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On 27 November 2023, the International Federation of Consulting Engineers (“FIDIC”) launched a new Practice Note on dispute avoidance / adjudication boards (“DAABs”).
On large-scale construction projects, dispute avoidance is critical when it comes to successful project delivery. It can reduce time and money spent on disputes (including enforcement of decisions), but also promote a healthy relationship between contract parties and other project participants, which is invaluable in long-term projects.
FIDIC’s Practice Note seeks to raise awareness of the dispute avoidance function of DAABs and provide advice on best practice.
What is a DAAB?
The 1999 FIDIC Suite of Contracts provides for dispute boards in one form or another. The 2017 editions of the FIDIC ‘rainbow suite’ maintain, and in fact expand, the dispute board provisions. However, parties often exclude these provisions when agreeing FIDIC-based contracts.
DAABs are a tool that can allow parties to resolve disputes before they resort to arbitration or litigation. In a “standing” DAAB, a panel of 1, 3 or more individuals (often specialised construction professionals) is appointed by the parties at the start of a construction project. They exercise a dual role throughout the life of the project: (i) help the parties avoid disputes by providing informal assistance to resolve disagreements between the parties before they crystallise into a dispute (i.e., dispute avoidance); and (ii) if a dispute does arise, make a formal decision on that dispute, with the benefit of having been involved in the construction project from the get-go (i.e., dispute adjudication). To exercise this dual role effectively, DAABs are often acquainted with the nature and progress of the construction projects, for example, by reviewing monthly reports or conducting regular site visits.
Parties may also choose to appoint an “ad hoc” DAAB as and when an issue arises. However, in practice a standing DAAB (as recommended by FIDIC) is more likely to promote successful dispute avoidance and resolution than one appointed on an ad hoc basis after a dispute has arisen.
FIDIC’s advice on best practice
DAABs are purely creations of contract – for a DAAB to succeed, the parties and DAAB members must (i) have confidence in the DAAB’s ability to perform its dispute avoidance role; and (ii) agree on how the DAAB will do so.
Accordingly, the Practice Note sets out the following 5 core tasks for every DAAB, which according to FIDIC, can contribute towards the DAAB successfully exercising its dispute avoidance role:
Concluding remarks
Parties may want to consider whether there may be benefits in using a DAAB to bolster the parties’ ability to resolve issues early. DAABs are creatures of contract, which means that parties can tailor a DAAB to their needs. For example, the parties can adjust the level of engagement they would prefer from the DAAB throughout a construction project. In multi-contractor and/or multi-package construction projects, there may also be opportunities to agree that the same panel of DAAB members will be appointed under each construction contract, so the DAAB can have a holistic understanding of the project, avoid inconsistent outcomes, and thereby contribute to the success of a project.
However, ultimately, DAABs are just one tool available to parties to assist with dispute avoidance. Parties should bear in mind that appointing a DAAB will necessarily involve upfront costs in the form of payment of DAAB members’ fees, and that the success of a DAAB will largely depend on the parties’ understanding of, and commitment to, the DAAB as an effective tool for dispute avoidance and resolution.
Thanks to Gaurika Mohan for her assistance with this article.
7 December 2023
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