Dispute Boards (DB) Presenters: Rammy Cone Dr. Ralph Ellis Jim Guyer Dispute Resolution Board Foundation. Moving projects forward since 1996.

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1 Dispute Boards (DB) Presenters: Rammy Cone Dr. Ralph Ellis Jim Guyer Dispute Resolution Board Foundation. Moving projects forward since Copyright Dispute Resolution Board Foundation 2019

2 Overview New Engineering Contract (NEC) Informal Assistance/Advisory Opinions FDOT What s working Potential areas for improvement

3 Goal of the Dispute Board Avoid and resolve disputes early and efficiently

4 NEW ENGINEERING CONTRACT (NEC)

5 Example of Collaboration Developed in the early 1990s by the UK Institute of Civil Engineers to bring an end to the adversarial approach that had become so prevalent in the construction industry Used for infrastructure and building projects in UK, South Africa, Hong Kong, New Zealand, and India

6 Example of Collaboration Used since 1996 on most Olympic venues DBs used in London and Rio Facilitates the implementation of sound project management principles and practices Almost zero awareness of the NEC in North America

7 Example of Collaboration Moves away from a reactive and hindsight based decision making and management approach to one that is foresight based, encouraging a creative environment with proactive and collaborative relationships. The objective is the proactive collaboration among all those involved in the project.

8 Example of Collaboration Traditional contracts are focused on the allocation of liability and often written in legalease NEC contracts reflect key principles of clarity, flexibility, and stimulate good project management Written in plain English using short sentences and bullet points

9 Example of Collaboration NEC reduces the likelihood of post-contract claims, arbitrations, and court cases

10 Example of Collaboration NEC Core clause 10.1, states: The Employer, the Contractor, the Project Manager and the Supervisor shall act as stated in this contract and in the spirit of mutual trust and co-operation.

11 Example of Collaboration Key performance Indicators (KPIs) of Contractor Goals are set in the Incentives Schedule Contractor reports to the Project Manager performance in each of the Key Performance Indicators by certain deadlines

12 Example of Collaboration The contractor is paid the amount indicated in the Incentives Schedule if it is improved or meets the indicated goal for the Key Performance Indicator. The secret to success is to assess implications as and when they arise, agree time and cost on an event by event basis and then move on.

13 Example of Collaboration The contract defines precise time limits for communication and responses by both parties, especially when dealing with the assessment of compensation events. Prescribed time periods tell contractors when to notify compensation events and project managers have to reply promptly to notifications and quotations

14 New Engineering Contract (NEC) Example of Collaboration Effective mechanisms: Work together for efficiency and savings Key performance Indicators (KPIs) Negotiated target price contract, 50/50 split of savings Added International Chamber of Commerce (ICC) DB rule makes for an effective combination for Dispute Avoidance and Resolution

15 New Engineering Contract (NEC) Potential Pitfalls Written in present-tense English which sometimes creates ambiguity Has not been formally translated in other languages, which can lead to translation errors Does require an understanding of active project management Should be conformed to local laws/jurisdiction

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17 INFORMAL ASSISTANCE AND ADVISORY OPINIONS

18 ICC Dispute Board Rules (DB) Rules Article 17 allows for informal assistance for resolving disagreements: Occurs during any meeting or site visit A party proposing informal assistance from the DB shall endeavor to inform the DB and the other party in advance of the meeting or site visit DB or either party can initiate the request for AO All parties must agree to proceed with AO

19 ICC Dispute Board Rules (DB) Rules Informal Assistance may: Take the form of a conversation among the DB and the parties One or more separate meetings between the DB and any party with the prior agreement of all of the parties

20 ICC Dispute Board Rules (DB) Rules Informal Assistance may include: Informal views given by the DB to the parties A written note from the DB to the parties Any other form of assistance that may help the parties resolve the issue

21 ICC Dispute Board Rules (DB) Rules Nonbinding Nature: "If called upon to issue a Conclusion in connection with a Disagreement on which it has provided informal assistance, the DB shall not be bound by any views, whether expressed orally or in writing, that it may have given in the course of its informal assistance, nor shall it take into account any information that has not been available to all Parties."

22 ICC Dispute Board Rules (DB) Rules A board s conclusion on a dispute: Is binding upon receipt for the duration of the project If notice of dissatisfaction is communicated within 30 days, can proceed to judicial or arbitral proceedings Conclusion is admissible

23 Advisory Opinions Term Advisory Opinion is used often used in USA Most DOTs with DRB programs use AOs: Caltrans Los Angeles MTA New York MTA Nevada DOT Ohio DOT West Virginia DOT

24 Advisory Opinions If the contract documents do not contain advisory opinion process, parties can agree to it in the TPA or in the OPs. Advisory opinions are for potential disputes where parties have disagreed, but want input from DRB before taking official positions. Both parties must agree to request the advisory opinion. Copyright Dispute Resolution Board Foundation 2018

25 Advisory Opinions DRB Chair arranges for the exchange of summary level position papers on the issue. DRB Chair coordinates time and place for the advisory opinion meeting (typically in conjunction with a regular DRB meeting). After hearing from the parties, DRB confers and provides oral opinion. Copyright Dispute Resolution Board Foundation 2018

26 Advisory Opinion Position Paper Basic content: Brief position statement Key documents Key contract specifications Not voluminous document Information known at time Don t include unrelated info Seek approval of all parties to use advisory Copyright Dispute Resolution Board Foundation 2018

