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Creative Dispute Resolution

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Creative ADR

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How DRBs and CSPs Save You Time, Money and Headaches
 

Dispute Review Board Information (DRB)

Dispute Review Boards

Advantages of Dispute Review Boards

Large Commercial Projects

Large Residential and Small Commercial Construction Projects

CDRS Dispute Review Boards Models

EDRB or CDRB Options Flow Chart (PDF)

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How and When to Establish a Dispute Review Board
Overview - Advisory Opinion Only DRB Agreement
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Dispute Review Board Checklist-Questionnaire (PDF)

Dispute Review Board Initiation Agreement (PDF)

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Construction Settlement Panel Agreement (PDF)

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Construction Settlement Panel Fees And Related Costs (PDF)

 

CREATIVE ALTERNATIVE DISPUTE RESOLUTION PROCEDURES

It is almost a given that some form of a dispute will develop on every construction jobsite.  It might be between the owner and the general contractor (GC), between the GC and a subcontractor, between a subcontractor and another subcontractor, between a subcontractor and a sub-sub contractor, between the GC, Sub, Sub-Sub and their material supplier, between the owner or GC and the Architect or Designer, and the list goes on and on.

The ready availability of a dispute resolution system to handle those disputes not only will allow the project to continue with little loss of time and money, but it will also allow the Parties to continue to work together on the project after an understanding is reached or a neutral ADR Specialist renders a decision.

Although the GC usually has the responsibility for settling all disputes and makes the final decisions on the project, if the dispute involves the GC, especially if it also involves the Owner, some other mechanism for dispute resolution needs to be in place to facilitate an expeditious and inexpensive solution to the dispute.  Many times there is a mechanism in place to handle disputes only between the Owner and the GC, which leaves all of the others involved in the construction process to work out their disputes on their own, with no pre-arranged dispute resolution process to handle their disputes.

Elsewhere on this website, we discuss the advantages of the Binding Mediation and Med-Arb processes which we feel are the best way to handle disputes on a construction project.  It offers finality to the dispute and first allows the disputants to first try to come to some form of an agreement with the assistance of a skilled construction mediator.  It is a growing practice for a contractor to arrange to have a skilled mediator/arbitrator with construction knowledge to be available with short notice to handle and conduct a quick Binding Mediation or Med-Arb process.  It is not unusual for there to be several Binding Mediations or Med-Arb procedures on one construction project.  The contractor usually has negotiated the General Contractor’s Fast Track Agreement (PDF) that establishes a set fee with the mediator/arbitrator for these quick, short Binding Mediation or Med-Arb procedures without the usual paperwork or time delays that would normally be required.  There may be an additional fee required if a jobsite visit is required prior to the Binding Mediation or Med-Arb session.   The Owner should have the GC, each sub contractor and anyone else involved in the construction project sign this Fast Track Agreement prior to the commencement of the construction project, unless a Dispute Review Board is being utilized for the project.

We all know that time is money.  The dollars you spend on dispute resolution will be more than offset by the costs that you will incur if the project is delayed, especially if you have to stop the project and wait for your attorneys to prepare a case and go to an outside arbitration or to a civil litigation trial.

CDRS offers and has developed several different dispute resolution mechanisms and procedures to handle virtually every type of dispute related to the construction process.  CDRS Administrators will discuss your specific construction project with you and will develop a custom dispute resolution process that will work best for your specific construction project.

In addition to developing your specific dispute resolution program, the CDRS administrator will remain available to assist you and the others involved in the dispute, in helping with the selection of the dispute resolution specialist(s) from among the construction-experienced members of the “CDRS National Panel of Construction ADR Specialists” who are located throughout the United States and in selected foreign countries.  It is only half of the dispute resolution process to develop a dispute resolution program to serve the construction projects needs.  The other half of the process is providing for a qualified construction-experienced ADR Specialist to conduct the specified dispute resolution processes.  If the ADR Specialist is experienced in the construction ADR processes, his/her direction and decisions, if required, should be based on their construction knowledge and will not have to rely of the parties to “educate” them as to the construction matters involved. 

Too many Parties to a construction contract simply accept the dispute resolution contract language that is specified in a standard form construction contract.  Then when you need to utilize the dispute resolution process that is specified in your construction contract, you find that it does not work well or is cumbersome and expensive to implement.  CDRS recommends that you consult with your attorney and with CDRS in the development of the construction contract clauses that will specify your dispute resolution processes.  Make certain that you specify the dispute resolution processes that will work best for you and specify the provider of the dispute resolution services you will need such as CDRS.

