Disputes Review Board

Disputes Review Board

Disputes Review Board : Introduction

In year 1952, the concept of dispute review board (DRB) was initiated in the

construction of Central Artery/Tunnel in Boston (Harmon, 2009). The implementation is a

success by means of the usage of DRB in most tunnel construction thereafter. Surprisingly,

DRB concept achieved a track record for itself between the year 1975 and 1985 and the year

after. That is the nature of DRB change itself from the original intended tunnelling project

towards other major heavy civil engineering construction (McKillop, 2003]. This change

marks the evolution of the DRB.

Research has been conducted in searching for the credibility of DRB and the first ever

manual was published in year 1996 being title as “Construction Dispute Review Board

Manual”. In the same year, a non-profit organization called as the Dispute Resolution Board

Foundation (DRBF) was established to promote the usage of DRB worldwide and to boost

the confidence in adopting DRB. In year 2007, DRBF published their own Dispute Review

Board Manual which can be seen as the advanced version of the first manual published.

In recent years, DRB were virtually implemented in every construction areas such as

bridges, airports, building cogeneration plants, roadways and etc. in many countries such as

United States, Great Britain, Australia, Bangladesh, Pakistan, Vietnam, China and India

(Harmon, 2009). Generally, the context, nature and size of the dispute will influence the

choice of specialist chosen to act for the claimant or respondent and, very probably, the

choice of the method of dispute resolution (Turner, 1999).

1


In Malaysia, contractual parties are often faced with three kinds of dispute resolution

methods (Sundra Rajoo, 2009):

1. Litigation (Formal way as in court)

2. Arbitration (Less rigid procedure but resemble to court)

3. Alternative Dispute Resolution (Informal, Third parties involvement)

DRB are yet to be utilized in the Malaysian construction industry (Fenn, Davies and

O’Shea, 1998). It requires DRB members who are selected for their knowledge and technical

expertise in that particular type of project to be constructed and for the employer and

contractor to have complete confidence in the impartiality of the DRB.

Dispute resolution generally refers to one of several different processes used

to resolve disputes between parties, including negotiation, mediation, arbitration,

collaborative law, and litigation.

One of the most important elements in the effectiveness of a dispute resolution system

is to institute the system at the very beginning of the project and incorporate it into the basic

contract documents. Without prior agreement on a process for dealing with problems and

disputes, it can be difficult, after a disagreement has developed, to get parties to come to

agreement on a method of dispute resolution.

Prior to that, one must have sufficient knowledge on each and every dispute resolution

method available. Thus, the objectives of the study are identifies as: (1) to understand and

explain the concept of DRB ; (2) to determine the practicability of DRB; and (3) to identify

the barriers in implementation of DRB.

2


The research would render useful information and guide regarding DRB. It could

enhance the project stakeholders’ awareness and knowledge of the DRB particularly for its

effectiveness as a prevention method from escalating to a higher or more protracted level of

resolutions like arbitration and litigation.

Dispute Review Board is “a board of impartial professionals 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”. It is a unique, proactive, no adversarial

project management technique utilized during the course of construction to help the

contractual parties in dealing with the conflicts and solving any disputes arise thereon

(Harmon, 2003). DRB was form usually in a three person board from a trusted independent

construction equipped with the experienced and appropriate technical background to address

prevention and resolution of disputes (Pena-Mora, Sosa and Mccone, 2003).

A DRB is typically comprised of a single person, or a panel of three or five members

as required (McKillop, 2003). The purpose to keep the odd number is to achieve a majority

decision in case of any decision could not be reached. The member are selected in such

manner that one of the member appointed by the employer and approved by the contractor,

the second member appointed by the contractor and approved by the employer, and a third

member selected by the first two members and approved by both the employer and contractor

(Corgan, Kelleher and Dorris, 2002). The third member usually serves as the chairperson.

Although members are selected each by both contractor and employer, it should be strongly

emphasized that this does not implied that the members are employed to provide their

services and stand towards their respective owner. They are so selected to implement fairness

into the contract so that initially, faith was there.

