By Eng. Vaughn I. Lezama, B.Sc., FAPETT, M.ASCE, R.Eng.
CEO Consulting Engineers Associates 2005 Ltd
Registrar, Board of Engineering of Trinidad and Tobago (BOETT)
Introduction — The Best Dispute Is the One That Never Fully Develops
Engineering and construction projects are inherently exposed to disagreement. They bring together employers, contractors, consultants, specialists, suppliers, financiers and regulators, often over several years, under changing technical, financial and physical circumstances. Design develops. Conditions differ from those anticipated. Instructions are issued. Programmes change. Variations arise. Costs increase. Decisions are challenged.
Disagreement, therefore, is not necessarily evidence of project failure.
The real question is how disagreement is managed.
A dispute rarely begins on the day that a formal claim is submitted. It usually begins much earlier: with an unclear instruction, an untested assumption, an incomplete record, a delayed decision, an inadequately defined scope, or a risk for which no party clearly accepted responsibility.
The distinction between dispute avoidance and dispute resolution is therefore fundamental.
Dispute avoidance seeks to recognise and manage disagreement while there remains an opportunity to protect the project. Dispute resolution provides the processes by which an established dispute is determined or settled when earlier intervention has not succeeded.
Both are necessary. But avoidance should come first.
This philosophy is reflected particularly clearly in the evolution of the FIDIC Conditions of Contract from the Dispute Adjudication Board (DAB) under the 1999 forms to the Dispute Avoidance/Adjudication Board (DAAB) under the 2017 suite. FIDIC describes the change as moving the DAB of 1999 to a DAAB operating on a standing basis, thereby enhancing the Board’s role during the project.
The significance of that change extends beyond terminology. It reflects a different philosophy of project governance:
Do not wait for disagreement to become a dispute before bringing independent professional judgement to bear upon it.
Why Construction Disputes Develop
Construction disputes are sometimes described in deceptively simple terms:
- the Contractor was late;
- the design was defective;
- the Employer changed the scope;
- the Engineer failed to decide;
- the ground conditions were unforeseeable; or
- the work was defective.
But disputes rarely result from one isolated event.
More commonly, there is a chain of causation. An incomplete brief produces an evolving design. The evolving design produces late information. Late information disrupts procurement. Disruption affects the programme. Programme pressure leads to acceleration. Acceleration affects productivity and possibly quality. Additional costs are incurred. Records may be incomplete. Responsibility becomes contested. Eventually, what began as a manageable project issue becomes a formal claim.
The visible dispute may concern money or delay. Its deeper causes may lie in briefing, design coordination, communication, risk allocation, decision-making or governance.
That leads to an important principle:
Do not confuse the event that finally produces the claim with the causes that created the dispute.
Understanding this distinction is central to effective dispute avoidance.
Dispute Avoidance Begins with Good Project Management
Dispute avoidance should not be regarded as a specialist procedure activated only when lawyers or claims consultants become involved. It begins with the ordinary disciplines of competent project management.
Several fundamentals are necessary: clear and comprehensive contracts, effective communication, formal change-management procedures, regular meetings and progress reporting, appropriate risk allocation and early-warning systems. These principles are deceptively simple. Their absence, however, appears repeatedly in construction disputes.
Clear Scope and Risk Allocation
A contract is not merely the document to which the parties turn when something has gone wrong. It establishes the project’s allocation of responsibility. It identifies scope, authority, payment obligations, time requirements, risk allocation, procedures for instructions and variations, certification, claims and dispute resolution.
Ambiguity at the beginning of a project frequently reappears later as disagreement over entitlement.
- Who was responsible for the information?
- Who carried the design risk?
- Who coordinated the interface?
- Who was authorised to issue the instruction?
- Was the additional work within the original scope?
- Who carried the risk of the unforeseen condition?
These questions should preferably be answered before the relevant event occurs.
