CONSTRUCTION CONFLICTS AND DISPUTE REVIEW BOARDS: Attitudes and Opinions of Construction Industry Members
Harmon, Kathleen M J
Many believe that having a dispute review board available to hear construction disputes when they arise, and issue a nonbinding recommendation, is a superior way of resolving-and even avoiding-disputes. To determine whether the anecdotal information about DRBs has any foundation, author Kathleen Harmon, conducted a survey of construction professionals and construction attorneys as part of her Ph.D. dissertation, to find out their attitudes toward disputes and DRBs. Her findings confirm the positive view about the DRB process.
God’s creation of the world in seven days is the oldest construction project and a miracle of efficiency. However, construction projects undertaken by mere mortals tell a quite different story. Most cannot be completed without lots of paperwork and the involvement of numerous parties with different agendas and financial restraints. By and large, construction projects are a breeding ground for disputes of all kinds. They result from many factors, including among other things, unfair allocation of risk, multiple prime contracts, unrealistic expectations and schedules, poorly prepared contract documents, financial issues, communication problems, and even the economy.1
The construction industry has been on the forefront of the alternative dispute resolution movement. The recent trend is to look for methods of resolving disputes other than traditional processes (such as litigation, arbitration and mediation), which typically begin after the conflict has escalated and the parties’ positions have hardened. One of these methods is the dispute review board (DRB). This is a panel, made up of three experienced construction professionals (often engineers), formed at the beginning of a project to hear disputes when they arise and make non-binding recommendations regarding their resolution. Using a DRB is usually a condition precedent to the commencement of binding dispute resolution processes, such as litigation or arbitration.
Although DRBs are generally considered to be highly effective, there is little, if any, empirical evidence to validate that opinion. Moreover there is also a dearth of data concerning the impact of disputes on the project and the parties’ relationship. This study attempts to partially fill that void.
This is the first national study exploring how the construction community, which places a high value on both time and money, perceives disputes and DRBs. The primary issues addressed in the study are: (1) how disputes affect the project; (2) how disputes affect the party’s relationship; (3) the impact of a DRB on the project; and (4) the effectiveness of DRBs in resolving disputes.
Dispute Review Board Basics
The DRB is different from other ADR methodologies in that disputes can be addressed during the course of the contract, not at its end. Typically, DRB members make periodic visits to the construction site and become familiar with the parties and the project. This enables the parties to bring conflicts to the board while the project is ongoing.
Generally, the DRB panel is established during the pre-construction phase. The owner and contractor each nominate one member to the panel, and each must approve the other’s nominee. The two DRB nominees (or the owner and contractor by mutual agreement) select the third member of the DRB. DRB members are compensated by the parties in accordance with a DRB agreement. The contract specifications outline the DRB’s role. A DRB only has the authority granted to it by the parties.
Records indicate that since 1975, 922 projects (approximately 95% of which have been in the United States) have used a DRB.2 These DRBs heard a total of 1,108 disputes, but only 25 (involving nine projects) were not resolved by the DRB and required litigation.3 The use of DRBs has been endorsed by a number of construction-related organizations.4 Since the mid-1990s, the financing documents of the World Bank have provided for DRBs on large construction projects. The construction documents of the Federation Internationale des Inginieurs-Conseils (FIDIC) also provide for DRBs in the General Conditions. Moreover, DRBs are required on certain projects by several public-sector agencies.5
This research involved a mix of quantitative and qualitative methodologies (i.e., statistical data from a survey questionnaire and interviews with a group of survey respondents) in an effort to obtain a rounded picture of the views of construction industry professionals about construction disputes and DRBs. For the quantitative research, 703 survey questionnaires6 containing 76 questions were mailed on Aug. 2, 2002, to individuals in the U.S. construction industry. The mailing was followed by reminder letters, e-mails and telephone calls in an attempt to facilitate the return of outstanding questionnaires.7 Four hundred and fifty-six questionnaires were returned, an excellent response rate (65%).8
A key purpose of the survey was to analyze the moderating effects of DRBs. For this reason, many of the survey questions were designed to elicit beliefs concerning the DRB process. To simplify the data, an exploratory “factor analysis” was performed, which identified these five factors: procedural justice, interactional fairness (i.e., fair treatment and respect), multiple goals, face saving and legitimacy (i.e., the panel’s experience and social authority). These factors are explored below.