3


In typical construction contracts, the parties approach the project consultant to make a

decision regarding the contractual obligations of the respective parties. As the project

consultant is an agent of the owner, the initial review process may be perceived as biased and

dependent solely on the expertise of a party chosen by the owner.

In contrast, Dispute Review Boards (DRBs) provide opinions which are independent

of party interest. DRBs have come to play an increasingly important role in large and

complex construction projects, both in Canada and internationally. Projects that have

involved DRBs in recent years include the $15 billion Hong Kong airport, as well as in the

comparatively smaller $8 million Twin Falls Project in Idaho. Here in Canada, DRBs were

integrated into the contracts underlying the $1 billion expansion of Toronto’s Sheppard

Subway line.

While DRBs can range from 1-5 board members, most often, a DRB will consist of 3

members, with each party to the contract selecting one member who must be approved by the

other party. 2 The selected and approved members will then choose a third member

collectively to act as the Chair of the DRB.

The jurisdiction and role of the DRB can be varied in the contract on a case-by-case

basis. However, DRBs are typically called upon to issue a non-binding opinion whenever

there is a claim by one party that cannot be resolved with the other. In some cases, the board

may intervene on its own, without the parties’ consent.

While some believed that the existence of the DRB would actually lead to additional

disputes, in practice, just the opposite occurred. 3 The use of DRBs seems to have the effect

of reducing the number of disputes by pressuring the parties to resolve the dispute amongst

themselves without bringing it before the DRB. This may be because members of the DRB

are often professionals with a great deal of experience in the type of project underway and

4


interpretation of construction contracts. It has been observed that “…contractors are less

likely to present exaggerated claims for the sake of increasing pressure on the

owner/employer, and owners/employers are less likely to reject meritorious claims. Stated

differently, both sided have a vested interest in preserving their credibility, which may suffer

if they misbehave while the ‘teacher is in the room’”.

The use of a DRB becomes slightly more complicated in the event that a claim,

having previously been decided by the DRB, proceeds to litigation or arbitration. There is no

clear answer as to whether the opinions of the DRB should be admissible at trial or

arbitration.

The reported success rate of dispute resolution through DRBs is high. As of 2007 over

1,000 projects in North America used a DRB, and in 98.7% of those projects there was no

arbitration or litigation.

Nonetheless, while much of the literature on DRBs highlights their cost-effectiveness

and high success rate, there are several important critiques of the DRB process to be made.

First, the strength of the decisions of the DRB depends heavily upon the credibility,

knowledge and expertise of DRB members. These factors are variable, which means that the

strength and credibility of the Board’s decisions is contingent upon the makeup of the group.

However, this is true of any dispute resolution process and is not unique to DRBs.

Second, the DRB resolution process does not rely on the rules of legal procedure. The

absence of procedural protections may, in turn, result in a lack of confidence in the Board’s

decisions.

Third, and relatedly, lawyers generally do not sit as members of DRBs. This can be

viewed meritoriously by the industry as decisions are made by construction professionals

alone. However, the fact that DRBs typically do not include legal professionals may detract

5


from the strength of any decision that is heavily based in law, or in the interpretation of a

contract.

These critiques are important, not only because of the counter-perspective they offer

to the dominant, widespread praise of DRBs, but also because they give insight into

safeguards and additional precautions that might be adopted by the parties to enhance the

efficacy of DRBs.

Parties to a project wishing to engage with DRBs should select highly qualified,

capable board members. Parties can solicit board members through an advertised request for

qualifications, and may also conduct personal interviews.10 Board members should also be

kept abreast of project developments by way of periodic site visits, and the sharing of

progress reports and meeting minutes.

The absence of procedural protections is more difficult to remedy. Nonetheless, this

shortcoming is, in some sense, also one of the strengths of DRBs: it is the informality of the

DRB process that makes it more cost-effective than litigation. Furthermore, DRBs exist as a

function of the contract between parties. As such, the contract can contain provisions that

mandate certain procedural rules and can similarly require that a DRB member be a lawyer,

arbitrator, or other legal professional, thereby mitigating many of the potential dangers posed

by the current DRB system.

