The Dispute Board (DB) process has an important role in both avoiding and resolving disputes among contracting parties on large and complex construction projects, and has earned its place in the ADR toolkit.
Major projects often feature significant risks depending on project type, complexity, duration, and available budget. Dispute Boards offer significant benefits in the following areas:
Risk Management
DBs address inevitable risks that involve cost and time, which are typically identified during the design and procurment phase during a comprehensive risk review. The DB is able to advise, assist, and resolve these issues when the contracting parties disagree about their responsibility for these issues.
DBs proactively adopt a dispute avoidance role and, in this capacity, help the contracting parties in managing or resolving contentious issues and contractual disagreements before they develop into a formal dispute.
In its dispute resolution role, the DB provides the parties with an independent recommendation or decision on formal disputes, thus enabling the parties to resolve such matters at the project level.
Dispute Management
From a business perspective, conventional dispute management and resolution can be costly. Not only are there significant costs in hiring expert consultants and lawyers, but project personnel can become tied up in preparing or defending claims rather than focusing on project delivery.
In addition, unresolved or protracted disputes can lead to delays and disruptions to work on the project, increasing costs and causing a breakdown of relationships and communication.
DBs allow the contracting parties to maintain control over the dispute resolution process at the project level, and at a far lower cost and time commitment compared to more formal ADR processes or litigation.
Dispute Boards as Project Insurance
Parties spend large sums of money on line of insurance for projects, such as general liability, builder's risk, umbrella policies, etc. Larger and more complex project often implement owner or contractor controlled insurance programs which, in addition to actual policy costs, bring associated costs of managing and administering the program. The purpose of these programs is to prevent or minimize losses and/or pay for losses that may arise through a transfer of risk to insurers. This is similar to the role of the DB, although the DB serves a much wider and more positive purpose in influencing project outcomes.
Data collected by the DRBF indicate the cost for these insurance policies and programs almost always exceeds the cost of the DB by a significant margin, even before accounting for the other benefits of the DB.
There is no doubt that avoiding escalation of issues and disputes is a solid investment insuring against future high costs of dispute resolution.
Cost-Benefit Analysis
The carrying costs of the DB relative to the budget of the project are small, usually in the range of .05 percent to .15 percent of project costs. These costs are generally fixed, therefore known, versus the unknowns of other formal dispute procedures or ADR methods, especially arbitration and litigation.
A DB works within the management structure of the project to minimize project costs. For example, the DB will often attend senior management meetings held in conjunction with DB meetings.
The extra marginal costs of a DB is less than any other formal dispute resolution process. The DB is relatively informal, often does not involve outside consultants or lawyers, does not include any document-discovery and uses real-time information readily available to both parties and the DB.
Comparison studies between DB and non-DB projects almost always report a positive outcome, with typically fewer and smaller cost overruns, and fewer schedule delays.
Read more about the benefits of Dispute Boards in the Dispute Board Manual: A Guide to Best Practice and Procedures.