13th Annual Spring Symposium in Dispute Resolution

13th Annual Spring Symposium in Dispute

Resolution

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April 25, 2013

Copyright © Dispute Resolution Board Foundation 2013

DRB PresentationWhat is a DRB?History of DRBsBenefits of DRBsRecommended elements for a successful DRBDRB ethicsDRB selection Dispute Resolution Board Foundation (DRBF)A success story 2

WHAT IS A DRB?

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Dispute Review Board (DRB)

A DRB 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.

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“… a real-time ADR process for the resolution of issues and claims, controlled by the owner and the contractor.”

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A Dispute Review Board has the ability to "look forward" in a collaborative way to help the parties minimize impacts of unplanned events that will affect the job tomorrow, rather than "looking back" to assess blame for yesterday (distinguishing DRBs from mediation and arbitration, which only look back).

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HISTORY OF DRBs

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History of DRBs

Early 1970’s tunneling industry conducted studies on dispute resolutionFirst DRB used on second bore of I-70 Eisenhower Tunnel in Colorado in 19761996 DRB Foundation established; DRB Manual publishedBy 2010 over 2,200 US projects worth US $200 billion

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History of DBs - International1981: First International DB, El Cajón Dam,

Honduras1995: The World Bank makes DBs

mandatory for all World Bank-financed projects over US $50M

1997: Asian Development Bank & European Bank for Reconstruction & Development adopt DB

Worldwide, roughly 100 DRB contracts using DRBs start every year, worth over US $5 billion per year 9


Public and Private Projects Airports Bridges Buildings Dams Energy Highways

Ports Power plants Underground Universities

Application to Types of Projects

What do they have in common?

Lengthy duration

Complex site and/or construction methods

High risk10

Region 1 DRB Projects 1975-2010

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Puerto Rico

DC

293

2233

1 1

44

667

417

36

2

261

1 1 10

824

1

2

7

6

252

2

3

512

121

1

1

4

21

55

5

13

4

15

2

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DRBs in TexasStarted in 1993Owners: US Dept. of Energy (4)

Dallas Area Rapid Transit (17)TX Dept. of Criminal Justice (5)North Texas Tollway Authority (1)MTA of Harris Co. (6)The City of San Antonio (1)

Contract values ranged from $9 to $140 million 13

Low Cost Resolution High Cost Resolution L

ess

Co

ntr

ol

M

ore

Co

ntr

ol

Negotiation

Facilitation

Early Neutral Evaluation

Joint Experts

Mediation

Mini-Trial

Arbitration

Court Special Master

Court Settlement Conference

Bench or Jury Trial

Partnering

ADR Continuum 14

DISPUTE REVIEW BOARD

DISPUTE REVIEW BOARD

BENEFITS OF DRBs

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Primary Benefits of the DRB Process

Claim avoidance During periodic meetings, the DRB reviews the status of outstanding issues and inquires about any potential problems or disputes.

Dispute resolution Early identification and resolution of disputes in “real time” is critical to the success of the DRB process.

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Other Benefits of the DRB Process

DRB recommendation is helpful for: Owners because it provides a basis and record for making decisions. Contractors because it provides an early opportunity to resolve disputes that may impact project schedule or cash flow.

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DRB ReviewsThe DRB process appears to be effective in assisting in the resolution of disputes, leading to more timely completion of projects, reduced cost overruns and avoidance of claims. Utilization of DRBs on larger projects can serve to motivate greater cooperation between parties resulting in fewer unresolved claims and a reduced litigation potential.Florida Department of Transportation,

Office of Inspector General18


DRB ReviewsWMATA believes the presence of the Board encourages both the owner and contractor to settle their differences in most instances without DRB hearings. In cases where hearings are necessary, resolutions can be reached fairly and expeditiously. The Board can also prove beneficial in minimizing the adversarial relationships of the parties and is useful in guiding resolution to issues prior to them becoming a dispute.Washington Metropolitan Area Transit

Authority, Department of Capital Projects Management


DRB Reviews

The Dispute Review Board…is truly a Best Practice within the industry. It is practical, reliable and cost-effective.

Federal Highway Administration

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University of Washington

DRBs used for over 20 years

60 "vertical" projects valued at $6 Billion

2 formal DRB hearings 6 informal hearings No arbitration or litigation

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DRB Track RecordThe DRB process has experienced a very high rate of success in resolving disputes without arbitration or litigation.

Resolution rate to date: over 98% of matters going to the DRB do not go on to later arbitration or litigation.

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RECOMMENDED ELEMENTS FOR A SUCCESSFUL DRB

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Recommended Elements for a Successful DRB

1. DRB members are neutral and subject to the approval of both parties.

2. DRB members sign a Three-Party Agreement obligating them to serve both parties equally.

3. DRB’s fees and expenses are shared equally by the parties.

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Recommended Elements for a Successful DRB

4. DRB is organized when work begins, before there are any disputes.

5. DRB keeps abreast of job developments by periodically reviewing relevant documentation and regularly visiting the site.

6. A DRB Advisory Opinion can assist the parties in the early resolution of a dispute.

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Recommended Elements for a Successful Standing DRB

7. Either party can refer a dispute to the DRB.

8. An informal but comprehensive hearing is convened promptly.

9. The written recommendations of the DRB are non-binding, but are admissible later in arbitration or litigation.

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Recommended Elements for a Successful Standing DRB

10.The DRB members are absolved from any personal or professional liability arising from DRB activities, and cannot be called as witnesses in subsequent proceedings.