Profile of Respondents
The respondents were predominantly contractors (163) and engineers (139). Forty were attorneys and seven were architects.9 The participants were highly educated: 86% held a master’s degree.10
As expected, the respondents were overwhelmingly male (97.5%) and Caucasian (96.3%).11
The respondents’ ages ranged from 26 to 90, with 59 being the average age. Fifty percent were between the ages of 49 and 67.12 On average, male respondents were approximately 15 years older than females.
About 67% of respondents worked full time, while 33% worked part time. The age range for full-time respondents was 26 to 77 (21% of these respondents were over 61); while the age range for part-time respondents was 44 to 90 (69% were over 67 years of age). Not surprisingly, the part-time respondents tended to be older.
Approximately 45% of respondents had served on a DRB, 33% had served as a mediator and 35% had served as an arbitrator. Approximately 54% said they had used the DRB process within the past five years, whereas only 17% had no experience with DRBs. Thus, the majority of respondents had both knowledge and firsthand experience with the DRB process.
The purpose of the qualitative research was to provide additional information about the destructive nature of construction conflicts and respondents’ attitudes toward DRBs. I approached a number of questionnaire recipients with a request for an interview. Some I knew through professional societies or past business relationships; others were referred to me by personal contacts. Sixteen people (five attorneys, five engineers, four contractors, one retired CEO of a major northeastern university, and one consultant) agreed to be interviewed. The interviews were conducted in person between August and October 2002 in Florida, New Jersey, New York and Washington, D.C. I used standardized questions to minimize the variations in the responses. I also asked follow-up questions. Some of those interviewed are quoted and although they consented to the use of their real names, pseudonyms are used here.
Attitude Toward Disputes
Financial Costs. Virtually all respondents13 (99%) agreed that disputes occurring during the course of construction result in additional financial costs. Only three respondents disagreed with this proposition. In addition, nearly all respondents (95%) were concerned with the high cost of litigation and 75% were concerned that preparing for arbitration or litigation will consume too much time. The respondents who were unconcerned about the financial costs of adversarial dispute resolution were contractors and engineers. It may be that these respondents had no or limited involvement in a litigated case.
Hidden Costs. Ninety-four percent of respondents recognized that hidden costs may be incurred if disputes arising during construction are not quickly resolved. Examples of such costs include the diversion of manpower away from the project (or even a new project) in order to prepare for a deposition, trial or arbitration; the time it takes to bring an attorney or consultant up to speed about the project and the dispute; a reduction in bonding capacity; and damage to reputation. Eighty percent of respondents expressed concern that unresolved disputes would force them to divert attention from the next project. This is a major concern for both contractors and owners since workers occupied with resolving disputes may not be fully available for new projects. Eighty-five percent of respondents agreed that having a DRB will reduce the indirect costs of resolving a dispute. Indirect costs may be reduced by freeing up management to focus on new projects, and making available manpower and other limited resources.
Parties’ Working Relationship. Nearly 97% of respondents agreed that conflicts adversely affect the parties’ working relationship. Daniel, an engineer with over 40 years’ construction experience, asserted in an interview: “Relationships are strained at best. [Conflict] limits communications. It raises suspicion and it can easily bog a project down unless somebody is willing to go out on a limb.”
Brett, an officer of a consulting firm, said: “Normally, an unresolved dispute fosters hard feelings, can cause lack of communication between the contractor and the owner, and in the direst cases can result in financial instability for the contractor.” As the comments of these gentlemen illustrate, unresolved conflicts can negatively affect the way the parties interact.
Effect on the Job. A significant number of respondents (81%) agreed that unresolved disputes are counterproductive to the progress of construction. Brett, quoted above, pointed out that such disputes can bog down a project. Frank, a construction attorney with an engineering background and 39 years of litigation experience, said a dispute
creates a lot of lingering problems beyond the dispute itself for the completion of the project. It kind of sours the relationship among the people, and it makes it more difficult to resolve other problems that come up during the course of the project.
Bradley, a respondent with over 43 years of tunneling experience, warned: “Well, it’s divisive and both [parties] are worrying about the fight they are in rather than getting the job done.”
Other interviewees shared similar opinions. For example, Thomas, a former construction executive and an experienced mediator and DRB panelist, reflected:
Well, depending on the project, of course, [unresolved disputes] can be devastating. And any dispute or unanswered claim by a party can just impact a job immensely…. Once the dispute starts to gain momentum, so to speak, people get very impacted in their positions and are less likely to take options for resolution to it. Negotiation kind of grinds to a stop…. If I’m spending my time preparing a claim of some kind, no matter what it be, rather than spending my time on making the progress of the job, keeping it going properly, it’s a two-headed monster.
