Dispute boards and the Olympic Games: A tried and tested method of dispute avoidance

The Olympic Games are an economical, logistical and legal feat that tests a nation’s ability to deliver quality infrastructure in a timely manner on the world stage. 

A host city is placed under immense pressure to have all the necessary facilities, venues and other associated construction work completed on time for the sporting events to commence. 

Delay is not an option and every government decision is openly scrutinised in the public eye. However, as all in the construction industry know, undertaking major projects is fraught with risk in terms of delay, defects, cost blowouts and a raft of other unexpected consequences. 

For an Olympic Games host city, such as Brisbane in 2032, it is imperative that the suite of contracts it enters into to build the venues, facilities, and infrastructure contain appropriate dispute avoidance and resolution mechanisms to manage the risks, and inevitable disputes, as and when they arise. 

Based on a history of success, this Insight proposes that dispute boards, in whichever form, are most appropriate for the avoidance of disputes. They are also useful for resolving disputes that cannot be avoided without the need to have recourse to formal dispute resolution processes such as public litigation or arbitration. 

Part 1: Introduction

In Australia and internationally, dispute boards (DBs) have been used successfully on a number of construction projects. DBs, in their various forms, are an alternative to the standard dispute resolution processes that parties often include in their construction contracts.

Although used less frequently, DBs when established and utilised appropriately, are a highly effective mechanism for avoiding (and where necessary resolving) disputes, providing a project with the optimal chance of successful completion within time and budget.   

Importantly, DBs are a creature of contract. The contract prescribes the number of neutral third party members on the panel, the rules and procedures the panel will apply and follow, and the scope of their role during the project’s lifetime.

In general, members of a DB meet to review the project’s progress, provide recommendations to resolve issues (often in an interim and non-binding manner) and proactively assist the parties to avoid formal disputes. As will be discussed in Part 2 of this Insight, the effectiveness of a DB hinges upon, amongst other things, careful consideration of the structure of the DB, the parties trusting and investing in the DB, and appropriately skilled members being selected to the panel.

An array of different construction projects have utilised DBs. According to the Dispute Resolution Board Foundation (DRBF), there have been 107 projects totalling $59.2 billion in Australia since 1987 that have used a DB in some format.

Within Australia use of DBs has increased significantly in the past decade, particularly in New South Wales and Queensland. Internationally, given the popularity of the International Federation of Consulting Engineers (FIDIC) contracts, which have DBs in its standard terms, DBs are more commonplace.

Relevantly, for the purpose of this Insight, DBs were used in the contracts for the London and Rio Olympic Games in 2012 and 2016 respectively. Part 3 of this Insight details how DBs functioned at those Olympic Games and the unique way that they were designed to be most effective. The use of DBs in London and Rio, and the success achieved, is an appropriate platform against which to consider their continued and future use in the Brisbane 2032 Olympic Games.

Since the International Olympic Committee named Brisbane as the host of the 2032 Olympic and Paralympic Games in July 2021, Queensland has and continues to carry out significant work in preparation for the games. An Olympic Infrastructure Agency is expected to oversee the developments that include rebuilding and improving existing stadiums, and constructing five new stadiums.

It is estimated that most of the capital investment will occur in the second half of this decade, averaging $800 million to $1.1 billion annually between 2027 and 2030. Further, that it will cost almost $7 billion to run the games, which will be privately funded. On its own, the city’s major stadium, the Gabba, will cost $2.7 billion to be rebuilt so that it is ready for the opening and closing ceremonies. Funding for the Gabba will be paid for by the Queensland State government. There are also plans for a new ’Brisbane Live’ entertainment arena at Roma Street that will be built seating up to 18,000 people.

Work is already underway on the Brisbane Metro — a fully electric, high-capacity train network linking the city to the suburbs to make it easier to connect people with the sporting venues hosting events. Victoria Park is also expected to be transformed and a number of ‘Green Bridges’ will be constructed to improve access and enhance movement around the city. Ultimately, the Brisbane 2032 Masterplan will require cooperation from all levels of government and the private sector to ensure a successful Olympic Games.

Cooperation, collaboration and dispute avoidance in Olympic Games projects is crucial. The Olympic Games are uniquely challenging. They have an immovable deadline, require an inordinate number of people and contractors to ensure completion, and are scrutinised globally.[1] To this point, Anika Wells, the federal Sports Minister, has acknowledged the hard deadline associated with Olympics Games projects. But, the challenge for Brisbane in 2032 is made more complex by the current climate of the construction industry, which is plagued by global supply chain issues and the rising costs of materials and resources. It is in that context that the developments in Brisbane are primed for disputation.