TAKING THE TIME TO PROPERLY CREATE AND DEVELOP YOUR DISPUTE RESOLUTION CONTRACT CLAUSES WILL COST MUCH LESS THAN THE COSTS YOU WILL INCUR IF YOU DON’T TAKE THE TIME.

DISPUTE REVIEW BOARDS

Dispute Review Boards (DRB) provide the construction industry with a mechanism to help construction projects to predict and handle potential construction problems before they occur, to provide advisory opinions on questionable or disputed matters, and to provide an alternate dispute resolution process to settle any disputes that cannot be settled between the parties to the construction contract.  DRBs are currently used all around the world in the construction of roads, railroads, tunnels, dams, bridges and other major construction projects.  It is only in recent years that the DRB has been used in the construction of large commercial buildings such as manufacturing facilities, shopping centers, hotels, etc. Because the construction industry has seen the many benefits, DRBs are now being used for the construction of small commercial projects and large residential houses.  If the DRB is empowered with the ability to render final and binding decisions upon the parties to the construction project, the project is virtually guaranteed to continue with a minimum amount of lost time and money that would normally be encountered when arbitration or litigation is required to settle disputes.  CDRS recommends the DRB having the authority to make final and binding decisions, which is reflected in the following information. 

AS EVERY CDRS DRB IS CUSTOM DESIGNED FOR EACH CONSTRUCTION PROJECT, THE FOLLOWING IS AN EXPLANATION OF THE MOST COMMON FORMS OF DRBs UTILIZED ON CONSTRUCTION PROJECTS.

LARGE COMMERCIAL PROJECTS

The Standard CDRS Dispute Review Board concept involves a DRB that is comprised of five individuals.  The project owner selects one DRB neutral member, the general contractor selects one DRB neutral member and the third DRB neutral member is selected by both parties to serve as the DRB chair.  The fourth member is the general contractor’s representative (GC-Rep) and the fifth DRB member is the project owner’s representative (O-Rep).  The GC-Rep and the O-Rep are fully participating members of the DRB in reference to the rendering of advisory opinions and are also there primarily to provide technical and substantive information to the DRB.  Only the three neutral members will participate in any dispute resolution procedures.  If the DRB is given the authority to render a final and binding decision on unresolved disputed items, it is required by CDRS, that the three neutral members have both mediation and arbitration training and experience.

The DRB is formed well in advance of the commencement of the construction project.  All DRB members are provided with, at their request, a full set of construction plans, contract documents, change orders, addendums and all other appropriate materials for them to be completely familiar with every aspect of the entire project.  The DRB, if required, can meet several times prior to the commencement of the project or until the DRB members feel that they have a full understanding of the scope and depth of the construction project.  After the construction project commences, the DRB meets on a regular basis to review the progress of the project. They try to anticipate any up-coming problems such as future shortages of materials, increases in the cost of materials and labor, the possible unavailability of special experts or trades-people required by the nature of the project, etc.  If requested by either Party, the DRB will issue an advisory opinion on how they suggest that the possible future problems should be handled.  The project owner and the general contractor will use that advisory opinion to decide on how to proceed with the project. 

In the event that the project owner and the general contractor cannot come to an agreement on how to handle those problems, after reviewing the advisory opinion issued by the five-member DRB, if the DRB has been given the authority to render a final and binding decision on unresolved items, the two non-chair neutral members of the DRB will conduct a co-mediation with the Parties to try to settle the dispute.  If the co-mediation is not successful, the DRB will convene an arbitration hearing where the owner and the general contactor will have the opportunity to “present their case” to the DRB.  The three voting neutral members of the DRB, serving as a tripartite arbitration panel, will then issue a final and binding decision to the parties on how the issue will be handled.  If either Party involved in the co-mediation feels that they have given private and/or confidential information to either of the co-mediators, the arbitration will be handled by the DRB Chair as a sole arbitrator.

If a dispute develops during the construction project that cannot be settled by the parties to the construction contract, either a special DRB meeting and hearing may be scheduled or the parties may wait for a regularly scheduled DRB meeting if appropriate.