There certainly seem to be downsides to DRBs, at least in the form that they often

exist at present. However, DRBs exist as a function purely of the contract between parties. As

such, the contract can contain provisions that mandate certain procedural rules and can

similarly require that a DRB member be a lawyer, arbitrator, or other legal professional,

thereby mitigating many of the potential dangers posed by the current DRB system.

6


DRBs continue to be an asset to parties wishing to advance their construction projects while

mitigating disputes as they arise.

There was an early concern that the ready availability of a DRB would attract disputes, but

“in practice, just the opposite has occurred” (Hinchey & Haris, 1999):

“ . . . (T)he existence of the DRB seems to have had a dampening effect on

controversies by, in effect, giving the parties an incentive to resolve disputes among

themselves, rather than suffer the inconvenience, disruption, and possible

embarrassment of having to call in the DRB. According to virtually all surveys and

commentary, party satisfaction with DRBs is high. Those who have used the process

on one project tend to use it repeatedly. The high level of satisfaction is usually

attributed to the ‘real time’ resolution of the dispute, while all involved parties are

available and the job can continue to move forward”.

Furthermore:

“. . . contractors are less likely to present exaggerated claims for the sake of

increasing pressure on the owner/employer, and owners/employers are less likely to

reject meritorious claims. Stated differently, both sides have a vested interest in

preserving their credibility, which may suffer if they misbehave while the ‘teacher is

in the room’”.

7


DISPUTES REVIEW BOARD CASE: THE TORONTO SHEPPARD SUBWAY

TWIN TUNNELS PROJECT

The City of Toronto's Yonge Street subway line, the first of its kind in Canada,

opened in 1954. And on January 1 of that year, the Toronto Transit Commission (the

“TTC”), an agency of the City of Toronto, became the sole provider of public transportation

services in the city. Over the years, new subway extensions, branches and lines extended the

reach of the city to the growing suburban populations.

The Sheppard Subway line, which took 8 years to build, and which cost almost $1

billion, opened on November 22, 2002. It was the first subway line in Canada whose two

separate subway tunnels (the “Twin Tunnels”) were built entirely by two tunnel boring

machines (“TBMs”). The TBMs (nicknamed “Rock” and “Roll”) not only dug through the

earth, but also installed reinforced concrete liner rings as they passed. The Twin Tunnels

were approximately 2.7 miles in total length, were to run side by side, approximately 40 feet

apart, and were generally located from approximately 15 to 85 feet below the surface of

Sheppard Avenue East.

TTC had entered into a CDN $93 million tunnelling contract with MPF, a joint

venture consisting McNally International Inc., PCL Constructors Eastern Inc., and The

Foundation Company Inc. (subsequently known as Aecon Construction Group Inc.). The

Twin Tunnels contract established, and set out the procedure, function and key features of, a

Dispute Review Board. The DRB’s stated purpose was to assist in the resolution of claims

and other disputes arising out of the performance of the work on the Twin Tunnels project, in

an independent, fair and impartial manner, in order to avoid construction delay and litigation.

8


The mandate of the DRB included the provision of written recommendations to the

parties in order to assist in the resolution of such disputes. However, although not binding on

either party, “the recommendations of the Disputes Review Board should carry great weight

for both the Commission [TTC] and the Contractor [MPF]”.

According to the Twin Tunnels contract, the DRB was to consist of one member

selected by TTC and approved by MPF, a second member selected by MPF and approved by

TTC, and a third member selected by the first two members and approved by both TTC and

MPF. The third member was to act as Chair for all DRB activities. The contract also

provided that “(i)t is desirable that all Disputes Review Board members be experienced with

the type of construction involved in this Twin Tunnels Project, and interpretation of contract

documents. The goal in selecting the third member is to complement the construction

experience of the first two and to provide leadership for the Board’s activities”.

The DRB member selected by TTC and approved by MPF was a well-respected

engineer who was President of a consulting company, and who had substantial underground

and mass transit project experience and expertise.

