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How to have a Dispute and come out as Friends

1. Background: Adjudication as intended?

In the original New Engineering Contract, Adjudication was intended to be a quicker, cheaper, less procedure’lised and friendlier form of dispute resolution compared with arbitration or litigation, so that the parties can move on.

  • Then Latham and the Housing Grants, Construction and Regeneration Act happened and:
  • Lack of time barring means that the initiator has all the time– and takes it – to prepare their case leading to long expense documents!
    • Having prepared it, they can ‘ambush’ the other party by launching the adjudication at the most awkward time.
    • Adjudication, with wider use, has attracted progressively more case law meaning it is becoming progressively more prescriptive in how it is done …  regardless of the size and nature of the dispute.
  • How do we go back to dispute resolution which satisfies the high level criteria underlined and in bold above?

2. Some alternatives to conventional Adjudication

  1. Independent expert who reviews it from one parties’ perspective.
  2. Independent expert appointed by both parties to give a non-binding independent view. Variants include:
    1. Licence to talk to people so not just a desk-based contractual “in a form which can be read, copied and recorded” review.
    2. Brief can extend to recommendations on tackling causes of dispute.
  3. Building on 2. workshop based approach to resolve differences, with either:
    1. Someone knowledgeable on NEC as facilitator or
    2. Genuine ‘know nothing’ facilitator.
  4. Negotiation:
    1. get more senior people in so a ‘Disputes ladder’ and
    2. those people need to have authority to resolve.
  5. Mediation: needs to be chosen not imposed
    1. Use of a neutral facilitator to reduce the impact of “personalities”.
    2. Needs to be a problem with “shades of grey”
  6. Short and sharp adjudication. Agree beforehand:
    1. Limited size of submissions
    2. Emphasis on Adjudicator verbally ascertaining facts and ‘going to see’ documents.
  7. Dispute Resolution Boards: consider at project inception
    1. Is the cost justified on the project?
    2. How will you keep the DRB up to date?
    3. Do you want a DRB or a DAB?
  8. Other:
    1. Early Neutral Evaluation
    2. Party Tribunal
    3. Med-Arb
    4. Part 8 Court Proceedings
    5. 100 day arbitration
    6. Online dispute resolution

3. The Exercise

  • Move into 6 groups of 5ish people to take different sub-topics
  • These sub-topics are:
    • Criteria for a good dispute resolution process under NEC3 and then one other
      • Alternative to Alternative Dispute Resolution: identification of pros and cons
      • Collaborative use of Adjudication as orignally intended
      • Pros and cons of conventional Alterntive Dispute Resolution e.g. mediation, adjudication and disputes boards.
  • Organise yourselves - chair, scribe, method or writing up, process etc, & come up with useful 'write uppable' output in ?? mins
  • Prepare to feedback for 5 mins each group and to enhance.
  • If you finish earler, gather your thoughts on another sub-topic.

Group A1: Alternatives to ADR

Adjudication

Pros

  • Quick
  • Cheap
  • Less procedure
  • Friendlier

Cons

Can be:

  • Long Winded
  • Expensive
  • Legally driven : procedural and antagonistic

Mediation

Pros

  • Friendly
  • Less procedure
  • Cheap
  • Works when there is a genuine desire to help

Cons

  • Non-binding decision
  • Can be used as fishing exercise or as something we have to do avoid litigation costs.
  • Waste of money

Note small contracts are less likely to use ADR.

Workshop/Negotiation

Pros

  • Easy to instigate
  • Cheap

Cons

  • Same problem passed up the line
  • PM is not impartial : paid by Employer, own company may have done design and looking at previous decision.

Dispute Boards

Pros

  • Background Knowledge means they are not coming to it cold.
  • Greater set of opinions to resolve issue
  • Easy access : within 28 days.
  • Can be binding if drafted into contract.

