Dispute Resolution Boards (DRBs), also referred to as Dispute Avoidance Boards or just Dispute Boards, can be effective mechanisms for the avoidance and resolution of disputes. They are designed to be established at the outset of the project and to monitor the project on an ongoing basis, including by meeting regularly to assess the progress of a project.
EXAMPLE Key role of DRBs The interviewees on the Port of Miami Tunnel project in the USA felt that the Dispute Resolution Board was helpful in avoiding the escalation of disputes. It was used for a dispute that occurred over increased tunnelling costs, where the DRB ruled that certain cost increases should be covered by the Procuring Authority. Once this decision was made, the parties were able to negotiate the dollar amount, avoiding court proceedings. For more information, see the Port of Miami Tunnel Case Study. |
Because DRBs are designed to be established at the outset and PPP contracts are long-term in nature, their costs can be high and fixed irrespective of whether a dispute arises.
The process for resolving disputes using a DRB normally begins with each party producing an appropriately detailed position paper for consideration by the DRB. Thereafter a meeting can be held to give each party an opportunity to present its case for determination by the DRB. Once formal procedures have begun the timeframes will generally be tight, emphasising the importance of ongoing good document control by the Procuring Authority. Information management and document control is detailed in Section 3.4 (Information management). DRBs are not bound by traditional rules of evidence and the members will have broader discretion on how they inform themselves of the subject matter.
DRBs can provide interim solutions to problems and keep the parties working constructively together. Their use should therefore help to avoid problems escalating and the relationship between the Project Company and the Procuring Authority deteriorating. However, any determination will typically be subject to review through court proceedings or arbitration if a party decides to go down that path.
A DRB may have a broader function to help avoid disagreements turning into disputes. This can involve seeking the opinion of the DRB to assist the parties' thinking in agreeing to an appropriate dispute resolution mechanism.
EXAMPLE Additional benefits of DRBs The dispute resolution process for one of the case studies in a developed market included the use of a Dispute Avoidance Board, which can make recommendations to the parties. In one situation it recommended an expert determination process be used, which was then successful in resolving the dispute in question. |
DRBs are commonly used in construction contracts between a principal and a contractor. PPP arrangements are more complex because there are more parties involved. For example, a PPP contract is agreed between a Procuring Authority and a Project Company, though construction risks are passed down to a separate construction contractor under a construction contract. This adds complexities to a DRB arrangement. One way of addressing such complexity is to give the construction contractor a 'seat at the table' in addition to a Project Company and/or require the construction contractor to agree upfront to the determinations of a DRB.
DRBs will generally have a dispute resolution function whereby either party can formally refer a dispute to the DRB for a written recommendation or determination. These recommendations or determinations can be binding or non-binding, depending on what the parties agree in the PPP contract. The other option is that the board can fulfil either function (i.e. issuing binding and non-binding decisions) and the parties decide on a case by case basis whether they are seeking a binding or a non-binding decision.
22% of the PPP contracts reviewed globally allowed for DRBs. There were several examples of disputes being resolved using a DRB, including in Germany the USA, and Australia. Out of the data sample, 9% of disputes were successfully resolved using a DRB.
In some jurisdictions, such as Chile, a standing technical panel is established to hear certain disputes and propose settlement agreements prior to any formal arbitration (though the panel may not necessarily be called a DRB). Other jurisdictions (e.g. Europe) also consider the engagement of a single or a panel of experts on a case by case basis to issue an opinion on a dispute to assist the parties in coming to an agreement before the dispute moves to arbitration. A technical panel of experts can have similar cost implications to those of a DRB.