The DRB member selected by MPF and approved by TTC was a registered civil,

geotechnical and safety engineer, and a Professor of Civil Engineering at Stanford University,

who had experience as an expert witness in cases involving geotechnical, contractual or

construction practice issues, and who had served both as Chair and as a member of numerous

other dispute review boards.

The DRB member selected by the two appointed members of the DRB as Chair of the

DRB, and approved by both TTC and MPF, was an engineering consultant with substantial

9


experience managing large tunnelling and other underground construction contracts, who had

considerable experience chairing numerous other dispute review boards relating to tunnelling,

subway and other construction and infrastructure projects.

Within a short time after commencing its tunnelling work, MPF gave notice to TTC

that it was incurring additional cost as a result of muck disposal problems due to high foam

usage. MPF alleged that the actual quantity of foam that it was required to use in order to

successfully excavate the tunnels far exceeded both what it expected to use and what it could

have reasonably been expected to use. MPF contended that, as a result of the high foam

usage, its tunnel spoil was reduced to such a high-slump condition that its disposal costs were

significantly increased. MPF alleged that both it and its trucking subcontractor were forced

to haul the excavated and conditioned tunnel muck to inconvenient and expensive disposal

sites, all at costs far beyond what MPF had included in its bid.

Subsequently, MPF submitted its 369-page claim for CDN $4.4 million in additional

costs associated with tunnel spoil disposal. TTC quickly responded that there was no valid

basis for the claim, and, after preliminary settlement discussions, the parties agreed to bring

the matter before the DRB for a formal hearing.

Both TTC and MPF were given the opportunity to make written pre-hearing

submissions, to present both factual and expert evidence, to make further submissions at the

2-day hearing, and to make written post-hearing submissions.

Shortly thereafter, the DRB released its detailed and comprehensive 41-page written

“Recommendation”. The three members of the panel, in unanimously rejecting MPF’s claim,

10


stated that “MPF has not made a reasonable case for extra compensation based upon

arguments that lay within the four corners of the contract.”

Presumably of the view that success lay just outside “the four corners of the contract”,

MPF provided written notification to TTC of its rejection of the DRB’s Recommendation (in

accordance with the contract), and commenced litigation proceedings.

The facts, issues, pleadings, and submissions in the ensuing litigation were virtually

identical to those which were put before the DRB. However, in its Statement of Claim, MPF

made no reference whatsoever to the hearing before, or to the Recommendation of, the DRB.

So TTC, in its Statement of Defence, pleaded that “(t)he claim being asserted by MPF against

TTC in this litigation is precisely the same claim that was submitted by MPF and TTC to the

DRB for hearing more than 2 ½ years ago”. MPF might have, but neglected to, put forward a

reply to the effect that the entire DRB process was non- binding and akin to mediation, and

was therefore privileged as being in the nature of settlement communications.

TTC also pleaded that the commencement of this litigation gave rise to the risk of the

court making a decision that would be inconsistent with the decision made 2 ½ years earlier

by the panel of three eminently qualified and experienced experts comprising the DRB; and

that inconsistent decisions would bring the alternative dispute resolution and DRB processes

into disrepute.

Furthermore, TTC pleaded that, as a matter of public policy, the commencement of

litigation, after the same claim was unanimously and unequivocally rejected previously by a

DRB, created a precedent that only served to discredit the benefits of the partnering, dispute

resolution and DRB concepts and processes, and to discourage other parties on other projects

11


from attempting to resolve their disputes using those concepts and processes instead of

litigation.

COMMENTARY AND CONCLUSION

12


DRBs offer a non-binding method of dispute avoidance that attempts to provide a

'release valve' for contractual tension to prevent disputes erupting altogether combined with

persuasive recommendations for their resolution if they do.

Dispute Review Boards are made up of typically one or three experts who can assist

in the management of conflicts and disputes in longer term and large projects.

Typically, the DRB is established shortly after execution of the contract documents,

as performance of work on the project begins.

A DRB has two basic responsibilities. The first is to become familiar with the project

during construction. This process begins with the Board’s review of the plans and

specifications, followed by periodic visits to the project.