Cons

  • Expensive, especially as percentage on small contracts
  • Requires ADR person
  • Normally non-binding

Group A2: Alternatives to ADR

  • Introduce trigger points for identifying possible or potential disputes throughout each NEC process.
  • Impose timescales for dealing with issues, disputes and / or inaction based on trigger points
  • Develop a secondary option that provides for the regular reporting by both PM & Contractor on operation of the contract to the Employer on progress of early warnings, compensation events, acceptance of programme etc. . Most of the cloud based NEC administration systems can provide do something like this in chart form. This could be supplemented by a commentary on trends and key/large early warnings, compensation events etc.

Group B1: Collaborative use of Adjudication as originally intended

  • Should encourage a collaborative culture from the outset.
  • Defined communication channels from the outset between the parties is vital; this includes having a dispute mechanism in place.
  • It should not preclude day-to-day closure / negotiation of issues.
  • Should not preclude the opportunity for ‘low level’ dispute boards.
  • Try to agree the basis of assessment of adjudication in advance i.e. setting protocols for content and timing in advance.
  • Going to adjudication should not be seen as a failure : having an unresolved festering dispute is !
  • Instead encourage closure of issues / disputes on a rolling programmed basis within timescales.
  • This supports and facilitates understanding of time and budget implications which is important in current market.
  • Recognise that Adjudication is a two way street : not just Contractor taking Employer to Adjudication.
  • Third party adjudication should provide assurance and confidence in closing off disputes.

Group B2: Collaborative use of Adjudication as originally intended

ADR Criteria

Objective

  • Solves problem:
    • Definitive
    • Binding/enforceable?
    • 3rd Party decision
  • Avoids formal Dispute Resolution
  • Proportional
  • Maintains relationships

Method

Options dependent on:

  • project/dispute size?
  • complexity?
  • public/private?

Collaborative Adjudication

  • More emphasis on negotiation and/or ‘soft’ conciliation mediate / conciliation
  • Engage parties on ‘positive’ adjudication : early, issue by issue, contained, limited size of submissions etc
  • Flow adjudication terms through into Dispute Adjudication Board, so not starting from scratch.

Group C1: Pros & Cons of Conventional ADR

Group C2: Pros & Cons of Conventional ADR

NEC Criteria

  • Deal with unresolved issue/dispute at the time that you realise it is unresolved
  • Once notified, deal with it in a set time scale
  • Arrive at a decision and move on

Recommendations on Process

  1. Categorise / rate on a scale disagreements :
    1. by urgency,
    2. value,
    3. complexity etc.
  2. Decide on best process given 1.
  3. Set a time constraint
  4. Use a collaborative escalation process. For example:
    1. Site team
    2. Senior management
    3. Director
    4. Mediation / ADR
    5. Adjudication

4. Key Points to take away

Each group was asked to summarise their key point / learning from the workshop. These were grouped afterwards

  1. The over whelming key lesson was : Agree upfront a (non-contractual) issue resolution ladder with strict timescales for when an unresolved issue is elevated to the next level, which is operated honestly and openly with the genuine intent of not letting unresolved issues turning into festering disputes.
    A suggested ladder looked like : site team > senior site management > director > mediation > adjudication.
  2. Both within the above issue / dispute resolution ladder &/or when a dispute occurs, identify the relative importance of criteria before you select the ADR process to use. For instance :
    a. Is it low cost / ‘value for money’ that you want ?
    b. A binding decision so that the parties can move on ?
    c. Speed of resolution (you could have a categorisation system for ‘Urgent’, ‘Medium’ and ‘Long term’.
    The criteria by which you select the ADR tool could be in line with the project’s objectives.
  3. Other key lessons learnt included
    a. Address the negative perception of Adjudication : true failure is failure to address an issue; see Adjudication as a management process for unresolved issues.
    b. Explore the use of agreed limits to be applied in the Adjudication protocol e.g. size of submissions etc.
    c. Choose the right contract and the right people for the right price and you will avoid disputes !