Although there is a cost to the DRB process, it is far less costly than the costs that would be incurred if the project were delayed or even shut down because of problems that were not anticipated by the parties that the DRB might recognize.  In addition, if unresolved problems were referred to binding mediation, binding arbitration or litigation, the legal costs that would be incurred in addition to the costs of delaying or shutting down the construction project, would certainly be very much higher than the cost of the DRB.   One of the main responsibilities of the DRB is to keep the construction project on time and within budget.

CDRS has several of its Dispute Resolution Specialists who have participated on and chaired DRBs across the nation for a variety of different types of construction projects.  The fees for CDRS DRB members will be determined for each construction project based on the geographic location and complexity of the construction project and the expertise required of the DRB member.  The neutrality, expertise and experience of the DRB member, along with their experience as a dispute resolution provider, is a major consideration in selecting that member.  All members of the “CDRS DRB Panel” are required to complete the CDRS DRB Training Course.   

LARGE RESIDENTIAL AND SMALL COMMERCIAL CONSTRUCTION PROJECTS

Two of the standard CDRS Residential Construction and Small Commercial Construction DRB concepts involve a DRB that is comprised of either three or five individuals.  In the three-person model, the DRB is comprised of the project owner, the general contractor and one neutral who will serve as the chair of the DRB who is selected by mutual consent of the project owner and the general contractor.  In the five-person model, the DRB is comprised of the three people mentioned above as well as an owner’s representative and the general contractor’s representative.  The owner’s representative and the general contractor’s representative are there primarily to provide technical and substantive information to the DRB and are non-voting members of the DRB.

The DRB is formed well in advance of the commencement of the construction project.  All DRB members, at their request, are provided with a full set of construction plans, contract documents, change orders, addendums and all other appropriate materials for them to be completely familiar with every aspect of the construction project.  The DRB, if necessary, meets as many times as is required, prior to the commencement of the project, until the DRB feels that it has a full understanding of the scope and depth of the construction project.  After the construction project commences, the DRB meets on a regular basis to review the progress of the project, to try to anticipate any up-coming problems such as future shortages of materials, increases in the cost of materials and labor, the possible unavailability of special experts or trades-people required by the nature of the project, etc.

If a dispute develops, the chair of the DRB acts as a mediator and tries to get the parties to come to an agreement.  If there is no agreement after the mediation session has concluded and the DRB has not been given the authority to issue a final and binding decision on unresolved disputed items, the parties will then need to proceed to the dispute resolution process to be supplied by an outside provider, that is specified in the construction contract, whether it is binding mediation, binding arbitration or litigation.  If there is no agreement after the mediation session has concluded and the DRB has been given the authority to issue a final and binding decision on any unresolved disputed items, the chair will have the authority to issue that final and binding decision on behalf or the DRB.  The chair is basically functioning as a mediator for a “Binding Mediation”. (Binding Mediation is covered and explained in further detail elsewhere on the CDRS website Binding Mediation. This process allows the construction project to continue with a minimum amount of lost time and money as a result of the disputed items.   The parties generally find it advantageous to have a neutral available to render an educated decision based on complete familiarity with the project.  This decision should be fair and equitable to all parties.

Although there is a cost to the DRB process, it is far less costly than the costs that would be incurred if the project were delayed or even shut down because of problems that were not anticipated by the parties that the DRB recognized in advance of the problems occurring.  In addition, if unresolved problems were referred to binding mediation, binding arbitration or litigation, the legal costs that would be incurred in addition to the costs of delaying or shutting down the construction project, would certainly be very much higher than the cost of the DRB.   One of the main responsibilities of the DRB is to keep the construction project on time and within budget.

CDRS has several of its Dispute Resolution Specialists who have participated on and chaired DRBs across the nation for a variety of different types of construction projects.  The fees for CDRS DRB members will be determined for each construction project based on the geographic location of the construction project, the expertise required of the DRB member and the complexity of the construction project.  The neutrality, expertise and experience of the DRB member, along with their experience as a dispute resolution provider, are major considerations in selecting the DRB member.  All members of the “CDRS DRB Panel” are required to complete the CDRS DRB Training Course.   

