Rebuilding capacity: The role of dispute avoidance boards

Rebuilding capacity in the construction industry is often framed around skills, efficiency and innovation.

But another lever is reducing the amount time spent by our industry on disputes.

The Australian Contractors Association’s (ACA) submission to the Productivity Commission in 2022 highlighted the issue of time and resources wasted on disputes and claims. They cited a 2018 survey by PlanGrid and FMI Corporation which found that construction workers lose almost two full working days each week dealing with conflict, rework and other avoidable issues.

Recent submissions by Consult Australia, alongside other industry voices like the ACA and Infrastructure Australia (IA), have emphasised the need for strategies that reduce the adversarial nature of the construction industry. Consult Australia’s submission to Infrastructure Australia earlier this year advocated for reforms to de-risk delivery.

“This means identifying ways to de-risk the market to reduce the level of disputation and therefore burden on professional indemnity insurance. The aim is to bring some balance back to the professional indemnity insurance market.”

Infrastructure Australia’s “Delivering Outcomes” report published on 21 May 2022 explicitly called for collaboration and integration as necessary to transform the infrastructure sector in Australia. IA’s report included a recommendation that owners implement visible and effective governance to enable infrastructure delivery and ensure the focus is on the right outcomes.

This is where Dispute Avoidance Boards (DABs) come in.

A Dispute Avoidance Board is a board of impartial professionals (usually 3) formed at the beginning of the project to follow construction progress, encourage dispute avoidance, and assist in the resolution of disputes for the duration of the project. Dispute Avoidance Boards are also commonly referred to as Dispute Resolution or Review Boards, Dispute Boards, Dispute Review Board (DRB), Dispute Review Panel, Dispute Avoidance/Adjudication Boards (DAAB), and many others. While they may be referred to in different ways, their function is essentially the same, which is to encourage dispute avoidance and to resolve disputes.

DABs effectively operate as part of the governance structure for a project, providing a rigorous and consistent forum for the parties to come together to work through issues on the project.

Over the years the key benefit of DABs is their focus on dispute avoidance and the benefit of rapid real-time decision making.

And the proof is in the pudding.

Firstly, from a cost perspective, while a three person DAB may cost in the order of $150,000 - $250,000 per annum (or 0.15% to 0.25% per annum for a $100 million project), the cost of a full blown dispute heard in international arbitration may cost 10 to 15% of the project costs (1) .

Secondly, and more importantly, the evidence proves their effectiveness. The Dispute Resolution Board Foundation statistics report that 98% of projects utilising DABs have been completed without reference beyond the DAB. And in Australia, the Dispute Resolution Board Foundation reports (2) :

• More than 80% of DB projects have finished on or ahead of time compared to the industry norm of well under 60% for similar value projects without DABs. The majority of DB projects have also been completed within the owner’s budget.

• Less than 5% of DB projects have been more than three months late, compared to the industry norm of more than 25% for similar value projects without DABs.

• Just under 80% have been completed without a single referral to the DAB, compared with an industry norm for projects without DABs of less than half that percentage completed without off-site dispute resolution processes being invoked.

There has been reticence in recent years for DABs to be used in Australia. The reasons for this are not clear although it has been suggested that that one barrier is the fact that Australian standard contracts (by comparison to say the NEC and FIDIC suites) do not include a requirement for DABs. It should also be noted that DABs are not a stated requirement of local funding agencies.

One lever the Australian market can and should easily pull to improve capacity is the widespread adoption of Dispute Avoidance Boards. In doing so, resources currently consumed by disputes can be diverted back onto projects.

If you’d like to find out more about dispute avoidance board and their practice in Australia, the local Dispute Resolution Board Foundation is holding its inaugural conference on 3 November in Brisbane. Framed around the theme “Being Match Ready for Olympic Infrastructure”, the conference will involve speakers from government and industry on how DABs can be used to drive better project outcomes over the next decades’ worth of projects. Hold the date and join the mailing list at www.drb.org to ensure your invitation to join in.

Kiri Parr,

DRBF Member and member of the conference organising committee.

1- Andrew Stephenson and Lucy Goldsmith, “Time for Australia to Embrace Dispute Resolution Boards”, 22 June 2021, https://www.corrs.com.au/insights/time-for-australia-to-embracedispute-resolution-boards

2- https://www.drbf.org.au/concept