A few respondents (16%) did not agree that conflicts are always counterproductive. Andrew, a construction litigator who happens to be a civil engineer and a well-known mediator, explained: “I’m not sure … there is much of an impact on [the progress of the project] … unless somebody slows the job down because of the disputes.”
Escalation Factor. Most respondents (96%) agreed that when conflicts are not resolved, they escalate and become protracted. Common sense indicates that this is not healthy. Brace, a civil engineer and experienced DRB panelist, succinctly observed: “There’s no positive outcome of a dispute not being resolved, only negatives.”
Emotional Costs. Eighty-nine percent of respondents agreed that unresolved disputes result in job stress. Conflict is stressful and physically and psychologically draining. The emotional cost can be substantial. Thomas described it this way:[T]here is no doubt about it, people can become so emotionally involved in the dispute, rather than focusing in on it, they have a real personal problem with the people in dealing with it. It’s hard to isolate it and look at it outside the picture of the relationships of the parties. And if you’re in charge, for instance, in the running of the project, this can become a real deterrent to you. Relationships start to deteriorate; people around the jobs see that, know there’s a problem. It impacts them and their progress. And it can be devastating to a job.
Conflict Displacement. The emotional effects of a conflict may lead to “conflict displacement,” whereby conflicts on one project carry over to another project. Peter, a former CEO of a large northeastern university and an experienced DRB panelist, acknowledged that construction disputes that are not promptly resolved encourage “an adversarial relationship that will fester for a long, long time” and that festering will carry over onto other jobs “like a virus.”
With work relationships, job progress, job satisfaction and profitability at risk, not surprisingly, 99% of respondents said that resolving disputes during the course of the project is preferable to resolution at a later time. The parties need to be proactive in resolving conflicts before their positions become hardened. An engineer respondent added this comment to the survey questionnaire: “[I]t is very important to settle claims during the project. Waiting to the end or close to it fosters ill will while the job is progressing.”
Attitude Toward DRBs
Job Satisfaction. A majority of respondents (58%) said that having a DRB hear disputes contemporaneously with their occurrence results in greater job satisfaction, and 69% said it reduces stress. A small number (15%) apparently saw no correlation between DRBs and job satisfaction.14
Quality of Resolution. Nearly three quarters (73%) of respondents said that a DRB results in a better resolution than arbitration, in which a decision is imposed on the parties. However, 7% (10 contractors and seven engineers) disagreed.15
These results indicate that some individuals prefer a binding process over a non-binding one that does not necessarily provide closure and may require additional ADR processes.
Meeting Budget. More than three quarters (79%) of respondents said that having a DRB increases the chances that the project will be completed within budget. This is significant because the majority of construction contracts have compulsory completion dates and liquidated damages provisions for each day project completion is delayed. Liquidated damages can range from a few hundred dollars to tens of thousands of dollars per day.
Job Profitability. A majority of respondents (54%) said that having a DRB would contribute to the profitability of the job. (Unexpectedly, 61% (i.e., 25) of the attorney respondents who answered this question were in this group.) However, 18% (i.e., 76) of respondents disagreed.16 The difference in opinions may simply reflect the view that other factors may more directly affect profitability. Examples include submitting an accurate bid based on fully developed and comprehensive contract documents, having a contractor who fairly prices up all change orders, good site conditions and weather, and an adequate and experienced labor pool.
Yet dispute resolution can also affect profitability. In today’s economy, both the owner and the contractor seek means to increase the value of their dollar-the contractor by increasing profits and the owner by controlling costs. When an owner spends money on adversarial dispute resolution processes, the funds available for rehabilitation, repairs and new construction are reduced. When the contractor spends money for litigation or arbitration, the profitability of the job is lessened.
Litigation Costs. Almost all respondents (95%) agreed that having a DRB provision in the contract indicates that the owner is open to resolving disputes without resorting to arbitration or litigation. Not surprisingly, the data revealed that controlling the costs of conflict is an important issue. More than three quarters of respondents (77%) agreed that having a DRB keeps the costs of dispute resolution down. Over four fifths (84%) agreed that having a DRB reduces the costs of outside legal counsel, and a majority (55%) agreed it reduces the cost of consultants. Consultants are sometimes used to assist in preparing information for the DRB hearing. Frank, the construction litigator, explained: “Sometimes you need outside expertise because the participants themselves don’t have it … or … to reach a resolution, you want someone who is a little detached to also give you some opinion evidence on the point.”