CDRS DISPUTE REVIEW BOARD THEORY

ONE OF THE GOALS OF CDRS IS TO PROVIDE THE CONSTRUCTION INDUSTRY WITH LOW COST DISPUTE RESOLUTION SERVICES WHILE PROVIDING PROFESSIONAL, KNOWLEDGEABLE, EXPERIENCED PERSONNEL AND INNOVATIVE PROGRAMS TO ANTICIPATE AND HANDLE CONSTRUCTION DISPUTES.  THE CDRS DISPUTE REVIEW BOARD CONCEPTS ARE JUST ONE EXAMPLE OF CDRS “THINKING OUT OF THE BOX” WHEN IT COMES TO DISPUTE PREVENTION AND RESOLUTION.

ADVANTAGES OF DISPUTE REVIEW BOARDS

  1. Helps to prevent disputes before they develop
  2. Helps to keep the construction project on schedule
  3. Provides knowledgeable neutrals for consultation purposes
  4. The CDRS DRB model allows the Owners Representative and the General Contractors Representative to be involved in the advisory opinions issued by the DRB.
  5. The CDRS DRB model provides the assurance that the project or any dispute related to the project will not result in a costly and long-lasting dispute resolution process to settle disputes
    1. Includes all of the Parties involved in the project including but not limited to the Project Owner, General Contractor, all Subcontractors, all Sub-subcontractors, material suppliers, architects and designers, other service providers and anyone else playing a major role in the construction project.
    2. All disputes are handled by the DRB and never need to go to outside binding arbitration or litigation.  (Handled In-House)
    3. If arbitration is necessary to settle a dispute, the three neutral members of the arbitration panel (or DRB Chair as a single arbitrator) are up to date on all aspects of the project and discovery is therefore very limited.
    4. All disputes are handled in a timely manner rather than having to wait to get on the courts docket or on an independent arbitrators schedule.
    5. Attorneys are welcome to participate in the dispute resolution process but are not required.
    6. Costs for the dispute resolution process are pre-specified in the DRB Agreement.  There will be no up-front filing fees, administrative fees or deposits required that are normally charged by other outside ADR service providers.
  6. DRB meetings are scheduled on a regular basis to anticipate and handle any disputes that might be developing.
  7. If multiple disputes develop on the project, they are handled in a consistent and pre-specified manner rather than having to adapt to the different arbitration rules and procedures of outside arbitrators.
  8. General Contractors will not have to guess on an amount to put in their bid for a “Litigation Contingency”.  The cost of the DRB should be able to be estimated prior to submitting their bid.  Only if there are more issues to discuss or disputes that need to be handled than is anticipated, will the cost of the DRB be higher than estimated.  (The estimated litigation contingency would also have been underestimated if there are more disputes on the project than were expected.)
  9.  CDRS offers professional assistance in setting up and custom designing the DRB from the early stages of the construction project and coordinates the entire process, including the selection of DRB Members, rather than having to try to find DRB members from around the country all who will have different requirements and fee schedules. 

HOW AND WHEN TO ESTABLISH A DISPUTE REVIEW BOARD

When a business owner, a municipality, a government agency, or any other entity decides to look into the possibility of beginning a construction project, they should consider the method and cost of handling disputes to be just as important as any other costs related to the project.  Even more important to consider are the costs related to preventing any disputes from developing or minimizing the effect that a dispute may have on the project.  By spending a relatively small amount of money up front to prevent disputes from developing and/or to handle disputes, the project will most likely never be shut down because of a dispute and the project will not be subjected to delays and increased costs as a result of a dispute, especially if the dispute ends up in an outside arbitration or civil litigation proceeding as specified in the construction contract or DRB Agreement.  As a result, a project owner should consider the use of a Dispute Review Board (DRB) in the very early stages of the project’s development.

Whether the project Owner is an individual, a business, a municipality, a government entity or any other type of Owner, they should contact Construction Dispute Resolution Services, LLC (CDRS) in the early planning stages of the construction project.  A CDRS DRB Administrator (Administrator) will review all aspects of the construction project with the project’s Owner and will recommend and design a DRB or multiple DRBs to help to anticipate and prevent disputes, settle disputes and to provide a level of comfort and assurance to the Owner(s) that the project should be able to continue without interruption due to the problems and worries that a project shut-down and/or an outside binding arbitration or litigation can cause.

It is important to realize that the cost of the DRB should be incorporated in the bidding process and is just as important as is any other item that requires bidding consideration.  If a DRB is not utilized on a construction project, most GCs include a line item cost for a “litigation contingency” which is usually quite a lot higher than the costs relative to using a DRB.  If the DRB is not mentioned as a cost item in the bidding process, it is very difficult, but not unheard of to establish a DRB after the construction contract has been awarded to a GC.

