DRBs - knowing and playing by the rules - TunnelTalk
North America DRBs-knowing and playing by the rules Aug 2008
Shani Wallis, Editor

So what are DRBs exactly? We all know the acronym, Dispute Review or Resolution Board, and we know the basics - a panel of three impartial professionals, one each nominated by the Owner and the Contractor and a third agreed by those two, who follow the contract diligently, from being appointed through construction, and consider the grievances or disputes presented and provide a non-binding recommendation that can be either accepted or rejected. If rejected, the deliberations and recommendations of the Board cannot be used as evidence in a subsequent arbitration or court case. That's it in a nutshell, right?

But what are they really? The requirements of the Board members, the mechanics of preparing and presenting disputes, the process of arriving at recommendations, the capacity of the two parties to either accept or reject the recommendations, the consequences of having a DRB and not using it properly, the consequences of having a lousy DRB and what to do about that - all are pretty much open-ended discussions and especially when considering questions such as: Can the members of a DRB be truly impartial? Should recommendations be unanimous and if not, what happens to the dissenting voice? Can the recommendations of experts really be dismissed if a dispute goes to court or arbitration? Can DRB members be sued?

These points were discussed (unfortunately with too little time to do justice to them all) at a daylong workshop held concurrent with the North American Tunneling conference (NAT) in San Francisco in June. The two tutors, Peter Douglass, Immediate Past President of the Dispute Resolution Board Foundation, and Joe Keating, a Foundation member, and both regular DRB panel members, moderated lively debate among a group of about 25 representing clients, contractors, consulting engineers - and the press. During the course of the discussions, it was evident that feelings run high about the good and bad of DRBs and that on several points even the two tutors had differing opinions on points of DRB conduct.

Fortunately, however, the common attitude towards DRBs (within the workshop group and in industry in general) is overwhelmingly positive. Clients now advertise appointment of a DRB to attract bidders for their job, many US tunneling contractors won't bid a job unless there is a DRB, and regardless of the differences of opinion, the pros far outweigh the cons.

Since their introduction in the mid-70s in the United States, DRBs are enduring and their use on all types of construction projects the world over has increased dramatically. Their track record is also exemplary. The workshop was told that some 98% of disputes heard by DRBs (to end 2005 when the number of DRBs became too numerous for the DRB Foundation's comprehensive database to monitor and record) led to final resolution and so sidestepping the pain and expense of lengthy and contentious arbitration or litigation.

Perhaps auspiciously DRBs were conceived for tunneling, and still apply today to a large majority on tunneling contracts. Application on other civil engineering contracts including bridge and dam construction, highrise developments, and highway and railway projects has increased in recent years, but the geological unpredictability and uncertainty and the consequences on the terms and conditions of a contract, make tunnels particularly prone to claims and disputes. It was on the Eisenhower road tunnel in Colorado in 1974 that a DRB was first convened in the US. It heard three disputes, all of which were resolved - amicably. There are today more DRBs in North America than internationally, where non-binding DRBs are often substituted with binding DABs (Dispute Adjudication Boards), but this is growing rapidly and international application may soon overtake application in North America. The original Dispute Review Board name was changed to Dispute Resolution Board some years ago to encompass the concept also of Dispute Adjudication Boards and the applicability of one or the other to certain different forms of contract is a continuing discussion.

At the NAT workshop, tunnelling was the common profession for the attendees and the tutors, and it was admitted that a large percentage of disputes center on differing site conditions. In that regard it was suggested that having a geotechnical engineer as one of a three-member board for a tunnelling project was a good idea. "Saves a lot of time and debate." It was also stated that most issues are brought by contractors with the assumption that most recommendations would therefore fall to the contractor's advantage. Setting the record straight, the tutors said that DRB recommendations split about 50/50 for each party. In separate conversation on a different occasion, a contractor confided that the contractor wouldn't spend the time or effort to prepare a claim unless it had fair expectation of being successful and then is more likely to live with the recommendation, saying "it's better than facing a judge".

Perhaps the most astounding of the revelations discussed at the workshop was confirmation by the tutors that the purpose of a DRB hearing is not to arrive at something that is fair and equitable. "All disputes must be adjudicated in strict reference to the contract's terms and conditions. If the contract is considered in anyway unfair, that's too bad. That is the document the client and the contractor signed and any dispute must be heard in that context. A DRB cannot rewrite the contract." There were nods of agreement among the attendees, particularly those representing the design engineering profession with hopes that that canon is emphasized at every opportunity.

Other wise words from the tutors at the workshop (to which TunnelTalk was permitted to sit in) included:

• Ensure that the position of each party to a dispute is well defined, and that the position papers are shared, before the issue goes to the Board. This exercise often illustrates that appreciation of the dispute by each party is wildly off the mark and that actually the differences are not as irreconcilable as previously considered;

• DRBs are not construction managers. Issues that can be resolved on site do not belong with the DRB;

• Be careful of attorneys as members of DRBs. They are confrontational experts. DRBs are not pits for adversarial confrontation;

• Beware also of two representatives from one side of the fence (Owner or Contractor). It is difficult to see the other's point of view if you have no experience of it;

• Disputes are better presented to the Board as issues of 'merit' rather than as issues of 'quantum' or amount;

• A good board will see a problem brewing before a dispute is referred, the greatest benefit of a DRB is in avoiding a dispute in the first place;

• DRBs cannot give work performance advice. If they do impartiality is compromised;

• Advisory opinions are a new concept for DRBs and are offered only if both parties agree to this type of referral (one party can bring a dispute to the Board for a full hearing). Both parties present the case as they see it, the Board deliberates and presents a verbal opinion. Should the situation remain unresolved, the opinion is disregarded and the Parties prepare for a full dispute hearing, at the request of either party; and

• The question about being sued? Wouldn't that be counterproductive? Isn't that the purpose of the DRB? To avoid litigation? Although there have been attempts to exclude the terms from the three party DRB agreements, most DRB Foundation members decline invitations to be on a Board unless there is a 'quasi-judicial immunity' and 'hold harmless' clause.

In closing, the tutors explained that disputes commonly range from a few hundred thousand to several million dollars, smaller ones bundled into one hearing on occasion. The largest is a whopping quarter of a billion US$! The cost of maintaining a DRB, it was said, is typically less than 1/2% of the contract value - an agreed bargain compared to the amorphous cost of arbitration or litigation.

In admitting that lip service is paid often to the appointment and use of a DRB, Pete Douglass said the message to all must be, "be true to the concept, adhere to the rules, keep communications absolutely confidential during deliberations, and abide by your decisions when parties either accept or reject the recommendations. That is the way we can continue to best serve the industry."

All the rules and codes of conduct for being on and working with a DRB are explained chapter and verse in a manual that is updated regularly to reflect the continuing experience gained through the use of DRBs. Copies of the manual are available as a pdf download from the Foundation's website (www.drb.org).

     

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