New proforma DAB Agreement for AS 4000’s new option of a Dispute Avoidance Board
Standards Australia has published for consultation an update of AS 4000 — its General Conditions of Contract for a ‘construct only’ construction contract. The update will include a new option for a Dispute Avoidance Board.
AS 4000 will refer users to the proforma DAB Agreement published by the Dispute Resolution Board Foundation (Region 3) for details on the Dispute Avoidance Board process.
The DRBF has taken the opportunity to update its proforma DAB Agreement, which can be downloaded free of charge from the DRBF Region 3 webpage (see link below).
The key changes are summarised below.
Functions of the DAB
A new clause 4 has been added to provide an overview of the functions of the DAB. Clause 4.1 provides that the DAB has two primary functions, namely:
the dispute avoidance function; and
the decision making function.
This clause does not limit the functions that the parties can give to the DAB.
The dispute avoidance function is described in broad terms in clause 4.2, as doing everything practicable to assist the contract parties to avoid or prevent issues arising under the contract from becoming disputes.
Clause 4.2 goes on to provide examples of such activities, including:
encouraging the contract parties to provide joint presentations on project progress and issues;
discussing issues raised by the contract parties with a view to amicably resolving them;
encouraging the contract parties to look ahead to identify potential issues;
raising issues that the DAB considers are not being reported or addressed by the contract parties;
requesting and reviewing a broader range of documentation or specific reports and materials from either contract party;
requesting special presentations on specific issues or potential risk areas;
encouraging and/or facilitating additional meetings and workshops to resolve issues; and
encouraging the contract parties to consider and, if agreed between them, request a written advisory opinion from the DAB.
This list is not exhaustive, and is designed to encourage the contract parties to allow the DAB to be proactive and inquisitorial in exercising its dispute avoidance function.
The DAB's decision making function is mentioned in clause 4.3.
Dispute Avoidance Procedures
The ‘default’ procedures that will apply to the dispute avoidance function are detailed in Appendix 1 of the DAB Agreement. They are based on the DRBF’s previous pro-forma General Operation Procedures, but have been retitled and amended to focus on the dispute avoidance function.
Clause 5.1 of the DAB Agreement requires the parties to discuss the Appendix 1 procedures at the first DAB meeting and either confirm them or agree upon adjustments to them. The Appendix 1 procedures will apply until any adjustments are agreed between the DAB and the contract parties.
Decision Making Rules
The ‘default’ rules that apply to the decision-making function are referred to in clause 6, and detailed in Appendix 2. These can also be amended by agreement, but it is not envisaged that this will occur at the first DAB meeting.
The current proforma DAB Agreement allows the contract parties to amend the Decision Making Rules without the agreement of the DAB. We have amended this to also require the DAB to agree to such amendments.
In Confidence and Without Prejudice
Given the importance of this concept to the dispute avoidance function, it has been defined and the provisions that were previously contained in the General Operating Procedures have been elevated to clause 7.1 of the DAB Agreement.
Clause 7.2 notes that communications that occur as part of the decision making process are not In Confidence and Without Prejudice.
DAB Member's commitment and responsibilities
The website reference to the DRBF Code of Ethical Conduct has been included in clause 8.3(c), removing the need for the definition.
The DRBF Code of Ethical Conduct consists of four canons that all DRBF members agree to adhere to, covering:
avoiding conflicts of interest and full disclosure of potential conflicts of interest;
maintaining confidentiality;
acting honestly, impartially, diligently and with integrity
conducting board meetings per the agreed procedures and in a manner that affords procedural fairness.
Contract Party commitments and responsibilities
The requirement for each contract party to be represented at each DAB meeting by at least one senior project executive and one off-site executive to whom the on-site executive reports has been elevated from the General Operating Procedures to clauses 9 and 10.
Replacement of DAB Member
Clause 18.3(c) has been amended to expressly permit the contract parties to agree a process for appointing a replacement DAB member if their contract does not prescribe a process, as will be the case with the update of AS 4000.
Dispute Avoidance Procedures (Appendix 1)
While these have been retitled and amended to focus on the dispute avoidance function, they continue to be drafted in a manner that enables Appendix 1 to operate as a stand-alone summary of the entire DAB process, as Appendix 1 is regularly the only part of the DAB Agreement that some representatives of the contract parties read.
The current requirement for advisory opinions to be "jointly requested in writing" by the contract parties has been clarified, to enable either contract party to make the written request, which must then be approved by the other contract party and the DAB.
Decision Making Rules (Appendix 2)
These have been amended to better reflect the process that Region 3 DABs have adopted for Decisions. The key changes are:
The process commences with a Preliminary Conference to allow the parties to consider whether the Decision Making Rules should be adjusted to better suit the dispute in question. The Preliminary Conference is to occur within 7 business days after the reference. The DAB is to issue directions for the conduct of the reference at the Preliminary Conference.
A process for arriving at a Statement of Agreed Facts has been added.
The DAB's agreement is required for the contract parties to amend the Decision Making Rules.
Takeaway - more pro-active dispute avoidance will mean fewer disputes
The distinguishing feature of Dispute Avoidance Boards, as generally practised in Australia, is the pro-active dispute avoidance role. All other dispute resolution methods including “alternative dispute resolution” are reactive, as they are only deployed after a formal notice of dispute has been given. By this time, the opportunity to avoid the dispute is lost, because positions have hardened.
The power of a proactive Dispute Avoidance Board is evidenced by the statistics. DABs have been used on 117 projects in Australia with a combined contract value exceeding A$70 billion (in dollars of the day). On none of these projects has a dispute proceeded to a litigation judgment or arbitral award. Rather, all disputes have been resolved within the project with the assistance of the Dispute Avoidance Board.
The inclusion of a Dispute Avoidance Board as an option within AS 4000, coupled with the additional guidance on the dispute avoidance function in the new proforma DAB Agreement, is therefore a very positive development for the Australian construction sector.