CDRS recommends that the CDRS DRB Administrator should begin to work with project Owners and to attend all of the preliminary construction planning meetings before the project goes out to bid to get a better understanding of the particulars of the construction project.  The Administrator can then design a custom DRB or DRBs to handle all of the aspects of the construction project prior to the project going to the bid process.  This early involvement will also help the CDRS DRB Administrator in assisting the Owner(s) and the General Contractor in selecting the Members of the DRB(s) from the approved list of CDRS DRB Specialists.  It is very difficult to select Members to serve on a DRB without knowing what qualifications and expertise the Members should possess to be an effective neutral Member on the custom designed DRB.

As soon as the General Contractor (GC) has been awarded the construction contract, the GC and the Owner (Parties) should contact the CDRS DRB Administrator to review the provisions of the DRB Agreement and make any modifications that are mutually agreed to by the Parties.    (If the GC, who was awarded the bid contract, would like to make any changes to the DRB Agreement and the Owner does not agree to those changes, the DRB Agreement shall remain unchanged, as it was provided to the GC in the bidding process as the DRB Agreement to be utilized by the Parties to the construction contract.)

The Administrator will then assist the Parties in the selection and appointment of the three neutral DRB Members, including the selection and appointment of the DRB Chair.  After the DRB Members have been selected and have agreed to serve on the DRB, the Administrator will assist the Parties and the DRB Members in executing the “DRB Agreement” as modified and/or agreed to by the Parties.  At that time, the Parties and the DRB Chair shall mutually agree upon a date to hold the first DRB meeting in order to bring all of the DRB Members up to speed as to the nature and particulars of the construction project and as to their role, responsibilities and authority as DRB Members.   (If there are multiple DRBs being utilized on the construction project, the same procedures should be followed for each individual DRB.)

At the first DRB meeting, the Owner and their representative to the DRB, the General Contractor and their representative to the DRB, the three DRB neutral Members and the Administrator must all be in attendance.  Attorneys are welcome at all DRB meetings but shall not be considered participants on the DRB, and may only participate in the DRB meetings at the discretion of the DRB chair.

CDRS DISPUTE REVIEW BOARD MODELS

Dispute Review Boards (DRB) have been used world-wide by the construction industry for many years.  Standard DRBs are basically comprised of three construction-knowledgeable neutral members who serve as an advisory board and are available to issue Advisory Opinions to assist the Parties to the DRB, the Owner and General (or prime) Contractor, in settling any disputes that develop between them.  The DRB meets on a regular basis and reviews the progress and status of the construction project with the responsibility of not only assisting in settling of disputes but also in attempting to prevent disputes before they occur.

If the DRB is not successful in preventing and/or settling a dispute through DRB meetings and the issuance of Advisory Opinions, the dispute will need to go forward to a more formalized adjudication process such as binding arbitration or litigation to arrive at a “Final and Binding” settlement to the dispute.  These adjudication processes are generally conducted by an outside arbitrator (or panel of arbitrators) or by a judge and/or a jury through the traditional open “court trial”.  These outside processes can be very expensive and generally are scheduled and conducted many months or perhaps years after the dispute develops.   These festering disputes often cause undue anxiety and posturing by the Parties in anticipation of the upcoming arbitration or litigation, as the project continues.  Construction projects have been slowed down or have been shut down completely, at great cost to the Parties, while waiting for the dispute to be settled by the outside adjudication process.

CDRS strongly believes in the standard DRB process, however, we feel that the standard DRB process falls short of providing the Parties with an inexpensive and expeditious “Final and Binding” dispute resolution process.  If properly designed, all disputes can be handled entirely “In-House” by the DRB, which should also assure confidentiality of the dispute resolution process.  As a result, CDRS has developed several Expanded DRB Models, to provide the methods and mechanisms to virtually assure that ALL DISPUTES CONCERNING A CONSTRUCTION PROJECT CAN BE COMPLETELY HANDLED “IN-HOUSE” AND SHOULD NEVER NEED TO GO TO OUTSIDE ARBITRATION OR LITIGATION.

The CDRS Expanded DRB offers three options to be combined with and added to the traditional responsibilities of the standard DRB.