Clear Communication and Instructions
Change is inevitable on most projects. Uncontrolled change is not. Instructions that are verbal, ambiguous, incomplete, issued without proper authority or given without consideration of their time and cost consequences create fertile ground for disputes.
Good project administration requires significant instructions and decisions to be communicated clearly and, where necessary, formally. Collaboration and contractual discipline are not opposites. Indeed, formal discipline often protects good relationships because it prevents participants from developing different recollections of what was supposedly agreed.
Contemporary Records
Few lessons emerge more consistently from dispute resolution than the importance of reliable contemporaneous records. When disputes arise, memories differ. Informal discussions acquire new significance. Personnel may have changed. Events that appeared insignificant several years earlier may become central to questions involving delay, responsibility or entitlement.
Contemporaneous records — including correspondence, site diaries, minutes, photographs, programmes, inspection reports, test results, instructions, requests for information, variation records and certificates — provide the project with institutional memory.
But the lesson is not simply to produce more records. It is to produce better records: factual, timely, clear, relevant, objective and sufficiently complete to explain the event and the reasoning behind important decisions.
Early Warning Is More Valuable Than Late Argument
Perhaps the most important principle of dispute avoidance is early intervention. When an emerging problem is identified promptly, the parties may still be able to investigate it, preserve evidence, clarify responsibility, consider alternatives, revise the programme, mitigate consequences and make informed decisions.
When the issue is raised months later as a claim, many of those opportunities have disappeared. The work may already be covered. Records may be incomplete. Costs have accumulated. The programme has moved on. Relationships have deteriorated.
Early warning should therefore not be interpreted as an act of hostility. Properly understood, it is a project-management mechanism. The objective should not simply be to reserve contractual rights while allowing the problem to continue. It should be to bring the issue to the attention of those who can still do something about it.
The Duty to Decide
Avoidance also requires decisions. One of the recurring causes of escalating disputes is the reluctance of project administrators to make difficult determinations. A variation remains unvalued. An extension-of-time application remains unanswered. Responsibility for a physical condition remains unresolved. A technical submission remains “under review”.
Meanwhile, the project continues. The parties then proceed on different assumptions. Cash flow is affected. Programmes cannot be reliably updated. Costs accumulate. Positions harden.
The absence of a decision effectively becomes a decision of its own. Good contract administration therefore requires decisions that are technically informed, contractually grounded, reasoned, communicated clearly and made within a reasonable time.
From the FIDIC DAB to the DAAB
The development of FIDIC’s dispute-board provisions is particularly instructive. Under the 1999 Red Book, Clause 20 addresses Claims, Disputes and Arbitration, including appointment of the Dispute Adjudication Board, obtaining its decision, amicable settlement and arbitration. The DAB therefore provided an important intermediate mechanism between project-level contract administration and final arbitration.
A properly constituted DAB could provide a relatively rapid, specialist determination by professionals familiar with construction and the contractual environment. FIDIC also made clear that DAB decisions were intended to have binding effect even where they had not yet become final, and its 2013 Guidance Memorandum addressed enforcement where a party failed to comply with such a decision.
The 2017 FIDIC forms took the concept further. FIDIC introduced the Dispute Avoidance/Adjudication Board — the DAAB — and explicitly strengthened the dispute-avoidance function. The 2017 Red Book identifies mechanisms for dispute avoidance as one of the significant features of the Second Edition and includes DAAB procedural rules.
The importance of the change is reflected in FIDIC’s own description of the evolution: the 1999 DAB was brought forward into the 2017 DAAB on a standing basis, enhancing its role throughout the construction project. The DAAB should therefore not be perceived merely as a miniature arbitration tribunal waiting for a dispute to arrive. Its greatest value may arise before adjudication becomes necessary.
The Standing DAAB — Part of the Project’s Dispute-Avoidance Architecture
A standing DAAB can become familiar with the project, its participants, contractual framework, progress and developing issues. That familiarity is important. A tribunal appointed several years after an event must reconstruct the project retrospectively from documents, witness statements and expert reports. A standing DAAB has the opportunity to understand the project while it is actually unfolding.