The construction industry is well aware of the financial and hidden costs associated with construction disputes. The survey data suggests that having a DRB to assist in the resolution of a dispute is better than traditional “win/lose” dispute resolution methodologies.
Attitudes Toward DRB Selection
Selection Process. The composition of the DRB panel is central to the DRB process. The members of the panel must have the confidence of the parties if the DRB is to be effective. Ninety-two percent of respondents said that their great confidence in DRB panelists is a result of the control they exercise over panel selection. Eighty-four percent of respondents recognized the importance of the right of either party to reject the other party’s proposed nominee. Thomas described the process, which he characterized as “extremely fair”:
First of all, the process of selection, where each party makes a selection for their appointee, which then has to be approved by the other party. And the selection of the third party, the chair, is usually approved by both parties as well, depending on the contract. So that when the board convenes, it has been approved and looked at. The background and disclosures have been made by both parties, or both members or all three members of the board. So they understand who these people are because the trust put in the board is extremely important to making it work. They’ve got to trust that the board is extremely important to making it work. They’ve got to trust that the board is objective and neutral [and that it] also has the professional background to help them to realize that they can resolve these disputes without going to litigation or some other method. So I think it’s important, really important, that they have this trust in the board.
Panel Attributes. The survey responses indicated that construction industry participants consider the following attributes to be desirable in a DRB panel: (1) construction knowledge and experience, (2) fair and impartial decision making, (3) credibility, (4) professional behavior, and (5) the possibility of panel members being rejected, and (6) knowledge of claims procedure.
Construction Knowledge and Experience. Nearly all (99%) respondents noted the importance of construction knowledge and experience. It is the education, training and experience of the panel members that makes their recommendations persuasive. Since a DRB cannot force a settlement, its success in resolving disputes depends on its ability to persuade the parties to voluntarily accept its non-binding recommendations.
Reputation. Some researchers have hypothesized that the panelists’ reputation in the industry plays an important role in giving legitimacy and authority to the DRB.17 My research results confirmed this hypothesis: 90% of respondents agreed that industry reputation is an important attribute in a DRB panelist. Ken, a senior construction company executive and civil engineer, said in an interview:
I think the panel members must have some pure stature in the construction community in the specific sector of work that the project encompasses. Somebody who has dam experience, tunnel experience, high-rise experience, deep foundation experience. And that word gets around. In fact, it’s part of the networking of the whole DRB panel community that while there is a formal approach to selecting members, the pool of members often gets formed by word of mouth and the stature of the individual people in their segment of the construction community.
Credibility. The data showed that 98% of survey respondents considered credibility a necessary attribute in a DRB member. Mark, a civil engineer and DRB administrator, warned: “All they have is their credibility. If you have somebody with a lot of experience and you respect his opinion, that’s what the DRB members have going for them. If they don’t have that, they don’t have anything.”
Fair and Impartial Decision Making. Another important consideration in choosing a panelist noted by 98% of survey respondents is the ability to render fair and impartial decisions. Not surprisingly, a high percentage of respondents (95%) agreed that panel members need to be unbiased. Daniel explained: “The construction community wants objectivity, but it also wants that objectivity from individuals who are knowledgeable about the construction process, as opposed to people who have no familiarity with [construction].”
James, an attorney, mediator and arbitrator, underscored this point: “It’s critical that the DRB … appears impartial and unbiased at all times.”
Brennan, an attorney and president of an independent ADR firm, also stated that DRB panels must render fair treatment:
If [DRB panelists] appear to be prejudiced against a party, that party is not going to take the process very seriously. And it does happen. Even if the DRB is completely right, the party that is taking the position contrary to where the DRB seems to be going could feel, if the DRB does it in a heavy-handed way, like the DRB is prejudiced and just not paying a lot of attention to the process. That’s particularly true because this process, unlike going to court and even some arbitrations, is nonbinding. So the parties have the ability to just go through the motions and ignore it.
What is surprising is that 2 % of respondents disagreed, among them four contractors, four engineers and two attorneys. It is possible that these respondents were less familiar with the DRB process. They may have mistakenly thought that since two DRB panelists are nominated by the parties, the process is similar to having two party-appointed arbitrators who can act as advocates for the nominating party. However, being an advocate for the appointing party runs counter to DRB procedures.
