The use of Dispute Review Boards on large public construction projects has become more and more common. Examples of public owners using DRBs on their projects include the Florida Department of Transportation, the Texas Department of Transportation, and the California Department of Transportation.
DRBs are usually comprised of one to three people who are appointed to the DRB to make recommendations about any disputes that arise on a project. Submission of a dispute or claim to the DRB may be a mandatory step that must be taken before anyone can file a lawsuit seeking additional compensation for work on a project.
Many times, the mandatory claims procedures in the contract between an owner and the prime contractor are flowed down to the subcontractors on the project. As such, there are several things that anyone, including subcontractors, working on a public project with DRB procedures should know.
1. Selection of the DRB members: There are many options for how the members of a DRB are selected. One option is where the owner and the prime contractor mutually come to an agreement on who will serve as the three members of the DRB. Another option is where the owner selects one member, the prime contractor selects the second member, and those two members select the third member. Frequently, the third member will serve as the chair of the DRB.
The selection of the DRB members is important because, as noted below, DRBs often issue non-binding recommendations. The DRB process works best where the owner and prime contractor believe that the DRB members are acting as impartial decision makers. Thus, it’s important that the members of the DRB do not have any apparent bias towards either the owner or the prime contractor.
2. A DRB’s decision can be binding or non-binding: If a DRB’s decision is binding, then the DRB will be acting more like an arbitration panel. That may mean that whatever the DRB “recommends” will result in a decision that may be enforceable in a court.
But many times, the DRB procedures will provide that the DRB’s decision will be non-binding. That means that the DRB will be issuing true recommendations that the owner and prime contractor can either accept or reject. If rejected, the parties will typically proceed with litigation to resolve the dispute.
You may also have situations where disputes below a certain level (e.g., $375,000 or less) are subject to binding decisions from the DRB, and disputes in excess of a certain amount are subject to mere recommendations. This hybrid approach can be beneficial for resolving relatively smaller disputes as quickly as possible, while leaving the larger disputes to be resolved in court, if needed.
3. The recommendation of a DRB can be admissible in court: If the parties do not agree with a non-binding DRB decision, they can “appeal” that decision by filing a lawsuit and litigating the dispute in court. The DRB procedures may specify whether DRB decisions are admissible as evidence in future court litigation.
If the DRB decision is admissible, that means that the court or the jury may consider the DRB’s decision as evidence in deciding who is right and who is wrong in the dispute. Given that the members of a DRB are usually viewed as experts in construction disputes (e.g., former construction company executives, project managers, engineers, and/or construction lawyers), it would not be surprising if a judge or jury hesitated to second guess a DRB’s decision.
If the DRB decision is inadmissible, then the judge or jury should not consider the DRB decision. Regardless, even where the parties have agreed that a DRB decision is inadmissible, you can rest assured that there will be a fight over how the DRB decision may be considered in court, if at all.
One of the main purposes of a DRB is to have the DRB consider disputes as they occur in real time on a project, not years later after the dispute originally arose. Another purpose is to have the parties resolve their dispute in an informal forum that may result in the parties being more transparent about the strengths or weaknesses of their claims.
If the DRB decision is binding, there is no doubt that the parties should treat the DRB process with the same seriousness and preparation as a lawsuit. Also, even if the parties have agreed that the DRB’s decision is non-binding, both the owner and the prime contractor (and any involved subcontractors) should put on the best case they can in support of their position.
Do not enter the DRB process with the mindset that “well, if we don’t agree with the DRB’s recommendation, we will just file a lawsuit.” That’s because the “winner” in the DRB process will do whatever it takes to get that DRB recommendation in front of the fact finder in the lawsuit (judge or jury), and the fact finder may be hesitant to overturn the decision of a panel of “experts.”
Bottom Line: The DRB process should be treated seriously by presenting your position on a dispute in the best possible light. An experienced construction lawyer should be consulted to ensure that you are given the best possible chance of prevailing on the claim or dispute at the DRB level.
As always, if you have any questions, please send me an e-mail.
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