives and disincentives related to achieving the revised target cost and schedule.
- This case underlines that a DRB is especially useful in technically complex disputes and can intervene at a critical juncture to save a project from being interrupted and forced into legal proceedings.
- Seymour-Capilano complexities
During the excavation of the vertical access shafts, the contractor encountered reaches of difficult mixed rock conditions. These conditions and their impact were the subject of the first formal DRB hearing and were resolved by the parties with the help of a DRB recommendation. However, the success of the DRB process on this project remained limited to this one issue. Another important problem was not brought before the DRB.
- Rock stability problems occurred in the deepest part of the alignment, when the tunnels were about 55% into their long drive. A safety issue was declared and work could not restart until the problem was resolved. The Owner believed that the tunnel designer and construction supervision engineer had prepared a plan that addressed the safety concerns and allowed for the resumption of work. The contractor did not accept the plan and high-level discussions between contractor, client, designer, and provincial safety authority failed to resolve the stalemate. Although the contractor requested that the situation of perceived unsafe conditions in the tunnels be taken to the DRB, the Owner declined to participate. The contract's DRB clause permitted the GVRD to terminate the contract at any time, instead of passing before the DRB.
Fractured rock in a Seymour-Capilano drive
- Faced with the contractor's refusal to return to work, the Owner terminated the contract expressing the position that it was left with no practical alternative in terms of completing the work. The Owner also took possession of the equipment on site. The Owner rebid the project and awarded a contract to complete the work to another joint venture at almost double the original value of the remaining work. The Owner has sued to recover these additional costs from the original contractor. In return, the contractor is suing to recover its losses. These include many millions of dollars for equipment confiscated by the Owner, as well as millions in unpaid labor and materials supplied to the project prior to termination.
- This case is a study in contrast to the successful use of DRBs for technically complex disputes such as the Niagara tunnel case. While resolution of the differences between the original contractor and the Owner ultimately rest with a judge to decide years from now and no doubt after significant expense has been incurred by both sides, one wonders if this situation could have been settled more quickly, more economically, and perhaps more amicably, had the parties accepted to bring the matter before the DRB.
- Why so few DRBs in Canada?
The sum of the past, present and future projects employing the DRB process throughout all of Canada averages less than one project per year, as opposed to more than 100 such projects annually in the United States. Reluctance to use DRBs in Canada in the past may be explained by the unfamiliarity of Canadians with the DRB process.
- The legal community in Canada has been more comfortable working within the bounds of established procedures and jurisprudence. Lawyers might have been resistant to including provisions for a DRB into the contract clauses thinking a DRB could work outside the terms of the contract. This fear is unfounded because all disputes must be reviewed in strict reference to the contract's terms and conditions. A DRB cannot rewrite the contract. There may also be some concern from lawyers about being trapped by an un-appealable DRB recommendation. Again, this fear is unfounded. The current popularity of the DRB process is due in part to the fact that advisory opinions and recommendations are non-binding. The disputing parties get the benefit of a neutral panel's experience and opinion about the case. This advice is given at a time when costs and impacts can still be mitigated.
- Consulting engineers and architects might have been reluctant to include DRBs into a contract believing the DRB could usurp their authority as first deciders when a dispute arises. This fear is also unfounded. Consulting engineers maintain their right to express themselves first regarding any dispute that arises. The DRB will intervene only after a dispute is brought before it at the request of both parties. Consulting engineers and other experts are also able to express their opinion during any DRB hearing.
Fig 1. Timeframe for dispute resolution under typical contracts vs. contracts subject to DRB
- Owners may have been hesitant to impose the process on contractors unfamiliar with this approach. In such a case, the TTC's approach of including optional DRBs with the approval of both parties seems wise at this time.
- Considering all the positive aspects, proven record of success and growing popularity throughout the world, it is suggested that the Canadian construction industry seriously consider the use of DRBs in Canada. This suggestion is not ours alone. In fact articles by several prominent Canadian lawyers and engineers over the last few years have already suggested the same. The concluding remark of one of these articles  is reproduced below:
- "The DRB process, properly organized and implemented, makes a great deal of sense. As governments and the private sector prepare to embark on various infrastructure project initiatives, through public-private partnerships or otherwise, the implementation of project-based DRB dispute resolution can provide important savings and benefits too valuable to ignore."
- The time has come for more DRBs in Canada.
- 1Dispute Resolution Boards (DRBs) – Creative ADR for Infrastructure Projects; Marston, D., Canadian Arbitration and Mediation Journal, Fall 2009
Niagara plan of action - TunnelTalk, Dec 2006
Accounting for slow progress at Niagara - TunnelTalk, July 2008
Vancouver's twin tunnels contract terminated - TunnelTalk, May 2008
Rebid reprieve for Seymour-Capilano - TunnelTalk, Jan 2009
Twin tunnel restart comes at a high price - TunnelTalk, April 2009
DRB scores success in Dublin - TunnelTalk, Aug 2010
DRBs in North America - knowing and playing by the rules - TunnelTalk, Aug 2008
Enhancing the success of DRBs - TunnelTalk, Oct 2008
Toronto Metro gears up for tender - TunnelTalk, Sept 2009
Add your comment
- Thank you for taking the time to share your thoughts and comments. You share in the wider tunnelling community, so please keep your comments smart and civil. Don't attack other readers personally, and keep your language professional.