Accordingly, Part 4 of this Insight explores the use of DBs as a principal mechanism for dispute avoidance, and where necessary, resolution in the 2032 Olympic Games in the various contracts with the contractors that will ultimately be delivering the projects on the ground.

Part 2: A snapshot of DBs: the ‘what’, ‘why’ and ‘how’

What are DBs?

A DB is a contractual mechanism for real-time dispute avoidance and rapid dispute resolution. Professor Paula Gerber refers to DBs as a kind of dispute avoidance process, which fundamentally act as a “circuit breaker to prevent escalation of conflicts”.[2]

There are various forms of DBs, including Dispute Resolution Boards, Dispute Avoidance Boards (DABs), Dispute Adjudication Boards and FIDICs Dispute Avoidance Adjudication Boards to name a few. This Insight refers to the general umbrella term of DBs throughout.

A customary DB comprises a panel, usually three, of neutral third party experts appointed by the parties at the outset of the contract. The DB members meet regularly during the course of the project, irrespective of whether any dispute has been referred to them, to review project progress and facilitate early resolution of issues as and when they arise before escalation into formal disputes.[3]

Depending on the nature of the role of the DB stipulated in the contract, the parties can request the DB to provide informal decisions during the project. The DB can also be available to provide more formal recommendations, or decisions, on the likely outcome of any dispute. The preference in Australia is for DBs to provide interim binding decisions.[4]

Significantly, a DB’s primary focus is on dispute avoidance, which is in contrast to processes such as mediation, expert determination, arbitration, litigation and other forms of alternative dispute resolution — each of these is reactive in nature and deal with the resolution of crystallised disputes.

Why are DBs used?

The principal benefit to be gained from a DB is the avoidance of formal disputes on a project through rapid real-time decision making thereby maintaining project relationships and progress of the works. It is believed that DBs have a positive impact on project budget and timely project completion. This is particularly important on high profile construction and infrastructure projects such as the Olympic Games that have an immovable end date and budgetary constraints.

The DB process may be considered akin to mediation (save for the crystallisation of a dispute) in that the panel members aim to assist the parties in a ‘without prejudice’ manner to find ‘best for project’ outcomes.[5] DBs are advantageous in that they can enhance more productive communication between the parties and promote the early resolution of issues before each side becomes entrenched in their positions. The evidence indicates that in the majority of cases, projects with DBs have been completed under budget, finished on or ahead of time, and avoided litigation or arbitration costs.

How can DBs be used most effectively?

The incorporation of a DB on a construction project must be done by carefully considering the nature, size and location of the project, and the parties involved. Only once the specific needs of the project and parties are identified can a DB be properly designed.

In particular, the choice of panel members is often one of the critical factors in a DB’s success. It is imperative that the parties have confidence, faith and respect in the panel members and the DB procedures. In order for the DB to have the highest chance of success, all parties must also put any adversarial tendencies to one side and adopt a cooperative approach at the outset.

Depending on where the project is located, it may be necessary for the panel members to have had experience in the particular region and understand the local laws. Further, the panel members may require specific legal or technical skills depending on the nature of the project and the potential issues the parties may anticipate arising.

Accordingly, for a DB to be most effective, the parties must tailor the processes to meet the needs of the individual project.

Part 3: Use of DBs on previous Olympic Games projects

2012 London Olympic and Paralympic Games

The 2012 London Olympic and Paralympic Games (London Olympics) involved multiple large-scale projects, comprising venues (including the Olympic stadium, aquatics centre, velodrome and velopark), transportation improvements (including utilities, structures, bridges and highways) and broadcasting and media. In total, the 55 major projects for the London Olympics were completed pursuant to more than 100 contracts and a budget of £9.3 billion.[6]

The chosen form of contract was the New Engineering Contract (NEC3). The dispute resolution provisions provided a stepped process which included two DBs in the form of an Independent Dispute Avoidance Panel (IDAP) and an adjudication panel (Adjudication Panel). There were two separate panels due to concerns around an adjudicator’s jurisdiction under the UK’s statutory adjudication legislation and issues of enforcement. The Institution of Civil Engineers, and other bodies assisted with appointing the DBs.

The standing panels were funded as a project cost, and the contractors covered the remaining costs associated with formal referrals.[7] If challenged, the final decision-making tribunal was the Technology and Construction Court of England and Wales.[8]

IDAP comprised 11 construction professionals (including the chair, Dr Martin Barnes[9]) all with experience in major projects, but with a breadth of varied expertise and skills to address any type of issue.[10] The members were designated to specific projects in which they would dedicate particular attention.

