Conflict avoidance, management and dispute resolution procedures (L1) Flashcards
What are the main conflict avoidance processes?
- Clear contract documentation - ensuring contracts documents are clear and unambiguous (e.g. capturing the specific details of the project and avoiding generic specifications)
- Record keeping - contemporaneous records of labour, plant, materials used on the project
- Regular reporting and proactivity - Regular monitoring of cost, progress and quality is important for the success of any project and allows issues to addressed early to keep the project on track
- Partnering and Alliancing - encourages cooperation, team working and problem solving between project participants
- Good payment practices
What is partnering?
- It is a concept that can be applied to many procurement routes (it is not itself a procurement route)
- It is a set of collaborative processes which emphasise the importance of common goals
- It can be implemented independently of the contract as a separate partnering charter or
- integrated into the contract to reinforce the partnering arrangement
- It is based on negotiation rather than competitive tendering
What are the advantages of partnering?
- Fewer disputes
- Early supply chain involvement
- Based on open-book and win/win culture
- Integration of design process with construction process
What are the disdvanatges of partnering
- Potential for abuse by one party
- Requires more client resource to compensate for the less competitive environment
- To be most effective, it needs be practised and learnt over a number of projects
- Direct cost of workshops, training staff and intensive involvement of management staff to establish the partnering approach
What dispute resolution techniques are you aware of?
- Negotiation (informal)
- Mediation and conciliation (informal)
- Expert determination (formal)
- Adjudication (formal)
- Arbitration (formal)
- Litigation (formal)
- Dispute Boards (formal)
What are the three distinct process that all dispute resolution techniques are built upon?
- Negotiation - whereby the Parties work between themselves to resolve the dispute
- Mediation and conciliation - whereby the parties are assisted by a third-party offering a non-binding view on the matter
- An adjudicative process - whereby the final outcome is determined by a third party who decision is binding on the parties
What is dispute resolution?
- Actions and processes taken to resolve contractual disagreement between parties
What is negotiation?
- It is a process whereby the parties work between themselves to resolve any issues or differences.
- It relies upon the parties finding common ground.
- It is more than just a dispute resolution procedure, it can be used to negotiate building contracts in the first place.
What is mediation and conciliation?
- The Parties agree on an independent third party to facilitate discussions between them, with the goal of reaching a settlement
- This can take an evaluative style whereby the mediator or conciliator evaluate the information and offers a view that is non-binding
- The power to settle remains with the parties but the process is led by the mediator
What is adjudication?
- Adjudication is a statutory form of dispute resolution that is available in the UK
- It is a relatively simple and efficient method of resolving disputes without engaging in lengthy and expensive court proceedings
- Adjudication relies on an independent third party who considers the claims of both parties
- A binding decision is made which can be appealed either through litigation or arbitration
- It has the advantages of being time sensitive with a decision being made within 28 days
What enforces the requirement for a construction contract to contain provisions for adjudication?
The Housing grants, Construction and Regeneration Act 1996 (aka Construction Act)
Which contracts does adjudication apply to?
It applies to all construction contracts entered into after the act commenced within England, Scotland and Wales
What if a construction contract does not contain provisions for adjudication?
- Parties still have statutory right to adjudication
- If there is no reference to the process in the construction contract, terms from Scheme for Construction Contracts 1998 will be implied
When can a dispute be referred to adjudication?
At any time
What happens if a dispute has been referred to adjudication?
- Referral Notice: Referring party serves it’s Referral Notice within 7 days of the Notice of Adjudication to the adjudicator and other party setting out their case (together with supporting docs)
- Response: Within 7 days of Referral Notice, Responding Party Party services its Response (together with supporting docs)
- Reply and Rejoinder: Adjudicator may permit Referring Party to reply to service a Rejoinder
- Decision: The adjudicator must give their decision within 28 days of the dispute being referred to them (can be extended by 14 days with agreement of Referring Party)
What is arbitration?
- For arbitration to apply it must be written into the contract
- A dispute cannot be referred to arbitration until it has first been referred to adjudication and a binding decision given
- Formal disputes are determined by a private tribunal chosen by the parties as opposed to the courts (litigation)
- It is an alternative to litigation
- The proceeding are undertaken in a private setting meaning the reputation of both parties can be preserved to an extent
- Multi-party disputes are not easily dealt with and separate arbitrations may have to be held
What is litigation?
