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Selection of Dispute Board Members

In this blog we explore questions concerning how the parties may select members to serve on a dispute board.

Sub-Clause 20.2 (Appointment of the Dispute Adjudication Board) of the FIDIC Red Book (the other books included similar clauses), provides that The Parties shall jointly appoint a DAB by the date stated in the Appendix to Tender … If the DAB is to comprise three persons, each Party shall nominate one member for the approval of the other Party. The Parties shall consult both these members and shall agree upon the third member, who shall be appointed to act as chairman. … However, if a list of potential members is included in the Contract, the members shall be selected from those on the list, other than anyone who is unable or unwilling to accept appointment to the DAB.’ (more…)

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Can the Engineer Serve as a DAB?

I recently attended a course to become a FIDIC Accredited Trainer. As part of the course assignments, the candidates were given a list of questions put forward on training courses by the delegates and the candidates had to give answers. One such question was as follows:

As per our Contract, the Engineer shall act as the Dispute Adjudication Board. As per Contract the Engineer is XYZ Consulting Ltd. The Engineer has appointed a person whom we do not know who shall act as the DAB. Please advise us whether this is a correct approach.

My answer was as follows:

If you have agreed, by entering into the Contract, that the Engineer shall act as the DAB, then you have to accept this. Questions must be asked however, about the effectiveness and correctness of such an arrangement. For example:

A DAB should be impartial; the Engineer is not

The Engineer has appointed another party, whereas your Contract provides that the Engineer shall act as the DAB (more…)

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The Differences between Dispute Resolution and Dispute Adjudication Boards

Internationally, and broadly speaking, Dispute boards fall into two categories – those who advise or make recommendations to the parties and those who decide or adjudicate on a dispute. Dispute Resolution (or Recommendation) Boards do the former and Dispute Adjudication Boards do the latter.

The philosophy of resolution boards is that after three experienced, respected and impartial board members have studied an issue and made a recommendation on the basis that ‘if you proceed to arbitration on this matter, in our opinion the outcome will be this or that’, the parties will probably accept this as being good advice. The Dispute Resolution Board Foundation records show that if one of the parties chose not to accept this advice then subsequent arbitrations have, in almost all cases, agreed with the DRB. The major difference is that a recommendation is just that, i.e. a recommendation and is not actually binding on the parties. (more…)

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The Differences between Standing and Ad-Hoc Dispute Boards

The main purposes of dispute boards are to help to prevent disputes and to deal with them quickly if a dispute does arise – FIDIC, for example requires the DAB to issue a decision within 84 days. Whilst such matters may be dealt with if the DAB is a standing board, it is difficult to contemplate how an ad-hoc DAB can achieve such goals.

A standing board is appointed and convened at the beginning of the project and is obliged to become acquainted with the project, the contract and the parties and to undertake site visits and keep abreast of matters. Thus, the board is available to provide advice and opinions on matters that may otherwise be elevated to disputes. If a dispute is referred to the board, the members are well equipped to start work on the matter immediately and should be able to provide a decision within the prescribed 84-day period. (more…)

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Impressive Statistics from the Dispute Review Board Foundation

The Dispute Review Board Foundation (DRBF) has collated some very impressive statistics in relation to dispute boards.

drbf (more…)

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CPD Talk Emphasises the Value of Dispute Boards for Construction Projects in the UAE

The following guest blog was written by Suzanne Hunter, Membership Relations Manager and organizer of CPD events at the Royal Institute of Chartered Surveyors (RICS).

 

We were pleased to have Andy Hewitt present a talk on dispute boards to members of the RICS at our latest CPD evening, held in Abu Dhabi on 27th April 2015.

Andy’s talk focused on the added value that dispute boards can bring to construction projects in the UAE and focused on areas such as:

  • What a dispute board is
  • How dispute boards are convened
  • The responsibilities of an effective dispute board
  • The key elements of an effective dispute board
  • Cost of dispute boards
  • The perceived barriers to dispute boards and explanations on why, in reality, such barriers do not exist
  • How dispute boards prevent disputes

(more…)

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DB MENA Hosts Seminar to Discuss Added Value that Dispute Boards Can Bring to Construction Projects in the MENA Region

Dispute Boards MENA held its first seminar on 2 March and, between a presentation and a panel discussion, discussed the added value that Dispute Boards could bring to construction projects across the MENA region.

John Wright and Andy Hewitt gave a talk which explained the purpose of dispute boards, how they are constituted and how they help to avoid disputes as well as settle them in a timely manner. Common misconceptions such as cost, enforceability and impartiality of boards were also discussed.

John Wright - Presenting

John Wright, Partner at Goodman Derrick LLP, delivering part of the presentation.

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Andy Hewitt, Principal at Hewitt Construction Consultancy, delivering his section of the presentation.

The panel was comprised of Sam Barakat (Director, Rider Levett Bucknall), Malcolm Kelly (Consulting Engineer and DB Practitioner), Richard Chamberlain (Director, Turner & Townsend) and Colin Pickering* (Managing Director, Murray & Roberts Middle East) and they  discussed such topics as why DBs are seldom used in the MENA region, the practical advantages of standing boards over ad-hoc boards, how DAB’s can help and encourage engineers to deal with matters in a timely manner and enforceability of DAB decisions in the UAE.

*Colin Pickering had an emergency client meeting and had to bow out of the seminar at the last minute. This was a shame but our presenter, John Wright, kindly offered to step in for him. 

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Panelists poised and ready to share their views.