FIDIC has expressed the view that the advantages of dispute avoidance, consistency of decisions and having the DAAB effectively integrated into the project’s dispute-management framework significantly increase the probability of successful project delivery.
This is an important change in philosophy. The Board should not be viewed as an institution that the Employer or Contractor hopes never to use because its involvement signifies failure. Its involvement can signify precisely the opposite: effective governance before failure occurs.
Informal Assistance — The Heart of Dispute Avoidance
One of the most important features of the 2017 approach is the DAAB’s ability to provide informal assistance in appropriate circumstances. FIDIC materials describe dispute avoidance as preventing disagreements from developing into disputes through informal assistance under the 2017 provisions. Importantly, the parties are not bound by the advice given during such informal assistance, and the DAAB itself is not subsequently bound by the views or advice it expressed.
This is significant because it creates space between ordinary project negotiation and formal adjudication. The DAAB may assist the parties to identify the real issue, distinguish fact from assumption, understand competing interpretations, identify missing information, explore possible solutions and prevent positions from becoming entrenched. The purpose is not to determine prematurely who has “won”. It is to help the parties solve the problem while it remains capable of solution.
When Avoidance Does Not Succeed — Adjudication
Not every disagreement can be resolved informally. There will be legitimate differences concerning contractual interpretation, valuation, extensions of time, responsibility, causation or entitlement. Where the disagreement matures into a dispute, the DAAB can move from its avoidance function to its adjudicative function.
This distinction is important. During dispute avoidance, the emphasis is upon assisting the parties to find a workable solution. During adjudication, the Board must independently consider the submissions and evidence and issue its decision in accordance with the contractual procedure.
FIDIC’s current description of the DAAB framework emphasises this dual function: proactively avoiding disputes while also providing binding decisions when disputes do arise. Thus, the same institution provides two fundamentally different interventions:
first, help the parties avoid the dispute; second, if avoidance fails, decide it.
Beyond the DAAB — The Dispute-Resolution Ladder
The DAAB sits within a wider spectrum of dispute-management processes. This process includes negotiation, mediation, adjudication, arbitration and litigation as progressively more formal methods of dealing with disputes. These mechanisms should not necessarily be regarded as competing alternatives. Each has a different function.
Negotiation allows the parties themselves to resolve the matter and should ordinarily remain available throughout the project.
Mediation introduces an independent neutral who facilitates settlement but does not ordinarily impose the outcome. It can be particularly effective where commercial interests extend beyond the strict contractual dispute.
Adjudication provides a comparatively rapid decision and is particularly valuable in construction where unresolved disputes concerning payment or time can damage an ongoing project.
Arbitration provides a more formal determination and is particularly suited to international construction contracts because parties can select the tribunal, procedure and seat within an established international enforcement framework.
Litigation may provide final judicial determination but can be expensive, lengthy and potentially damaging to commercial relationships.
The objective should therefore be to resolve disagreement at the lowest appropriate level of formality, while preserving access to more formal procedures where necessary.
Dispute Avoidance Does Not Mean Avoiding Legitimate Claims
An important distinction must be made. Dispute avoidance does not mean suppressing claims. Nor does collaboration require a Contractor to abandon legitimate entitlement, an Employer to accept unsupported claims, or an Engineer to compromise professional judgement merely to preserve harmony. A healthy project environment permits disagreement. The objective is to prevent disagreement from becoming unnecessarily destructive.
The parties should identify the precise issue, separate fact from assumption, preserve relevant evidence, explain their reasoning, acknowledge uncertainty and remain willing to reconsider positions when better information becomes available.
A dispute-avoidance culture therefore requires both cooperation and discipline. Without cooperation, every issue becomes adversarial. Without discipline, informal understandings create uncertainty. Successful projects require both.
The Engineer’s Role
Professional Engineers occupy a particularly important position in this process. Their decisions, instructions, certificates, reports, assessments and records frequently become the evidence upon which later claims and disputes are determined. Engineers therefore require more than technical competence. They require sufficient contractual literacy to understand the consequences of their professional actions.