- In the absence of any other procedure, the parties will have a right to refer their matter to an appropriate court
- Formal disputes are determined by a judge
- A dispute cannot be referred to litigation if the parties have agreed in the contract to resolve a dispute by arbitration
- Litigation proceedings are conducted in court through a trial
- They easily deal with multi-party claims such as defects unlike arbitration where individual arbitrations may have to be held
What court deals with construction related litigation/ disputes?
The Technology and Construction Court (TCC)
What dispute resolution provisions are there in the NEC?
- Under NEC3 there are 2 dispute resolution procedure options - W1 and W2
- W1 is used outside the UK and thus the Housing Grants, Construction and Regeneration Act 1996 does not apply
- W2 is used in the UK when the Housing Grants, Construction and Regeneration Act 1996 does apply
- And under NEC4 there are three disputes resolution procedure options W1, W2 and W3
- W3 being an option for a dispute avoidance board
How does the NEC deal with disputes?
- The NEC offers a two stage approach to dispute resolution
- The first step is adjudication
- The second step is arbitration if the dispute isn’t resolved at adjudication
- NEC4 adds a step prior to adjudication called senior representatives
- Under W2 use of senior representatives is not mandatory otherwise it would conflict with the Housing grants, Construction and Regeneration Act 1996
Under W2 of the NEC what is the process and timeline for referring disputes?
- First step is provide notice to the other party
- Referring party then has 7 days to refer the dispute to the adjudicator (possibly named in Contract Data)
- Both parties then have 14 days to provide the adjudicator with more information regarding the dispute
- Adjudicator then has 28 days from the date that the dispute was referred to make a decision (can be extended by upto14 days with agreement from the referring party)
- Once a decision is made a party has 28 days to notify the other if it wishes to refer the dispute to tribunal (arbitration)
- If not the adjudicators decision is binding
What would your considerations be prior to selecting a form of dispute resolution?
- The cost of dispute resolution in proportion to the claim being sought
- The timescales involved
- The impact on business relationships and reputation
What is conflict avoidance?
o It is involves careful and proper planning of a strategy for executing a project
o It is about adopting proactive conflict avoidance approaches such as:
- Clear contract documentation – ensuring documents are clear and unambiguous (e.g. capturing the specific details of a project and avoiding generic specifications)
- Record keeping – contemporaneous records of labour, plant and materials used on the project
- Regular reporting and proactivity – Regular reporting of progress, cost and quality is important for the success of any project and allows issues to be addressed early to keep the project on track
- Partnering and alliancing – encourages cooperation, team working and problem solving between project participants
- Good payment practices
What are options are available in your industry for dispute resolution?
o - Negotiation (informal)
o - Mediation and conciliation (informal)
o - Expert determination (formal)
o - Adjudication (formal)
o - Arbitration (formal)
o - Litigation (formal)
o - Dispute Boards (formal)
What is your first step in resolving a dispute?
o ¬The first step in resolving a dispute would be negotiation with the other party, adopting a principle based approach which involves setting objective criteria to obtain an accurate value as opposed to bargaining over amounts
o However, it should be noted that negotiation or agreement outside of the contract terms should only be carried out where formally instructed by the employer
o If the event the matter could not be settled amicably through negotiation
o It would be advisable for the parties to consider other alternative dispute resolution method such as mediation and conciliation
o The presence of a third party maybe able to put perspective on issues
o If resolution is still not reached, then adjudication would be the first formal step for resolving a dispute
How does arbitration differ to adjudication?
o Adjudication is a statutory form of dispute resolution in the UK
o Whereas, a dispute cannot be referred to arbitration until it has first been referred to adjudication and a binding decision given
Are both or either of these options final and binding?
o Yes
o However, the adjudicators decision can be appealed either through arbitration or litigation
How much do these cost?
Adjudication £95-330 an hour or £12k-14k
Arbitration £250-£650 an hour
Who pays for the dispute resolution procedures?
o In adjudication
Adjudicator has no power to order that one party pay the other party’s cost of adjudication unless the parties agree otherwise
The Housing Grants, Construction and Regeneration Act 1996, intends that both parties would bear their own costs
However, the adjudicator will usually award who should pay the adjudicators costs
o Whereas in arbitration and litigation
The winning party is also awarded its costs
Similarly, who pays the legal costs will be also determined
Who would decide who the mediator would be in mediation?
o The mediator is agreed upon by all parties and is neutral third party who helps the parties to reach an amicable settlement.