Earlier researchers have found that when socalled third-party neutrals appear to be biased, the disputants do not trust their suggestions.18 Individuals are more likely to abide by a decision of an ADR process they believe is fair. Neutrality is essential because it is the guarantor of a fair hearing and an impartial decision.
Treatment of the Parties. Interactional justice and procedural justice theorists assert that the quality of treatment received by the parties during a dispute resolution process is an important consideration in the perception of a fair procedure.19 Thus, individuals may feel that they have been treated unfairly even if they believe that the procedure and outcome are fair. Peter, an experienced DRB panelist, observed that a DRB needs to be professional and courteous:[A] DRB properly run treats all parties with great equity, with politeness; [the panel] needs to listen and they need to avoid … making facial expressions that are sending messages. They’ve got to play it very straight and they’ve got to be formal. This is no time for small talk. This is time for facts to be discussed in a professional way, such that you honor the person you’re talking to, and you give them credit for having brains and you don’t hide out in some quip or some story or war story to, you know, to shape the output of the conversation. Just the facts, ma’am.
Since DRB panelists are engaged to provide expertise to assist the parties, they need to conduct themselves in a manner that will inspire the parties to have confidence in them and in the process as a whole. A recent study indicated that the perception of dignity was a stronger indicator of procedural justice than the outcome of a dispute.20
Bruce warned in an interview that the process can be derailed if the panelists “are over officious” and “assume more authority than they have.” He noted that if they, “by their social behavior, irritate or agitate people, that wouldn’t be effective.”
Accordingly, the DRB has to walk a fine line between formality, authority and polite, professional behavior.
Knowledge, of Claims Procedures. Three quarters of respondents considered a candidate’s knowledge of construction claims procedures to be important. Some respondents who were interviewed indicated that DRBs can resolve disputes in a more timely manner because the members of the panel are familiar with claims practices and procedures. This may explain the view that use of DRBs reduces legal fees.
Fairness of the DTB Forum
The DRB process provides the parties with the ability to select neutral experts to serve on the panel, and to voice their positions before the DRB makes a non-binding recommendation. Thus, the parties have input into the selection process, and the opportunity to be heard and influence the decision. Because the parties can choose to accept or reject the DRB’s recommendations, they also determine the outcome of the dispute. Based on prior procedural justice research, it would appear that the DRB process has the potential to afford greater satisfaction to the parties than binding ADR processes.
The survey results support the hypothesis that the DRB process is perceived to be fair.
Eighty-five percent of respondents disagreed with the statement that DRBs do not provide a forum where disputes can be fully aired. Similarly, 93% agreed with the statement that the DRB hearing provides a forum that allows for the impartial resolution of a dispute. There is a correlation between these two results: fair hearings result in impartial resolutions of disputes. Bruce elaborated in the fairness issue in the interview:[The DRB process is] fair because both parties come to [the] DRB, on equal footing … all the DRB members work hard at being neutral. Neutrality is the underlying foundation of successful DRBs. It’s fair because a DRB itself is neutral, unbiased, objective…. Both parties have [an] equal opportunity to speak their peace, make their presentations. So I think it’s inherently fair.
Dispute Prevention Function. Supporters of the DRB process have claimed that having a DRB in place is enough to prevent disputes because the parties do not want to bother the panel with petty claims. For example, a respondent who is an administrator, wrote on the questionnaire:
The presence of a DRB on my project along with partnering … resulted in zero issues presented before the board. The level of proactive project management was elevated to a positive degree due to the presence of [a] DRB. DRB presence and influence minimized frivolous issues which typically in the past became major issues and/or claims.
In commenting on the impact that a DRB can have, James said, “[T]here is a social pressure to try and get these things resolved as quickly and as efficiently as possible in order to avoid having to bring something before the DRB.”
Andrew also noted this social pressure:[W]hen you visit the job site and you develop a social business/social relationship, that relationship makes it harder for people to bring claims, and particularly frivolous [ones] that they don’t truly believe in, to the panel. Which means that usually the claims that end up coming to the DRB are only those about which there are legitimate, difficult disputes that the parties can’t legitimately resolve amongst themselves.
