The Conflict Avoidance Pledge, which promotes collaborative working and early intervention techniques, continues to gain signatories. Its key promoters include not only RICS, but the ICE, ICC, DRBF, CIARB and RIBA. Whilst adjudication is a highly effective form of dispute resolution (in that disputes often go no further), there is no doubt it can damage commercial relationships if not used carefully. Tight timetables and the occasional late night do not necessarily assist matters. It perhaps not surprising then that parties are looking for other options to prevent the cost (both in terms of time and money) and uncertainty that disputes are unfortunately accompanied by.

However, the right to adjudicate “at any time” where the Housing Grants Act applies means that Option W2 of NEC4 is frequently the one selected by necessity in England and Wales. Whilst this does have a Senior Representatives’ process, which should hopefully remove some of the risk associated with entrenchment from those dealing with the dispute, it does not provide for a Dispute Board along the lines of Option W3 (or FIDIC contracts). As such, the tool kit to keep “disagreements” from escalating into disputes within Option W2 are comparatively limited.

As the recent King’s College Report on Dispute Boards has demonstrated, access to a truly independent and objective Board to intervene early can be a very useful tool. For example, the report found that in 45% of cases Individuals reported that dispute avoidance resulted in a dispute being completely avoided where a Dispute Board was utilised (see my Insight on this topic at https://www.fenwickelliott.com/research-insight/newsletters/insight/99). Hopefully this is where the new Conflict Avoidance Clauses for use with the NEC4 ECC form can also bring something additional to the table.

Whilst the new clauses are for use with both Options W1 and W2, I am particularly interested in their potential use for high value projects and/or disputes where the Housing Grants Act does apply. The Senior Representatives’ Process can undoubtedly be very effective if used correctly and if the representatives are sufficiently removed from the dispute itself. However, the NEC option of a Conflict Avoidance Panel provides an opportunity to properly test the merits of a “disagreement” with an independent party before it has a chance to escalate. It can also potentially suggest a way through that is not “one party takes all”. Obviously, there will be a cost for this tool but for high value projects and/or high value “disagreements” that cost may result in a variety of different types of savings.

So, what does the new clause provide for when used in conjunction with W2? Well, it provides for the option of the parties choosing (by agreement) to use a Conflict Avoidance Panel of 1 or 3 members to review what is referred to as a “disagreement” and make a recommendation. The process commences with a notice of disagreement. The parties then meet within a week to: (a) define what goes to the panel and the outcome wanted; and (b) decide which members of the panel they think would work or ask for an appointment from a nominating body. A scoping meeting is then held within one week of the panel being appointed. This is to ensure that the exercise is sufficiently focussed and to decide on timings and procedures. Where the parties can’t agree on procedures the panel is to decide.

The disagreement is then referred within one week of the scoping meeting, a response is provided within one week and a recommendation provided within two weeks of that response (subject to any clarifications requested). If the recommendation is “implemented” by the parties then it becomes binding on the parties. If not, then the matter can still be referred to the normal W2 processes. Costs are to be shared equally (it being a consensual process).

It remains to be seen how often this option is adopted and how effective it is. However, for parties looking for an option akin to a Dispute Board (and the benefits those can bring), but working within the confines of the Housing Grants Act, it is definitely one to consider. After all, it is consensual and nothing can prevent you adjudicating at “any time” anyway (unless you’ve agreed and implemented the recommendation), so the downsides of including it in your contract seem negligible whilst the potential upsides considerable. Needless to say, parties should give careful thought as to who their Conflict Avoidance Panel should be when deciding to take the plunge.