Archive for the ‘Guest Writer’ Category

Choosing Dispute Board Members

Some Parties are fairly, or very, familiar with the DB process and have worked with a few DB Members. They are in a position to choose the same people again, or to elect to choose an alternative, for whatever reason. However, some Parties have less, or even no, knowledge of the process and nominating and appointing a DB Member and Chairman may be a risky business. So what should you consider when appointing DB members? Here are my tips:

Generally, DB Members have to confirm that they are independent of the Parties, so do not be tempted to nominate someone whom you think might favour your Party. It puts the Member in a difficult position and may cause resignation of the Member late on, with all the attendant cost and inconvenience.

The Member has to act in an unbiased way. This can be a subjective matter, but one can gain a sense of the Member’s approach to matters by the way emails are written, and by voice and perhaps face to face contact by meeting in person, on skype or video-conference. And don’t be afraid to ask around to see if you can find someone who has worked with potential nominees. This can be very useful. (more…)

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Choosing a Dispute Board – Preliminary Considerations

In practice, it is the Employer who will decide whether or not to have a dispute board (DB) on his project. So what are the criteria which he needs to look at when making this decision?

I suggest there are a combination of practical, financial and legal matters. This puts the Engineer, the Quantity Surveyor and the Employer’s legal advisors in the spotlight (so I hope some of them are reading this, or that readers will put these points to them).

So let’s ask ourselves some questions..

On the practical side, what do you think might influence the decision? Remember that a DB is there to firstly try to avoid and prevent disputes.

When do potential disputes start to arise? (more…)

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What Makes a Suitable Dispute Board Member?

A couple of years ago I was asked to provide training on procurement for a large developer in the GCC region. Part of my recommendation was that the developer should seriously consider including provisions for the appointment of dispute boards within his contracts.

After the course, the senior contracts manager gave me a lift to the airport and during the journey, told me that he did not like DABs. When I asked him why, he told me that the only experience he had of DABs was on a project where a single person DAB was appointed and that when the DAB member first came to site he immediately informed the project team that he was a lawyer and had no experience in construction projects. Obviously, in this situation the appointees of the DAB here had not considered the requirements of a DAB member very well when making their selection, because, if the DAB member or members are not suitable for the role, the DAB process will surely fail. So what qualities should we look for when selecting and proposing members? (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 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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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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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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