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DRB ETHICS

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DRB ETHICS Five Canons

1. Strong emphasis on disclosure2. Conflict of interest shall be avoided - no ex parte communications with the parties 3. Do not divulge any confidential information to others unless approved by the parties.4. Conduct meetings and hearings in an expeditious, diligent, orderly and impartial manner. 5. Impartially consider all disputes referred to it. Reports shall be based solely on the provisions of the contract documents and the facts of the disputes.

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DRB SELECTION

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Selection of Board MembersAn essential element in the DRB process is that all parties are completely satisfied with each Board member. Board members should be:

Experienced and technically qualified. Impartial with no conflicts of interest. Trained in the DRB process.

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Criteria: Technical ExperienceParties must evaluate qualifications for the specific project experience as to:

Type of construction Specific construction methodsType of project delivery method Types of foreseeable disputes

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Criteria: Other Skills Experience with interpretation of contract documents. Experience in resolution of construction disputes and Alternative Dispute Resolution. Ability to analyze disputes and write reports in a clear, concise, and logical manner.Complement other skills sets on DRB.

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Criteria: Neutrality/Availability

Completely: neutral impartial objective

Avoid conflicts of interest for the duration of the project. Available to fulfill duties as required.

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Criteria: Training/Role Training, experience, and understanding of the DRB process and DRB role. Dedicated to the objectives and principles of the DRB process and DRB role (including DRB Canons). Demonstrated ability to manage people and processes.

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Board Member Selection Methods

Typically, a three member Board is selected by:

Each party proposes a member for approval by other party; two selected DRB members nominate the third for party approval. Each party proposes a slate of candidates, from which the other party makes a selection; two selected DRB members nominate the third for party approval. Parties jointly select all three members.

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Selecting the Third Member

Third member should supplement technical expertise and background of the first two members. If to act as Chair, candidate should have DRB experience as well as expertise in managing processes.

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Three-Party Agreement Contract that binds DRB members and the contracting parties. TPA includes:

Scope of DRB services. Responsibilities of the parties. Duration of DRB’s services. Process for termination. Legal relations.

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Three-Party Agreement

TPA includes: Compensation rates and expense reimbursement guidelines. Cost splitting between parties. Invoicing process.

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Three-Party AgreementThe TPA typically includes the following:Each Board member shall be held harmless for

any personal or professional liability arising from or related to DRB activities. To the fullest extent permitted by law, the OWNER and the CONTRACTOR shall indemnify and hold harmless all Board members for claims, losses, demands, costs, and damages (including reasonable attorneys fees) for bodily injury, property damage, or economic loss arising out of or related to Board members carrying out DRB activities. 40

Dispute Resolution Board Foundation (DRBF)

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DRBF

The Dispute Resolution Board Foundation (DRBF), was established in 1996 and is a non-profit organization dedicated to promoting the avoidance and resolution of disputes worldwide using the unique and proven Dispute Resolution Board (DRB) method.

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DRBFThe DRBF provides assistance with the worldwide application of the DRB method by providing general advice and suggestions tailored for the conditions and practices existing in local areas. The DRBF publishes the DRBF Practices and Procedures Manual, which offers a thurough review of the DRB concept for owners, designers and contractors to employ the process more effectively. 43


DRBF

Worldwide presence with Three Regions:

1 - United States and Canada2 - Europe, Asia, Central and

South America, Mexico and Africa3 - Australia and New Zealand

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Dispute Resolution Board Foundation

19550 International Blvd., Suite 314Seattle, WA 98188

1-206-878-3336Toll free (USA only) 1-888-523-5208

Fax 1-206-878-3338Email: [email protected]: www.drb.org

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A SUCCESS STORY: CDOT

PROBLEMS LEAD TO A SOLUTION

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Background on New Disputes and Claims Resolution Spec

2005: More than 40 claims totaling over $19 Million

2006: QAR – Quality Assurance Review Basically said that the old process was not working

costing both CDOT and contractors lots of $.

CDOT/CCA Task Force Formed Goal was simply to reduce size and number of claims by developing a new spec, which added DRBs, and training for both CDOT and Contractor personnel.

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Task Force VisionEmpower the project level peopleProvide them with a step-by-step process with time lines to work withProvide them with a tool to assist them - the Dispute Review Board of impartial expertsResolving issues at the time they occur, not after the project is over

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CDOT DRBsStanding DRB: Typical three member board formed at the beginning of a projectOn Demand DRB: Board formed when the dispute has not been resolved at the Project Engineer and Resident Engineer levelsNo dispute can proceed to a claim unless it has been heard by a DRB

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CDOT Track Record = SUCCESSIn January 2008, the Dispute, DRB and Claim spec

was added to CDOT contracts. Totals from January 2008 to December 31, 2012

Contracts Awarded: 635 Totaling almost $2 billionStanding DRBs: 13, Standing DRB Hearings: 3On Demand DRB Hearings: 13 (6 on 2 projects)DRB Recommendations Rejected:

CDOT – 0 Contractor – 4To Dec. 31, 2012, only one claim has reached the Chief Engineer, was settled after arbitration started 50


Questions and Discussion

Thanks for your interest and attention.

Contact: Bill Hinton [email protected]

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13th Annual Spring Symposium in Dispute Resolution

Documents

Transcript of 13th Annual Spring Symposium in Dispute Resolution