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