Expanded DRB Options:

1.       Expand the DRB to five members; the three neutral members and an “Owner Representative” and a “General Contractor Representative”.  These two representatives shall be involved only in the efforts of the DRB to prevent disputes, in the general DRB discussions and in the issuance of Advisory Opinions.

2.       The addition of various Alternative Dispute Resolution (ADR) processes up to and including binding arbitration which should offer a “Final and Binding” resolution to any construction disputes that can be completely handled “In-House” by the DRB.

3.       The addition of all individuals, companies or entities that are involved in the construction project in the DRB process.  The DRB process that is utilized today across the world, usually involves the Owner and the General (Prime) Contractor.  The DRB may be effective in preventing and assisting in settling disputes between the major Parties, however, there are many disputes involving the subcontractors, their subs, material suppliers, service providers, etc. that can also add undue costs and project delays while the disputes are being settled by and thorough outside ADR or related outside adjudication processes.

In the event that all three options are included in the processes and procedures of the DRB, CDRS uses the term “Comprehensive DRB” to describe this complete and comprehensive DRB process.  As each DRB is custom designed to suit the needs of the construction project, any or all of the Expanded DRB options may be incorporated into the processes and procedures of the DRB.

The CDRS National and International Panels of Construction ADR Specialists are comprised of construction-knowledgeable experts and specialists in construction law and ADR who can serve as a neutral member of a DRB and as a mediator or arbitrator as required.  All members of the CDRS National DRB Panel have completed the CDRS Arbitration and DRB Training Courses conducted by the CDRS Dispute Resolution Training Institute and are available to serve on a DRB and are also eligible to serve as the DRB Chair.  CDRS requires the Chair of a CDRS DRB to be properly qualified and trained.

CDRS is the only National and International provider of DRB and ADR services available to the construction industry who offers the Expanded DRB and Comprehensive DRB programs.  In addition, CDRS offers a “one-stop” process in the formation and administration of a DRB.  It is customary for the Owner and General Contractor of a construction project, their construction management company (if applicable) or their designee to research and select DRB members from various lists or panels.  They then have to individually contract with those selected DRB Neutral Members to serve on the DRB and will have to perform various DRB administrative duties including all of the financial matters of the DRB and the compensation of the Individual DRB Neutral Members.

CDRS will assist the Owner in the formation of the DRB including the selection of the options available through the CDRS Expanded DRB programs and will handle all administrative duties including the selection of the DRB Members, the execution of all documents and agreements related to the formation of the DRB and the ADR processes selected and will continually perform related administrative duties as required by the DRB.  CDRS also offers a simplified once-a-month billing for the services of the DRB Members rather than having three separate individuals to deal with each month.

CDRS also offers a Construction Settlement Panel (CSP) option for those who do not wish to utilize the DRB process.  The CSP offers the same trained construction-knowledgeable Specialists to serve on a CSP without the Parties having to commit to the fixed expenses of the DRB.  Please contact CDRS to review the procedures and benefits of the CSP program. 

CDRS CONTINUES TO DEVELOP AND/OR PROVIDE UNIQUE AND DIFFERENT PROGRAMS TO ASSIST THE CONSTRUCTION INDUSTRY IN THE PREVENTION AND SETTLEMENT OF CONSTRUCTION DISPUTES.  OUR SPECIALISTS, LOCATED ACROSS THE UNITED STATES AND IN SELECTED FOREIGN COUNTRIES, ARE ALL TRAINED AND EXPERIENCED IN THE CONSTRUCTION AND/OR THE CONSTRUCTION LAW ARENA.  

OVERVIEW

The most basic Dispute Review Board (DRB) model used widely across the world is the “Advisory Opinion DRB” where the DRB is authorized to only issue advisory opinions to help settle a dispute, as specified in the scope of the DRB’s authority.  The DRB is generally composed of three neutral DRB Members with one member selected by the General Contactor (GC), one member selected by the Owner (Owner) and the DRB chair selected by the two members of the DRB after they have been selected by the Parties to the DRB.

CDRS recommends that the DRB be composed of five members.  One member selected by the GC, one member selected by the Owner and the DRB Chair selected by a mutual selection by both the GC and the Owner.  CDRS believes that the DRB chair should be selected by the Parties and not by the other two neutral members of the DRB.  It would be a tenuous DRB if the DRB Chair was selected by the two neutrals if one or both of the Parties had an objection to that person serving as the Chair of the DRB.  In addition to the three neutral members, CDRS recommends that the DRB add an Owner’s Representative (O-Rep) and a GC’s Representative (GC-Rep).   Adding these two members serves several purposes. 

