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13th Annual Spring Symposium in Dispute Resolution 1 April 25, 2013
Copyright © Dispute Resolution Board Foundation 2013 DRB Presentation What is a DRB? History of DRBs Benefits of DRBs Recommended elements for a successful DRB DRB ethics DRB selection Dispute Resolution Board Foundation (DRBF) A success story 2
WHAT IS A DRB? 3
Copyright © Dispute Resolution Board Foundation 2013 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. 4
Copyright © Dispute Resolution Board Foundation 2013 Dispute Review Board (DRB) “… a real-time ADR process for the resolution of issues and claims, controlled by the owner and the contractor.” 5
Copyright © Dispute Resolution Board Foundation 2013 Dispute Review Board (DRB) 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). 6
HISTORY OF DRBs 7
Copyright © Dispute Resolution Board Foundation 2013 History of DRBs Early 1970’s tunneling industry conducted studies on dispute resolution First DRB used on second bore of I-70 Eisenhower Tunnel in Colorado in DRB Foundation established; DRB Manual published By 2010 over 2,200 US projects worth US $200 billion 8
Copyright © Dispute Resolution Board Foundation 2013 History of DBs - International 1981: First International DB, El Cajón Dam, Honduras 1995: 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
Copyright © Dispute Resolution Board Foundation 2013 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 risk 10
Region 1 DRB Projects
Puerto Rico DC
Copyright © Dispute Resolution Board Foundation 2013 DRBs in Texas Started in 1993 Owners: 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 ResolutionHigh Cost Resolution Less Control More Control 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
BENEFITS OF DRBs 15
Copyright © Dispute Resolution Board Foundation 2013 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. 16
Copyright © Dispute Resolution Board Foundation 2013 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. 17
Copyright © Dispute Resolution Board Foundation 2013 DRB Reviews The 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 General 18
Copyright © Dispute Resolution Board Foundation 2013 DRB Reviews WMATA 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
Copyright © Dispute Resolution Board Foundation 2013 DRB Reviews The Dispute Review Board…is truly a Best Practice within the industry. It is practical, reliable and cost-effective. Federal Highway Administration 20
Copyright © Dispute Resolution Board Foundation 2013 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 21
Copyright © Dispute Resolution Board Foundation 2013 DRB Track Record The 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. 22
RECOMMENDED ELEMENTS FOR A SUCCESSFUL DRB 23
Copyright © Dispute Resolution Board Foundation 2013 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. 24
Copyright © Dispute Resolution Board Foundation 2013 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. 25
Copyright © Dispute Resolution Board Foundation 2013 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. 26
Copyright © Dispute Resolution Board Foundation 2013 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. 27
DRB ETHICS 28
Copyright © Dispute Resolution Board Foundation 2013 DRB ETHICS Five Canons 1. Strong emphasis on disclosure 2. 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. 29
DRB SELECTION 30
Copyright © Dispute Resolution Board Foundation 2013 Selection of Board Members An 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. 31
Copyright © Dispute Resolution Board Foundation 2013 Criteria: Technical Experience Parties must evaluate qualifications for the specific project experience as to: Type of construction Specific construction methods Type of project delivery method Types of foreseeable disputes 32
Copyright © Dispute Resolution Board Foundation 2013 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. 33
Copyright © Dispute Resolution Board Foundation 2013 Criteria: Neutrality/Availability Completely: neutral impartial objective Avoid conflicts of interest for the duration of the project. Available to fulfill duties as required. 34
Copyright © Dispute Resolution Board Foundation 2013 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. 35
Copyright © Dispute Resolution Board Foundation 2013 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. 36
Copyright © Dispute Resolution Board Foundation 2013 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. 37
Copyright © Dispute Resolution Board Foundation 2013 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. 38
Copyright © Dispute Resolution Board Foundation 2013 Three-Party Agreement TPA includes: Compensation rates and expense reimbursement guidelines. Cost splitting between parties. Invoicing process. 39
Copyright © Dispute Resolution Board Foundation 2013 Three-Party Agreement The 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) 41
Copyright © Dispute Resolution Board Foundation 2013 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. 42
Copyright © Dispute Resolution Board Foundation 2013 DRBF The 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
Copyright © Dispute Resolution Board Foundation 2013 DRBF Worldwide presence with Three Regions: 1 - United States and Canada 2 - Europe, Asia, Central and South America, Mexico and Africa 3 - Australia and New Zealand 44
Copyright © Dispute Resolution Board Foundation 2013 Dispute Resolution Board Foundation International Blvd., Suite 314 Seattle, WA Toll free (USA only) Fax Website: 45
A SUCCESS STORY: CDOT PROBLEMS LEAD TO A SOLUTION 46
Copyright © Dispute Resolution Board Foundation 2013 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. 47
Copyright © Dispute Resolution Board Foundation 2013 Task Force Vision Empower the project level people Provide them with a step-by-step process with time lines to work with Provide them with a tool to assist them - the Dispute Review Board of impartial experts Resolving issues at the time they occur, not after the project is over 48
Copyright © Dispute Resolution Board Foundation 2013 CDOT DRBs Standing DRB: Typical three member board formed at the beginning of a project On Demand DRB: Board formed when the dispute has not been resolved at the Project Engineer and Resident Engineer levels No dispute can proceed to a claim unless it has been heard by a DRB 49
Copyright © Dispute Resolution Board Foundation 2013 CDOT Track Record = SUCCESS In 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 billion Standing DRBs: 13, Standing DRB Hearings: 3 On Demand DRB Hearings: 13 (6 on 2 projects) DRB Recommendations Rejected: CDOT – 0 Contractor – 4 To Dec. 31, 2012, only one claim has reached the Chief Engineer, was settled after arbitration started 50
Copyright © Dispute Resolution Board Foundation 2013 Questions and Discussion Thanks for your interest and attention. Contact: Bill Hinton 51
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