For large construction projects, it is almost inevitable that disputes will occur between the owner and contractor due to unforeseen events, ambiguities in specifications, delays, additional work and more.
Traditionally, these disputes might fester unresolved until completion, resulting in years of arbitration or litigation with enormous time and cost implications. However, standing dispute boards (SDB) have emerged as a more efficient dispute resolution mechanism.
A standing dispute board is established at the inception of a major construction project with the consent of the owner and contractor. It comprises one or more impartial technical experts from disciplines like civil engineering, architecture, quantity surveying, project management, etc. The contract specifies the procedure for constituting the SDB, the number of members and the process of referral/hearings.
Standing Dispute Board Process
From the time construction begins, the SDB visits the site at regular intervals, perhaps quarterly, to keep itself abreast of work progress and any conflicts or issues. It maintains detailed documentation and tracks potential trouble areas. As soon as any matter escalates into a dispute, either party can refer it to the SDB through a formal submission setting out the details and questions to be dealt with.
The SDB then promptly organises a hearing, giving reasonable notice to both parties. Here, the parties make their submissions and are questioned by SDB members for clarification. The proceedings are structured but much simpler, faster and more flexible than litigation. There is much less paperwork, with limited obligations as to discovery, witnesses, etc.
After the hearing, the SDB considers the issues, evidence and from its own observations during site visits, submissions by both parties and contract conditions. It then issues a written non-binding recommendation with pragmatic solutions aimed at resolving the dispute economically and equitably.
The SDB recommendation may prescribe payment of specific amounts, granting of extensions of time, approval of change orders, etc. Either party is free to reject the recommendation and pursue further arbitration if dissatisfied. However, in most cases, parties accept it as faster and cheaper than litigation. The SDB continues to function throughout the construction phase.
The Benefits of Standing Dispute Boards
There are several unique benefits of the standing dispute board process:
- Speed – Disputes are resolved in just weeks instead of months/years for arbitration.
- Cost – SDB costs just a tiny fraction of legal proceedings. More disputes get settled before escalating into formal claims.
- Proactivity – SDB identifies issues early during site visits and helps to prevent them from becoming formal disputes.
- Continuity – The same experts hear all disputes that arise over the entire project.
- Informality – Hearings are simpler, faster and do not require legal representation.
- Equity – Technical experts often provide fair recommendations acceptable to both parties.
- Harmony – SDB non-adversarial approach causes minimal acrimony and preserves business relationships.
- Flexibility – Unhappy parties can still pursue arbitration/litigation if they are seriously dissatisfied.
For very large projects, it is prudent to have a three-member SDB to cater to multiple engineering disciplines and lower the risk of bias. For smaller projects, one to two members may suffice. Members are paid fixed monthly/hourly rates plus expenses. Costs are shared by both parties or borne by the party referring to a dispute.
SDB members must be experienced professionals with strong technical/commercial backgrounds and skills to grasp project issues quickly. Many reputed global bodies like the Dispute Resolution Board Foundation, the Chartered Institute of Arbitrators and the International Chamber of Commerce maintain panels of accredited SDB professionals.
Standing dispute boards are now a globally accepted mechanism for efficient, economical and harmonious dispute resolution in complex construction and infrastructure projects.
For contractors, owners and construction lawyers alike, expertise in SDB processes is very useful while drafting contracts or dealing with project disputes. As significant construction markets embrace standing dispute boards, there are also growing career opportunities for professionals to serve as SDB experts.
‘Different aspects of Dispute Boards in Latin America, UK & Middle East’ was discussed at our September 2022 webinar, with guest speakers, Jaime Gray of NPG (Peru) and Anna Laney of Crown Office Chambers (UK). Click here to view the webinar and presentation.
For expert legal advice and representation in construction and commercial property matters, contact Barton Legal today.