The DRB’s second major responsibility is conducting hearings on any disputes

referred to it. At a hearing, which usually is held at the construction site, owner and

contractor representatives who have first-hand knowledge of the issues are given the

opportunity to present facts, documents, and the rationale in support of their respective

positions. Formal recording of the hearing and participation by lawyers are both relatively

rare. Following the hearing the DRB issues a written recommendation or a decision, setting

forth its analysis and opinion. If one or both parties elect to reject the recommendation, the

issue proceeds to the next stage of dispute resolution under the terms of their agreement.

The presence of a DRB can circumvent the negative attitudes and posturing by both

parties that occur when disputes linger for years and when attorneys, either in-house or

outside counsel, are actively involved in the dispute process.

The litigation settled before trial. “You have a pretty good case, Mr. Pitkin. How much

justice can you afford ?”

13


REFERENCES

14


A. McKillop, “Dispute Review Boards Help Settle Disputes During Construction,” AACE

International, 2003, 11.1-11.4.

B. G. Corgan, T. J. Kelleher and E. Dorris, Construction Disputes: Practice Guide with Forms

2nd edition. New York: Aspen Publisher, 2002

C. C. Menassa, and F. Pena-Mora, Analysis of Dispute Review Boards Application in U.S.

Construction Projects from 1975 to 2007,” Journal of Management in Engineering,

Vol. 26, 2010, pp. 65-77.

D. F. Turner and A. Turner, Building Contract Claims and Disputes 2nd Edition. Singapore:

Longman, 1999

DRRF, DRBF Practices and Procedures, 2007. Retrieved from

http://www.drb.org/manual_access.htm

K. M. J. Harmon, K., “Dispute Review Board: Elements of a Convincing Recommendation,”

Professional Issues in Engineering Education and Practice, Vol. 130, 2004, pp. 289 -

295.

K. M. J. Harmon, “Case Study as to the Effectiveness of Dispute Review Boards on the

Central Artery / Tunnel Project,” Journal of Legal Affairs and Dispute Resolution in

Engineering and Construction(ASCE) , Vol. 1, 2009, pp.18-31

P. Fenn, E. Davies and M. O’Shea, Dispute Resolution and Conflict Management in

Construction: An Internatioinal Review (eds). London: E & FN Spon, 1998.

15

http://www.drb.org/manual_access.htm


S. Rajoo. Sundra Rajoo Trade Disputes Solving Mechanisms, 2009. Retrieved from http://

www.sundrarajoo.com/2009/10/trade-disputes-solvingmechanisms-poram-course-

july-2009/

The institutes of Arbitrators & Mediators

https://www.iama.org.au/sites/default/files/resources/rules-guidelines/disputereview.pdf

DRBF Practices and Procedures Manual”, Chapter 1, Section 3 (revised April 2007), pages 2-

3 (at http://www.drb.org/manual/1.3_final_4-07.doc)

Duncan W. Glaholt, “Reviewing Dispute Review Boards”, 96 C.L.R. (3d) 167

Z.M. Matyas, A.A. Mathews, R.J. Smith, P.E. Sperry, Construction Dispute Review Board

Manual (N.Y.: McGraw Hill, 1995) at 30.

C. Chern, Chern on Dispute Review Boards (Oxford: Blackwell Publishing, 2008) at ps. 59-

64.

John W. Hinchey and Troy L. Harris, International Construction Arbitration Handbook

(Thomson/West, 2008), at para 1:10

Harvey J. Kirsh, “The Ins and Outs of Dispute Review Boards”,

http://www.glaholt.com/files/the_ins_and_outs_of_dispute_review_boards__paper_.pdf

16

http://www.drb.org/manual/1.3_final_4-07.doc

http://www.sundrarajoo.com/2009/10/trade-disputes-solvingmechanisms-poram-course-july-2009/

http://www.sundrarajoo.com/2009/10/trade-disputes-solvingmechanisms-poram-course-july-2009/

Documents

Disputes Review Board