In addition to helping avoid and resolve disputes, DRBs may literally encourage the parties to resolve disputes on their own. For example, many interviewees noted that a suggestion by the DRB to resolve a simmering problem can lead the parties to reach their own resolution. Bradley explained: “[The DRB] hear[s] about a dispute coming up in a regular meeting, not the dispute hearing. I think you can say firmly, ‘Look, this is a simple thing and you guys settle this and let us know. Report back to us at the next meeting what your progress has been.'”
Face Saving. In our culture, there is an overriding need to maintain face in aggressive interchanges and when an individual’s prestige has been publicly damaged.21 An individual will guard against losing face even if the economic cost is high because economic losses are often easier to bear than psychological losses.22 Offering concessions is an unattractive option because it can encourage the opposition to increase its demands.
When a DRB panel suggests that the parties resolve a dispute on their own, or issues a recommendation, it gives the parties an excuse to make concessions without losing face. In this situation, the parties believe they are accepting the advice of individuals they respect and trust, rather than capitulating to the oppositions’ demands.
This face-saving function was confirmed in the survey data. A majority of respondents (63%) considered the DRB recommendation to be a mechanism that allows parties to resolve their dispute without appearing weak to the opposing party.23 Daniel explained in an interview that DRBs can be used to save face “because individuals who know the answers may not want to face those answers and may prefer to have the answers imposed on them by the DRB, as opposed to voluntarily coming to that conclusion.”
James, whose background was in state government, said:[E]arly on I recognized that a lot of … people with decisional authority were reluctant to accept or become involved with settlement negotiations because of the fact that they would have to defend their settlement in some way. And more and more people are recognizing that they can take a DRB recommendation and say, “Look, we’ve had these three people look at it, this is what they recommended, and so that’s what we settled for,” and it gives them support where they didn’t have it before.
Thus, an intangible benefit of a DRB seems to be that it prevents the parties from becoming entrapped in irrational positions, and helps them to exit gracefully from them.
The DRB Hearing
The parties determine what information is presented to the panel at the DRB hearing. In general, attorneys are not involved in a representative capacity, so the parties make their own presentations. There is no cross examination during a DRB hearing, although each side has an opportunity to make a rebuttal.
Half of the respondents agreed that party control of what is presented to the panel contributes to the fairness of the DRB hearing. One quarter disagreed.24 Clearly, party control over the material presented is not the deciding factor in judgments of procedural fairness. There are stronger reasons why the process may be considered fair, e.g., the panel’s treatment of the parties, the fact that they are unbiased, etc.
Ninety-one percent of respondents agreed that the DRB process is effective because project personnel with firsthand knowledge of the dispute make the presentations at the hearings. These responses suggest that having knowledgeable presenters can influence the DRB’s decision on the issues. This is consistent with research findings that “voice” is important in how disputants perceive procedural fairness.25 It is clear that a person’s feelings of procedural justice are magnified by having voice, regardless of the ultimate decision.26
Some of the comments written on the questionnaires addressed the wisdom of excluding attorneys from the DRB process. An engineer respondent who said it was good to have project staff give the presentations, also argued that “attorneys should still be allowed to participate because, in some cases, staff are not the best at presenting these issues.” Another respondent, a consultant, pointed out the problem of memory, stating that “project personnel always forget. First-hand knowledge is only as good as the memories of those personnel.”
The DRB Recommendation
Researchers have found that having an explanation for a decision enhances the parties’ perceptions of the fairness of the process and the outcome.27 DRBs generally provide a reason for their recommendations. Eighty-four percent of respondents concurred with the statement that DRB recommendations are well-reasoned and useful in resolving a dispute, while only a small percentage (4%) disagreed.28
Also contributing to the perception of procedural justice is the ability to correct factual errors. Eighty percent of respondents said they considered the ability to correct misstatements in the DRB’s preliminary recommendation to be important.
Some researchers suggest that non-binding ADR processes, like mediation, may be perceived to be fairer than binding methods because the disputants control the outcome of the dispute.29 DRBs do not issue binding decisions. Their success depends on the ability to persuade the parties to accept their recommendation. Therefore, DRBs, like mediation, could be perceived as fairer than other processes. The more the parties look up to the DRB panelists (respect their social power), the more likely they are to accept the DRB’s recommendations. But this may be only one factor leading toward acceptance. The more well-reasoned the recommendation, the more acceptable it is likely to be to the parties.
