Monthly Archives: May 2007

Drafting for Disputes – DRBs, DABs and Project Mediation

The most significant development in ADR internationally is the almost universal acceptance of dispute resolution boards (DRB), whether comprised of one member or three.

The emphasis of DRBs is for the parties to keep the board informed of the progress of the works, and to allow a truly independent party, one step removed from the project, to make decisions using flexible procedures appropriate to the dispute.

There seems to be considerable reluctance in New Zealand and elsewhere to embrace what otherwise appears to be an eminently sensible procedure.  Part of the reluctance is, I suspect, linked to incurring what is perceived as unnecessary cost from adding a further layer of management, and also the perception that a range of skills may be needed which may not be available from a board appointed at award, or after the first dispute arises.

There is also the problem that DRBs sit uncomfortably with adjudication under the Construction Contracts Act 2002.

This paper was prepared for a breakfast meeting for the Arbitrators’ and Mediators’ Institute of New Zealand on 8 May 2007 and as background material for abridged articles for the NZ Lawyer and for Cross Section magazine.


Unforeseen physical conditions and allocation of risk

In the construction industry, we hear many adages like “project risk should be allocated to the party best able to manage it[1].  While commendable, truisms like this do not do justice to the complexities or the subtleties of allocating risk in large construction projects.

Risk is not static[2].  It changes through the construction process at a number of different levels – likelihood, avoidability, severity, downstream impact, foreseeability, manageability and value spring immediately to mind, and yet traditional tendered lump sum contracting procedures force contractors to commit to certain outcomes at a time of greatest uncertainty in a competitive environment[3].  The common thread in any analysis of allocation of risk is identifying initial uncertainty, how responsibility for that uncertainty is allocated, and what to do if the risk associated with that uncertainty does eventuate.

This paper was delivered at the first of two sessions organised by the Society of Construction Law on 1 May 2007.