1.  The O-Rep and the GC-Rep can add a degree of knowledge of the project to the DRB when they are discussing potential future problems and knowledge of current activities to aid in the discussion of current problems and/or disputes.

2.   The O-Rep and the GC-Rep, by participating in the advisory opinions of the DRB will be able to explain the reasoning for the advisory opinions issued by the DRB.  Without the Reps, the two Parties will be given advisory opinions issued by the three DRB neutral members and the Parties will then have to try to interpret the advisory opinion and guess as to why it was issued if the opinion does not fully explain every aspect of the advisory opinion.  The Reps will certainly be able to explain to their respective Party why the advisory opinion was issued as they were involved in the formulation of the advisory opinion.

3.   The DRB should be able to better understand the issues involved in issuing their advisory opinion with both Parties having representation in the advisory opinion formulation.

NOTE:  Any and all costs related to the O-Rep shall be the direct responsibility of the Owner and any and all costs related to the GC-Rep shall be the direct responsibility of the General Contractor.  CDRS will send meeting notices and related communications to the O-Rep and the GC-Rep as required.

If the DRB has been established as “Advisory Only” without “Final and Binding Authority”, it is possible that the DRB may be empowered to hold a co-mediation using two of the three neutral DRB members to try to have the Parties reach an agreement if they can not come to an agreement after the advisory opinion has been issued by the DRB.  This is a non-binding last attempt to reach an agreement prior to having the Parties go to outside arbitration or litigation to settle a dispute.

The following “DRB Agreement” with advisory only authority, is just one example of a basic DRB Agreement.   Keep in mind that CDRS custom designs each DRB for each client in order to provide the proper DRB for each construction project.

Dispute Review Board Agreement (Advisory Authority) (PDF)

Although Dispute Review Boards (DRB) worldwide typically have three neutral members serving on the DRB, CDRS recommends that a DRB have five members:  one neutral member selected by the Owner (Owner), one neutral member selected by the General Contractor (GC), the neutral DRB Chair selected by mutual consent of both the Owner and the GC, a GC Representative (GC-Rep) and an Owner’s Representative (O-Rep).  All five members will be involved in the issuance of any advisory opinions by the DRB.  Only the three neutral members will be involved in any dispute resolution procedures such as co-mediation, med-arb and arbitration.  Adding the O-Rep and the GC-Rep will serve the following purposes:

1.   The O-Rep and the GC-Rep can add a degree of knowledge of the project to the DRB when the DRB is discussing potential future problems and will add knowledge of current activities to aid in the discussion of current problems and/or disputes.

2.   The O-Rep and the GC-Rep, by participating in the advisory opinions of the DRB will be able to explain the reasoning for the advisory opinions issued by the DRB.  Without the Reps, the two Parties will be given advisory opinions issued by the three DRB neutral members and the Parties will then have to try to interpret the advisory opinion and guess as to why it was issued if the opinion does not fully explain every aspect of the advisory opinion.  The Reps will certainly be able to explain to their respective Party why the advisory opinion was issued as they were involved in the formulation of the advisory opinion.

3.   The DRB should be able to better understand the issues involved in issuing their advisory opinion with both Parties having representation in the advisory opinion formulation.

NOTE:  Any and all costs related to the O-Rep shall be the direct responsibility of the Owner and any and all costs related to the GC-Rep shall be the direct responsibility of the General Contractor.  CDRS will send meeting notices and related communications to the O-Rep and the GC-Rep as required.

By choosing the “Final and Binding DRB Model”, the Parties virtually assure themselves that they will never have to go to an outside binding arbitration or to litigation to settle any disputes between themselves.  The typical DRB model used worldwide usually specifies the Owner and the GC as the two Parties to the DRB.

Other CDRS models offer the opportunity to involve ALL OF THE PARTICIPANTS involved in the construction project to be involved in the DRB process.  Below are a few examples of some of the options available to be incorporated in the DRB program.