27 Advisory Opinions The parties consider the DRB advisory opinion in continuing negotiations. If the parties do not resolve the issue, they can pursue the formal process without prejudice. Copyright Dispute Resolution Board Foundation 2018

28 Advisory Opinions Advantages Provides credible, early input into issue resolution Requires significantly less investment in preparation effort time Input available before parties become more intrenched in their positions Copyright Dispute Resolution Board Foundation 2018

29 Caution Not all disputes are appropriate for Advisory Opinions. Complex, fact dependent, document heavy disputes should be left to the formal process. Copyright Dispute Resolution Board Foundation 2018

30 FDOT EXPERIENCE

31 FDOT DRB Process FDOT began use of DRBs in 1994 Expanded to use of regional Boards in 2002 FDOT added used of state-wide Boards in 2004

32 FDOT DRB Process FDOT uses DRBs on, or makes available to, EVERY CONSTRUCTION PROJECT Previously had a Contract Claims Committee for resolutions of claims; if unsuccessful with CCC, issues could go to State Arbitration Board Since implementation of DRBs, CCC was eliminated and State Arbitration Board is rarely used for construction projects

33 FDOT Results A study conducted by the University of Florida found: DRB projects performed significantly better in $/T measures than non-drb projects

34 FDOT Construction Trends Source: Ananth Prasad FTBA and David Sadler, Director, Office of Construction, Florida Department of Transportation presentation at DRBF Annual Conference 2018

35 FDOT DRB Process Expenditure Cal year Hearings # jobs let Hearing as % of jobs $ value of Contract lettings DRB Expenditures as % of Contract Lettings Cost Incr Time Incr CEI % % $ 1,070,617, $ 98, % 11.8% 30.6% 15.0% % $ 3,387,842, $ 574, % 3.8% 10.1% 10.8% Totals % $ 52,640,544, $ 31,049, % 7.8% 13.0% 11.0% Source: Ananth Prasad FTBA and David Sadler, Director, Office of Construction, Florida Department of Transportation presentation at DRBF Annual Conference 2018

36 FDOT DRB Process Percentage DRB Meeting Cost for a Typical Project $30,000,000 PROJECT WITH 2 YEAR DURATION Monthly the First Six Months. Every Other Month Thereafter Monthly the First Six Months. Quarterly Thereafter Monthly the First Three Months. Quarterly Thereafter Description Meet Monthly 1. Number of DRB Meetings DRB Meeting Cost $ 3,300 $ 3,300 $ 3,300 $ 3, Cost of DRB Meetings $ 79,200 $ 49,500 $ 39,600 $ 33, Apparent DRB Cost Savings in Reducing # Meetings 5. Typical Project Budget $ 30,000,000 $ 30,000,000 $ 30,000,000 $ 30,000, DRB Cost as Percentage of Total Budget 0.26% 0.17% 0.13% 0.11%

37 FDOT s View Successful in reducing the number of claims Small number of issues go to DRB hearing Most issues resolved on projects without any hearing or further disputes resolution

38 Contractor s View Mostly supportive of the process Thinks process is too formal Thinks there are too many rejections by FDOT

39 FDOT has seen the benefits of DRB use on its contracts an intends to continue making them available on contracts.

40 FDOT DRB Process Potential Areas for Improvement: Escalation process of issues seems to be trending in direction of lengthy delays. Results in disputes not being resolved or heard by the DRB in a timely manner Differing approaches of CEIs in managing incentive projects (some very proactive, others not so)

41 Potential Areas of Improvement Method of selecting DRB Members and Chair Jockeying between parties sometimes creates animosity in the early going of the contract by trying to swing the DB in their favor. Advisory opinions might better inform the parties of a likely judicial or arbitration outcome when owner asserts dispute is not Duly Preserved.

42 Potential Areas of Improvement There is no consequence for rejecting a recommendation. Should DRB decisions be binding for life of Contract? Parties not following the frequency of meetings stated in the TPA. Are the Statewide Asphalt/Concrete Pavement/Structures and Warranty DRBs the best mechanisms for effective Dispute Resolution?

43 Discussion

44 FDOT DRB Process Percentage DRB Meeting Cost for a Typical Project $30,000,000 PROJECT WITH 2 YEAR DURATION Monthly the First Six Months. Every Other Month Thereafter Monthly the First Six Months. Quarterly Thereafter Monthly the First Three Months. Quarterly Thereafter Description Meet Monthly 1. Number of DRB Meetings DRB Meeting Cost $ 3,300 $ 3,300 $ 3,300 $ 3, Cost of DRB Meetings $ 79,200 $ 49,500 $ 39,600 $ 33, Estimated Additional Hearings due to Reduced # Meetings Minimum Hearing Cost Lump Sum* $ 8,000 $ 8,000 $ 8, Estimated Cost of Hearings $ 8,000 $ 16,000 $ 24, Estimated Possible Total DRB Cost $ 79,200 $ 57,500 $ 55,600 $ 57, Typical Project Budget $ 30,000,000 $ 30,000,000 $ 30,000,000 $ 30,000, DRB Cost as Percentage of Total Budget 0.26% 0.19% 0.19% 0.19% *Cost of Hearing does not include the work, time and costs required by FDOT, CEI, and Contractor for Strategy, Full Position Papers, Rebuttals, Cost of Consultants, Cost of Legal Consultation, Recommendation Analysis, Etc. (1 Minimum Cost Hearing is equal to 2.4 Regular DRB Meetings)