IDAP’s focus was on finding practical and logical solutions to problems as they arose before they became time-consuming and costly disputes.[11] Regular meetings were held and there was monitoring of the various projects. The DB process was designed to be flexible so that it could be adapted to suit any particular dispute and there were limited procedural rules.

At the time of implementing the IDAP for the London Olympics, Dr Barnes stated that:[12]

“The innovative approach of avoiding rather than resolving disputes is essential given the unique challenges that the [Olympic Delivery Authority] and its contractors face in delivering the London 2012 infrastructure and venues, particularly the immovable end date.”

Disputes not capable of resolution through the IDAP consultation process could be referred to the dedicated Adjudication Panel.[13] There were 12 members (including the chair, Peter Chapman) and the Adjudication Panel was required to comply with the UK statutory adjudication legislation.

It is reported that the DB process on the London Olympics worked exceptionally well and was an effective vehicle for avoiding the majority of disputes.[14] Only two disputes required adjudication, no court actions were commenced and, overall, the London Olympic venues were delivered on specification, ahead of time and within budget.

It was observed that having a dual panel system was particularly effective so that conflict avoidance could be prioritised and left unencumbered by the separate adjudication process.[15] Further, the informal nature of the DB process, inclusion of early warning procedures and real-time decision-making were credited as reasons for the London Olympics’ success.

From the London Olympics experience, three trademarks of an effective DB were identified:[16]

• the client’s leadership;
  
  
• the establishment of two panels beyond reproach, each with a set criteria to operate; and
  
  
• a proper risk sharing based on appropriate principles.

Ultimately, the success of DBs in the London Olympics justified their subsequent use in the construction contracts for the Rio Olympic Games in 2016.[17]

2016 Rio Olympic and Paralympic Games

Similarly to the London Olympics, the 2016 Rio Olympic and Paralympic Games (Rio Olympics) implemented a DB panel for dispute avoidance and resolution across some 35 contracts. The primary justification for embracing DBs for the Rio Olympics was to safeguard the timely completion of installations.[18]

The Brazilian Government was responsible for the delivery of city bid commitments, being the main venues and infrastructure, and Rio 2016 was responsible for delivery of the games, including what are described as the ‘overlay’ contracts.[19] The DB panel was introduced for the Rio 2016 contracts.

Experience in the implementation and use of DBs in Brazil was limited at this time and importantly there was no established list of local trained DB members. The DRBF was therefore involved in assisting Rio 2016 in the formation and mechanics of the DB. The DRBF created two panels, a panel of DB members from which each party could select one DB member (the third was chosen by the party-selected DB members), and a panel of DB chairs who would chair the three-person DBs.

Bespoke DB rules were drafted based on principles from ConsensusDocs 200.4 and 200.5 and were consistent with local laws. These bespoke rules formed part of the contract between Rio 2016 and the individual contractors.

Key features of the DB panels were:[20]

• a separate DB was established for each contract, which could be permanent or ad hoc with one or three members. The preference was a permanent or standing DB with three members;[21]
  
  
• party-selected DB members were chosen from a list of trained and certified local members. The DB members were required to have undergone training under the Rio 2016 DAB Training Programme (run by the DRBF), be properly certified, and be fluent in Portuguese or Spanish. Either party had the right to reject a party selected member, although grounds for rejection were limited in scope;
  
  
• DB chairs were also to be selected from the DB members list. DB members were chosen based on their familiarity with local law, geographic proximity to the Rio Olympics, previous DB experience and fluency in Portuguese or Spanish and English;
  
  
• short timetables were in place to accord with the short programs for the procurement of the Rio 2016 projects to ensure that construction timelines were met. This included appointing the DBs at the outset of the contract, setting frequent DB site visits, and requiring rapid delivery of the DB’s opinions and decisions;
  
  
• the DBs had the power to provide written advisory opinions when jointly requested. A formal referral of a dispute could be made to the DBs to obtain a binding decision. DB decisions were binding until overturned by arbitration;
  
  
• operational assistance was provided by a DB Program Manager to help the parties in the initial establishment of the DBs, and thereafter procedural operation of the DBs. This was important given the short timetables and to provide consistency across the 35 DBs; and
  
  
• remuneration rates for the DBs were fixed as a daily rate and monthly retainer. DB fees were split equally between the parties and included administration charges and the DB Program Manager fee.

Use of DBs in the Rio Olympics was regarded as successful. Ultimately the DBs were rarely used, however the existence of the DBs motivated the parties to resolve their issues as they arose. Accordingly, the aim of dispute avoidance was realised.[22] By also incorporating a degree of expediency into the process, it gave the Rio Olympics the greatest chance of avoiding delays in construction.

Significantly, use of DBs on the Rio Olympics raised the profile of DBs in Brazil and has been regarded as the catalyst for adoption of DBs into public works contracts.