1.     Require the GC to have ALL Subcontractors sign a “Subcontractor Binding Mediation Agreement” or a “Subcontractor Med-Arb Agreement” which will require the Subcontractor (Sub) to utilize one or two of the DRB neutral members to conduct a binding mediation or a med-arb process to settle any disputes between the GC and the Sub.

2.     Require ALL Subs to have ALL of their Subcontractors (Sub-Subs) sign a “Subcontractor – Sub-Sub Binding Mediation Agreement” or a “Subcontractor – SubSub Med-Arb Agreement” which will require all Sub-Subs to utilize one or two of the DRB neutral members to conduct a binding mediation or a med-arb process to settle any disputes between the Sub and a Sub-Sub.

3.     Require the GC, Subs, Sub-Subs and/or the Owner to have all Material Suppliers sign a “Material Supplier Binding Mediation Agreement” or a “Material Supplier Med-Arb Agreement” which will require all Material Suppliers to utilize one or two of the DRB neutral members to conduct a binding mediation or a med-arb process to settle disputes between the Material Supplier and the GC, Sub, Sub-Subs or the Owner.

4.     Require the GC, Owner, Sub, Sub-Sub or Material Supplier to have ALL of their Service Providers such as architects, designers, engineers, etc. sign a “Service Provider Binding Mediation Agreement” or a “Service Provider Med-Arb Agreement” which will require all Service Providers to utilize one or two of the DRB neutral members to conduct a binding mediation or med-arb process to settle disputes between the Service Provider and the GC, Owner, Sub, or any Sub-Subs.

Typical DRBs are established only to assist the Owner and the GC to prevent, handle and settle disputes, leaving all others to settle disputes through outside arbitration or litigation.  By utilizing the procedures mentioned above, the DRB will be empowered to prevent, handle and settle ALL disputes between any participants in the construction project.  This should insure that the construction project should never be shut down because of a lengthy and costly outside arbitration or litigation.  All disputes should be handled within a very short period of time by the three neutral DRB members who should be well-informed on the progress and conditions of the construction project which should mean very limited discovery in the presentation of any dispute to the DRB.

CDRS custom designs each DRB to suit the needs and requirements of the Owners of a construction project.  The provisions mentioned above are just a few of the options that are available to be incorporated into a “CDRS Custom Designed DRB”. 

The following “DRB Agreement” which specifies “Final and Binding Authority” for the DRB is a basic agreement and does not allow for the final and binding authority to extend past the Owner and the GC.  Any disputes involving subcontractors, material suppliers, service providers, etc. will be handled according to the dispute resolution procedures as specified in their construction contracts.

Dispute Review Board Agreement (Final and Binding Authority) (PDF)

OVERVIEW – LARGE RESIDENTIAL AND SMALL COMMERCIAL DRB

The following DRB “Large Residential and Small Commercial DRB Agreement” gives the option of selecting from five different possibilities for the structure of the DRB. The five suggested models are the most commonly used models of the large residential and small commercial DRBs.  Keep in mind that CDRS will develop a custom DRB for each construction project.

One of the models allows an owner to select a representative to serve on the DRB.  CDRS feels that in many large residential and small commercial construction projects, the owner does not have the experience or expertise to represent themselves on the DRB.  In a three person DRB where the Owner, General Contractor and one neutral CDRS DRB Specialist, serve on the DRB, the DRB usually does not issue a formal advisory opinion, however, after discussions with the parties, the trained CDRS DRB Specialist will help the Parties in resolving any disputes between themselves.

If the CDRS DRB Specialist has been empowered to render a final and binding decision to settle disputes, he/she will make the final and binding decision for the Parties to settle the dispute.

In lieu of using a DRB, the Parties may also elect to use the General Contractor’s Fast Track Agreement (PDF) which will also provide an informal and inexpensive method of settling disputes.  Also available is simple contract language which specifies either binding mediation or med-arb as the dispute resolution procedure to settle disputes.  Suggested contract language to specify binding mediation or med-arb is located elsewhere on this website.

Dispute Review Board Agreement "LR&SC" (PDF)

PLEASE CONTACT CDRS AND REQUEST THAT THEY ASSIST YOU IN

SELECTING THE PROPER DISPUTE RESOLUTION PROCESS TO BE

SPECIFIED IN YOUR CONSTRUCTION CONTRACT.

New Mexico 505-474-9050

Nationwide toll free 888-930-0011

Fax 505-474-9061

Email cdrs@cdrsllc.com