Whilst the turn out could have been stronger, I think it was certainly a case of quality over quantity and we had some senior representatives from some of the larger UAE companies too which was encouraging. We hope that as DB MENA becomes more well known, the interest in and attendance at our activities will naturally increase.

As for future seminars, we already have an idea for the next one, which will probably be a mock DAB session. Whilst we don’t have details of when this will be yet, please do let us know if you would be interested in attending this session.

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Guideline Costs Of A Dispute Adjudication Board Under FIDIC Contracts

Costs will vary considerably depending on factors such as the location and duration of the project, whether a standing or adhoc board is used, frequency of Dispute Adjudication Board (DAB) visits, number of DAB members, home location and required fees of DAB members, how many disputes are referred to the DAB and the complexity of such disputes.

 

For a standing DAB, each Member is paid (normally in the agreed currency of the contract):

  • a retainer fee per calendar month (reduces by 50% from date of taking over of whole works*)
  • a daily fee whilst working or travelling
  • all reasonable expenses – generally includes business class air travel
  • any taxes properly levied in the Country on payments made to the Member (unless a national or permanent resident of the Country)

*Note: Under the MDB Harmonised Edition the reduction is one third rather than 50%.

For an adhoc DAB, no retainer fee is payable.

Example costs of a DAB

The cost illustration below is based on a standing DAB appointed for a 2 year project in a country more than 1 day’s travel from each Member’s home location, and visiting the site every 4 months during the construction works. A daily fee rate of US$ 3,000 has been used, which is the 2013 published rate for arbitrators appointed by the International Centre for Settlement of Investment Disputes (ICSID), an organisation which is part of the World Bank. A retainer of 1 day per month has been assumed.

The figures are only an approximate guide to costs and must be adjusted for the actual situation and details of each project.

 1 person DAB3 person DAB
Monthly Retainer$3,000 x 24 months = $72,000 $216,000
Site Visits (daily fee)$3,000 x 6nr x av 4 days = $72,000 $216,000
Visit ExpensesEst. $3,500 x 6nr = $21,000 $63,000
Monthly Retainer during Defects Notification Period $1,500 x 12 months = $18,000$54,000
Total$183,000$549,000

If a dispute is referred to the DAB, depending on the complexity, the Member may well spend 20-25 days (including the time for a hearing). The additional DAB costs (based on 25 days) are thus:

  1 person DAB3 person DAB
Daily Fees $3,000 x 25 days $75,000$225,000
Expenses est. $5,000$15,000
Total$80,000 $240,000

For simpler disputes, on a ‘documents only’ basis without the need for a hearing, the time spent by the Member(s) is generally in the region of 10-12 days. This reduces the above costs to $30,000 for a 1 person DAB and $90,000 for a 3 person DAB.


Who pays for the DAB?

Standing DAB:

  • Costs are shared equally between the Contractor and Employer (Note: Contractor would need to include in the tender for his 50% share of the likely DAB costs).
  • Generally a provisional sum in the BOQ for the DAB.
  • Each Member submits their invoices to the Contractor for payment. Monthly retainer and airfares submitted quarterly in advance. Contractor required to pay within 56 days of receipt of invoice.
  • Contractor includes 50% of invoiced amounts in his applications for payment for reimbursement by Employer.
  • If Contractor fails to pay, Employer has a duty to pay the amount due. Employer is then reimbursed by Contractor for 50% of the invoiced amount, plus any financing charges and costs of recovering the fees.

Adhoc DAB:

Members are entitled to an immediate advance of 25% of the estimated total daily fees and 100% of estimated expenses. The remaining procedure will then be as above, except that further invoices of Members are to be paid within 28 days. The DAB is not obliged to give its decision until all invoices have been paid in full.

This blog post was written by Nigel Grout. Nigel has been a practising Quantity Surveyor for over 35 years and works worldwide as a dispute board member, adjudicator, arbitrator, quantum / claims expert and is on the FIDIC President’s List of Dispute Adjudicators. Nigel is also listed on the Dispute Boards MENA List of Practitioners. 

For more information please visit: www.nigelgrout.com or contact Nigel at: info@nigelgrout.com

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DB MENA Plans Seminar to Educate Industry on the Added Value That Dispute Boards Can Bring to Construction Projects

In its efforts to educate the MENA region on the benefits of appointing dispute boards on construction projects, Dispute Boards MENA will deliver its first seminar in the UAE in March 2015.

The seminar, Dispute Boards and their Added Value to Construction Projects, will look at what dispute boards are, how they are convened, what responsibilities they have, how dispute boards are effective, costs of employing a dispute board, the perceived barriers to dispute boards and finally, how dispute boards actually prevent disputes.

Industry heavyweights will then conduct a panel session where key themes will be discussed and general discussion / Q&A will be facilitated from the audience.

Whilst final details will be confirmed nearer the time, tentative plans are as follows:

Date: 10 March 2015 (confirmed)

Time: 6:00pm – 8:30pm

Venue: Dubai, somewhere close to the Dubai Marina end of town to accommodate those travelling from Abu Dhabi.

Entry Fees: This is a non-profit seminar. Attendees will be charged a small entry fee to cover the hotel costs.

Interested in attending? Let us know.

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Dispute Boards MENA Launches Blog

In our continuing efforts to promote the use of dispute boards and to inform people of their value in the MENA region, we are excited to have introduced a blog to the website.

The purpose of the blog is to allow the practitioners who are registered on the website to contribute and write on dispute related topics for the benefit of all. The blog will also allow people to enter into discussions, pose questions and seek advice from our registered practitioners.
(more…)

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