The survey questionnaire asked whether a DRB recommendation allows for a business decision to be reached regarding the dispute. It also asked whether the recommendation contains useful information concerning the validity of the claim. Most respondents responded in the affirmative: 92% to the first question and 87% to the second. Thus, parties can easily rationalize that accepting a recommendation from a DRB panel of their choosing that takes the validity of the claim into account, and is fair and reasonable from a business point of view, is an intelligent business decision.
Overall, this research indicates that 71% (317 respondents) had a positive attitude toward DRBs (with only 5% or 22 respondents dissenting). An even greater number (88% or 390) agreed that DRBs contribute to the success of a project. We can infer from the data that the success of a project depends in part on the parties’ approach to conflict and dispute resolution. An important goal of every construction project should be the early recognition of conflicts and action to resolve them before the parties become polarized in their positions. A conflict resolution process that allows for disputes to be evaluated by professional experts, and to be resolved by the parties themselves while the job is in progress, offers a way to achieve this goal.
This study provides initial data and foundation material for understanding the destructive nature of unresolved conflicts and the potential for a successful project when using a DRB. Examining the views of those with DRB experience about this innovative ADR technique may help us better understand its effectiveness. This information cannot be more important and timely for an industry that highly values time and money and tries to make the best use of both.
1 S. Bradley, D.A. Langford, “Contractor’s Claims,” 25 (no. 3) Building Technology & Management 20-21 (1987); D. Bristow, R. Vasilopoulos, “The New CCDC 2: Facilitating Dispute Resolution of Construction Projects,” 11 (no. 2) Construction L.J. 95-117 (1995); J. Conlin, D.A. Langford, & P. Kennedy, “The Sources, Causes and Effects of Construction Disputes: A Research Project.” CIB Rpt. 02544083 (1996); J. Hewit, Winning Construction Disputes-Strategic Planning for Major Litigation (Ernst & Young 1991); C. Semple, F. Hartman & G. Jergas, “Construction Claims and Disputes: Causes and Cost/Time Overruns,” 120 (no. 4) J. Construction Engineering & Mgmt ASCE, 785-95 (1994).
3 R.M. Matyas, A.A. Mathews, R.J. Smith, & P.E. Sperry, Construction Dispute Review Board Manual (McGnw-Hal 1996).
4 Examples include the National Construction Dispute Resolution Committee of the American Arbitration Association, the CPR Institute for Dispute Resolution, the Construction Industry Institute (CII), the Construction Industry Presidents Forum, the Associated General Contractors of America, the American Underground Association, the Institution of Civil Engineers of the United Kingdom, the International Committee on Large Dams, the International Tunneling Association, and the European Bank of Reconstruction and Development.
5 For example the Florida Department of Transportation has required DRBs on all projects in excess of $10M; the Boston Central Artery/Tunnel project currently has 28 DRBs for its various construction projects. Recently, in 2002, the New York City Metropolitan Transportation Authority included DRB provisions in its East Side Access Project.
6 The questionnaire for this survey was based on preliminary and pilot questionnaires developed and tested in 2001. The current data were analyzed using SPSS version 10. A reliability coefficient (Chronbach’s alpha) was calculated and determined the internal reliability to be .9211, which indicate high reliability.
7 Of the 804 questionnaires originally mailed in this study, 456 were returned by the recipients, and 86 were returned as undeliverable by the U.S. Postal Service. Fifteen questionnaires were returned with notes indicating that the participant had passed away or believed was unqualified to answer.
8 For clarity, the terms “respondents,” as used in this article, refers to the individuals who answered the survey questionnaire. Sixteen respondents also were interviewed.
9 Twenty-seven respondents (6%) failed to provide an answer to this question.
10 Nine respondents (2%) failed to answer this question.
11 Thirteen respondents (approximately 3%) did not provide an answer to these questions.
12 Fourteen respondents (3.1%) failed to indicate their profession.
13 See supra n. 8.
14 Twenty-seven percent did not register an opinion on whether having a DRB hear disputes results in greater job satisfaction.
15 Twenty percent (90 respondents) did not indicate an opinion on this issue.
16 A significant number of respondents (28% or 116) gave no opinion on this issue.
17 J. Brockner, G. Ackerman, & G. Fairchild, “When Do Elements of Procedural Fairness Make a Difference? A Classification of Moderating Influences,” in J. Greenberg & R. Cropanzano (eds.), Advances in Organizational Justice 179-212 (Stanford Univ. Press 2001); J. Casper, T. Tyler, & B. Fisher, “Procedural Justice in Felony Vases,” Working Paper 87-03 (American Bar Found. 1987); Construction Industry Institute (CII 23-2), Dispute Prevention and Resolution Research Team, Prevention and Resolution of Disputes Using Dispute Review Boards (Resource 23-2)(CII 1996); L.M. Friedman, Total Justice (Russell-Sage Found. 1985).