Part 4: Key issues for the 2032 Brisbane Olympic and Paralympic Games

The 2032 Brisbane Olympic and Paralympic Games (Brisbane Olympics) are less than 10 years away. As with any Olympic Games projects, the focus is on building a legacy of success and creating a lasting impact in Queensland following the conclusion of the Brisbane Olympics.

An issue that should be front of mind during the planning and strategic procurement phase is how disputes should be dealt with. Disputes, as we all know too well, have the ability to cause significant cost overruns and project delays. This is of particular importance in the context of an Olympics project involving substantial infrastructure and construction works over numerous contracts, with an immoveable end date (extensions of time beyond that date are not an option) and a limited budget funded from the public purse.

It is against this backdrop that focus should be directed towards dispute avoidance in the first instance. It is evident from the discussion above regarding the London and Rio Olympics, that the DBs established on these projects contributed to the successful completion of these projects through limiting disputation. It is suggested that establishing a DB for the Brisbane Olympics could offer similar substantial benefits.

If the Brisbane Olympics are to follow suit and engage a DB, there are a number of factors that will require careful deliberation:

• DB format
  
  Two separate panels were established for the London Olympics, one to deal with dispute avoidance and the other for determining formal disputes.[23] In comparison, in the Rio Olympics the established panel had the dual function of dispute avoidance and determination. There are significant benefits to be gained by a DB adopting a dual function, including expedited high quality decision making given the DB’s intimate knowledge of the project and an element of satisfaction in any DB decisions given the professional relationship, and trust built between the parties and the DB members during the course of the project.
  
  There is also the issue of whether a three person standing DBs is preferred, or whether one person ad hoc DBs may be suitable for smaller contracts. Save in circumstances where disputes are of limited complexity and value, the preference should be towards three person standing DBs.
  
  
• DB skills and experience
  
  This is a key characteristic in determining the success of a DB. It is imperative that the appointed DB members have the necessary technical and legal skills coupled with practical DB experience. This is vital so that the DB can carry out its duties to a high standard, and that the parties can trust the DB members in their analysis and decision making.
  
  The DRBF is well established and actively involved in Queensland. The DRBF has an established list of experienced DB members from which suitable members could be drawn. This is in contrast with the Rio Olympics where there was a lack of DB experienced candidates in the first instance.
  
  
• Commitment to the DB process
  
  The Rio Olympics DB process applied to all underlay contracts. In the London Olympics use of the IDAP was recommended, but not mandatory, for all contracts. To facilitate the full potential of the DB, it is important to secure buy-in and participation to the DB process from the key project participants early on. Further, the parties must be confident in the DB and ensure that it has an ongoing working knowledge of the various projects and maintains a detailed understanding of progress and potential issues.[24]
  
  
• Applicable DB rules
  
  The applicable DB rules will require careful consideration and where appropriate should be modified to suit the specifics of the Brisbane Olympics. Standard DB rules are often based on the FIDIC suite of contracts or the International Chamber of Commerce DB Rules. The DB rules on the Rio Olympics were specially tailored to suit the requirements of local laws.
  
  
• Early DB involvement
  
  DBs are ordinarily established on execution of the contract. Consideration should be given to whether early appointment/involvement of the DB (or at least some members of the DB) would be beneficial. This may assist in developing the DB rules and the mechanics for the processes to be written into the various contracts.
  
  
• Form of contract 
  
  The London Olympics chose to use NEC3 as its standard form contact. NEC3 has a focus on early resolution of issues and early contractor involvement. Potential options for the Brisbane Olympics could include NEC4 ECC Option W3 which allows for a DAB, or alternatively a bespoke contract.

Part 5: Conclusion

Olympic Games projects are often described as accelerated regeneration projects involving complex construction and infrastructure contracts. Given that it is highly likely that disputes will necessarily arise, focus should be directed towards avoiding disputes before they crystallise and the parties become entrenched in their positions. Drawing from the London and Rio Olympics experience, it is clear that DBs are a vital element of the dispute avoidance framework to prevent disputes derailing the building and construction work required for the Olympics Games.

However, the inclusion of a DB must be done on a project-specific basis. The success of any DB depends on the quality of the members, location, nature and size of the project, the parties involved, the degree of familiarity with DB processes and the particular contractual procedures governing the DB. For the Brisbane Olympics, assistance from local bodies such as the DRBF is likely to be critical for the effective setup and operation of a DB.

In addition to DBs, it is also essential that contracts are set up properly at the outset in terms of commercial risk being owned by the most appropriate party, early engagement of the supply chain and a commitment to fostering a collaborative culture.