A technically correct decision may still create difficulty if it is issued without authority, communicated ambiguously or inadequately documented. Similarly, certification must remain independent. A professional certificate represents judgement and should be supported by evidence, notwithstanding commercial or institutional pressure. Professional judgement must also be explainable.
Years later, the relevant question may not simply be whether a decision produced the desired outcome. It may be whether the engineer considered the information reasonably available, applied appropriate standards, identified assumptions and limitations, evaluated alternatives and reached a reasoned professional conclusion. Dispute avoidance is therefore inseparable from good engineering practice.
A Practical Framework for Avoiding Disputes
The lessons from dispute resolution can be translated into ten practical principles for project delivery:
- Define scope clearly. Responsibilities, exclusions, interfaces and deliverables should be understood before work proceeds.
- Understand the contract. Project participants should understand the authority, procedures and consequences attached to their actions.
- Allocate risk consciously. Important risks should not be allowed to fall into an undefined space between parties.
- Communicate clearly. Instructions, warnings, assumptions and decisions should be timely and understandable.
- Maintain reliable contemporary records. Material events and the reasoning behind important decisions should be recorded as the project develops.
- Decide promptly. Unresolved matters should not be permitted to accumulate until they become major claims.
- Manage change comprehensively. Variations should be considered not only in terms of direct cost but also time, productivity, sequencing, quality and consequential effects.
- Preserve professional independence. Certification, determination and technical advice must remain objective.
- Escalate emerging problems early. Early warning, senior-level engagement and, where appropriate, DAAB informal assistance should be used before positions harden.
- Learn systematically. Disputes and near-disputes should become sources of organisational learning rather than isolated episodes to be forgotten once settled.
These principles provides a practical framework for the supervising engineer who may have responsibility for the project oversight.
The Cost of Waiting
The financial cost of construction disputes is obvious: legal fees, experts, management time, delayed payment and sometimes prolonged arbitration or litigation.
The less visible cost can be greater. Disputes consume professional energy, damage trust, divide project teams and turn attention away from delivering the Works toward establishing liability for what has already gone wrong.
By the time the parties are preparing witness statements and expert reports, the opportunity to protect the original project may already have been lost. This is why the evolution from DAB to DAAB matters. It represents movement away from a model in which the neutral body primarily decides yesterday’s dispute, toward one in which an independent Board can also help the parties manage today’s disagreement before it becomes tomorrow’s dispute.
Conclusion — Project Success Requires More Than Winning Disputes
Dispute resolution remains essential. Some disagreements require adjudication. Some require arbitration. Occasionally litigation will be unavoidable. But the ultimate measure of good project governance cannot be the number of disputes successfully defended or claims successfully prosecuted. It should also include the number of disagreements that were identified early, examined objectively and resolved before they damaged the project.
The lessons of construction disputes repeatedly point to the same fundamentals: clear scope, appropriate risk allocation, contractual awareness, good communication, reliable records, timely decisions, fair administration and early intervention.
FIDIC’s progression from the DAB under the 1999 Conditions to the standing DAAB under the 2017 forms reinforces these principles by placing dispute avoidance alongside dispute adjudication as an integral part of project delivery.
The most effective DAAB intervention may therefore be the one that never produces a formal decision because the parties, assisted by an experienced and independent Board, resolve the disagreement before adjudication becomes necessary.
For Employers, Contractors, Engineers and other construction professionals, the lesson is clear:
Do not wait until a disagreement becomes a dispute before managing it.
A successful project is not necessarily one in which disagreements never arise. That expectation would be unrealistic. A successful project is one in which disagreements are recognised early, communicated openly, documented properly, considered fairly and resolved at the earliest appropriate level.
Ultimately, the most valuable lesson from dispute resolution is not how to become better at winning disputes. It is how to become better at delivering projects in which disagreement is prevented from becoming failure.