18 J.M. Wittmer, P. J. Carnevale, & M.E. Walker, General Alignment and Overt Support in Biased Mediation, 35 J. Conflict Resol., 594-610 (1991).
19 R. Bies, & J.S. Moag, Interactional Justice: Communication Criteria of Fairness,” in R. Bies, R. Lewicki, & B. Sheppard (eds.), 1 Research on Negotiations in Organizations 43-55 QAI Press 1986); E.A. Lind, & T.R. Tyler, The Social Psychology of Procedural Justice (Plenum 1988); T.R. Tyler, “The Psychology of Procedural Justice: A Test of the Group-Value Model,” 57 (no. 5) J. Personality & Soc. Psych., 830-838 (1989); T.R. Tyler & R. Degoey, “Collective Restraint in Social Dilemmas: Procedural Justice and Social Identification Effects on Support for Authorities,” 69 (no. 3) J. Personality & Soc. Psyc. 482-497 (1995); T.R. Tyler & R. Folger, “Distributional and Procedural Aspects of Satisfaction with CitizenPolice Encounters,” 1 (no. 4) Basic & Applied Soc. Psych. 281-292 (1980).
20 E.A. Lind, R. J. MacCoun, P. A. Ebener, W.L.F. Felstiner, D. Hensler, J. Resnik & T.R. Tyler, The Perception of Justice: Tort Litigants (Views of Trial, Court-Annexed Arbitration, and Judicial Settlement Conferences (Instit. for Civil Justice, RAND Corp. 1989); “In the Eye of the Beholder: The Perception of Justice: Tort Litigants’ Views of Trial, Court-Annexed Arbitration, and Judicial Settlement Conferences,” 24 (no. 4), Law & Society Rev. 953-996 (1990).
21 B.R. Brown, “The Effects of Need to Maintain Face on Interpersonal Bargaining,” 4 (no. 1), J. Experimental Soc. Psych. 107-122. (1968); E. Goffman, “On Face-Work: An Analysis of Ritual Elements in Social Interaction,” 18 (no. 3) Psychiatry 213-231 (1955); The Presentation of Self in Everyday Life (Doubleday Anchor Books 1959); S. TingToomey, The Challenge of Face-work (State Univ. of New York Press 1994).
22 Goffman, supra n. 21.
23 A few (10%) disagreed and some 28% had no opinion.
24 One fourth had no opinion.
25 L. Walker, S. LaTour, E.A. Lind & J. Thibaut, “Reactions of Participants and Observers to Modes of Adjudication,” 4 (no. 4) J. Applied Soc. Psych. 295-310 (1974).
26 E.A. Lind, R. Kanfer, & P.C. Earley, “Voice, Control, and Procedural Justice: Instrumental and Noninstrumental Concerns in Fairness Judgments,” 59 (no. 5) J. Personality & Soc. Psych. 952-959 (1990).
27 R. Folger & C. Martin, “Relative Deprivation and Referent Cognitions: Distributive and Procedural Justice Effects,” 22 (no. 6) J. Experimental Soc. Psych. 531-546 (1986); R. Folger, D. Rosenfield & T. Robinson, Relative Deprivation and Procedural Justification. J. Personality & Soc. Psych., 45 (no. 2), 268-273 (1983); D.L. Shapiro, & J.M. Brett, “Comparing Three Processes Underlying Judgments of Procedural Justice: A Field Study of Mediation and Arbitration,” 65 (no. 6), J. Personality & Soc. Psych. 1167-1177 (1993).
28 Twelve percent (49 respondents) had no opinion.
29 D.L. Shapiro, & J.M. Brett, “Comparing the Instrumental and Value-Expressive Models of Procedural Justice Under High and Low Decision Control,” paper presented at the National Academy of Management Meeting, Miami (1991).
By Kathleen M. J. Harmon
The author holds a Ph.D. from Nova Southeastern University. She is president of Harmon/York Associates, a 20-year old construction consulting firm located in Secaucus, N.J. Her e-mail address is kharmon email@example.com.
Copyright American Arbitration Association Nov 2003
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