(1) Adjudication! 3 October 2012 (2) Estidama! 4 October 2012 - - PDF document

October 2012 1

Can Adjudication assist Abu Dhabi in achieving its Sustainability (Estidama) goals for the construction industry?

Presentation by: Paul Straker

FCInstCES, FRICS, FICE, MCIArb October 2012

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Credit to Others – Citations(?)

Kindly note that throughout this presentation; I cite

• ther

eminent professionals, by cross reference to a bibliography at the end

• f

the presentation notes(?).

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(1) Adjudication!

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(2) Estidama!

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(3) The ICES survey 2012

• n Dispute Resolution!

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How do these 3 relate?

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My Hypothesis!

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“I assert that Adjudication can significantly assist Abu Dhabi in achieving its Estidama (sustainability) goals for the construction industry”

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The results of the ICES dispute resolution survey for Abu Dhabi 2012, support my assertion!

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HOW?

First some background information.

An Overview

• f

Adjudication, Estidama & key findings from the dispute resolution survey.

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What is Adjudication?

• “A process whereby the [neutral third party]

adjudicator who may not be a lawyer has to reach a decision on matters referred to him [by] the complaining party”. (1.1)

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Who is the Adjudicator?

• Either

a single suitably qualified and experienced person / adjudicator.

• Or

a dispute adjudication board (DAB), comprising of 3 suitably qualified adjudicators.

• Appointed as a standing adjudicator/DAB at

commencement of the project; or on an ad- hoc basis; by the parties to the contract.

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What is an Adjudicator’s Decision?

• After a dispute (rejection of a clearly defined

claim) has been referred to the adjudicator for his decision thereon.

• The adjudicator, acting fairly and impartially, shall

adopt suitable procedures, to make his reasoned decision within a limited time (usually 3 months).

• The adjudicator’s decision will be contractually

binding; unless and until revised in an amicable settlement or an arbitral award.

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What are the alternatives?

• In Abu Dhabi Arbitration is the preferred

method of dispute resolution!

• However,

the Abu Dhabi Commercial, Conciliation and Arbitration Center (ADCCAC) also offer Conciliation prior to Arbitration.(3.0)

• Other

potential

• ptions:

Negotiation; Mediation; Early Neutral Evaluation; Expert Determination; Litigation.

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Dispute Resolution Options

• The following are the more commonly used

Alternative Dispute Resolution (ADR) methods.

• Discussed in order, from simple inexpensive

methods, to the more complex, legalistic and increasingly expensive methods.

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Negotiation ADR Litigation

Negotiation

• Theoretically gives the parties most control
• ver the dispute resolution process.
• Without the intervention of a third party: “…

typically consists of a sequence of proposals … and counter proposals … that continue until agreement is reached or negotiations break down …”. (1.2)

• Negotiations often break down!

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Negotiation cont’d

• Here’s just one of many reasons; the human

ego and lack of negotiating skills:

– “There will be many times that others would gladly change their minds and agree with you except for one thing: … – … they have already made a definite commitment, … and cannot change position in good grace … – … Skillful persuaders know how to leave the door

• pen so that others can escape from their

previous position without losing face .…”. (5.0)

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Mediation

• The

least adversarial dispute resolution method; utilizing skilled persuaders!

• “… the facilitation, by a third party, of a

negotiated agreement … in which the mediator does not decide the dispute, but facilitates communication and problem- solving by the parties”.(1.3)

• The optimum solution?

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BUT WOULD IT WORK?

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Conciliation

• Utilizes similar techniques to Mediation, except:
• Its more formalized; no meetings without both

parties present.

• Results in a settlement proposal, made by the

conciliator.

• Its a means of amicable settlement.
• Non-binding on the parties; therefore open to

further dispute!

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Early Neutral Evaluation

• Provided by an independent third party: “… an

early, frank and thoughtful evaluation of the relative positions of the parties …”;(1.4)

• “… to enhance the prospects of a successful

negotiation …”;(1.4)

• “… by offering a realistic view of what might

transpire if a case is fully prepared and tried”.

(1.4)

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Expert Determination

• Used where the parties have appointed a third

party expert and: “… submit an issue for the determination of a third party …”.(1.5)

• Its “used primarily in disputes of a technical

nature which require … an opinion on a specific issue or issues”.(1.6)

• The parties may agree in advance, to be

contractually bound by the determination.

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Adjudication

• Discussed

earlier: internationally proven; used by the Multilateral Development Banks (incl. the World Bank); on projects worldwide.

– FIDIC MDB Harmonised Construction Contract 2010; and throughout the FIDIC suite of contracts.

• Limited cost, similar to conciliation (typically

between 0.2% - 0.5% of construction costs).

• Reaches

an impartial and contractually binding decision; usually within 3 months.

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Adjudication cont’d

• “The DB procedure amounts to serial adjudication

… over 90% of disputes referred to a DB will not go beyond that procedure into arbitration or litigation …”.(Dr. Robert Gaitskell QC CEng).(4.0)

• Speedy resolution; thereby facilitating the works,

enhancing cash-flow and project delivery.

• Disposes of the argument, before tensions build;

thereby preserving business relationships.

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Arbitration

• An independent, impartial and finally binding,

private dispute resolution process; proven worldwide.

• Typically the default method, after the client’s
• wn dispute procedure in the UAE; and the

final method under FIDIC contracts.

• Award

is enforceable in many countries

(pursuant to the New York Convention); therefore

may be attractive to foreign parties.

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Arbitration cont’d

• Takes many months or 1 – 2 years to reach a

resolution.

• Formal, adversarial, typically with only one

Arbitrator in UAE.

• Heard

in private; but may still damage business relationships.

• Similar cost to litigation; and substantially

more than any of the foregoing methods.

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Litigation

• Not a form of ADR, but mentioned here to put

ADR in context.

• Settlement of the dispute through the courts.
• A judicial process that is finally binding;

subject to appeal.

• May not be enforceable outside the UAE

jurisdiction; therefore may not be attractive to foreign parties.

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Litigation cont’d

• May take many months or years conclude.
• Costs similar to Arbitration.
• Public hearing that may damage reputations.
• Can result

in a breakdown of business relationships.

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Estidama!

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What is Estidama?

• Estidama is Arabic for Sustainability!
• But with a difference.
• It is comprised of 4 fundamental pillars:

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Environment Economic Cultural Social

Integration at its core!

• Estidama integrates the 4 pillars.
• What are its expectations of the construction

industry?

• “To achieve significant environmental, social,

economic and cultural benefits, while ensuring that the costs

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the development are minimized.”(2.1)

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Pearl Rating System for Estidama

• A green building rating system.
• Launched by ABU Dhabi UPC in 2010.
• Mandatory for all construction projects.

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Comprises

• Mandatory and optional sustainability

requirements, to achieve:

– Minimum One Pearl Rating for all developments. – Minimum Two Pearl Rating for government developments. – The maximum is Five Pearls.

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How?

• “An essential part of the strategy for achieving

Estidama is to fundamentally change the way we approach design, construction and real estate development”.(2.2)

• To achieve Pearl Credit Points, under the Pearl

Rating Categories.

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Pearl Rating Categories(2.4)

• Integrated Development Process
• Natural Systems
• Livable Buildings
• Precious Water
• Resourceful Energy
• Stewarding Materials
• Innovating Practice.

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Integration

• Has

the potential to benefit from Adjudication.

• Integrated Development Process:
• “Encouraging cross-disciplinary teamwork to

deliver environmental and quality management throughout the life

• f

the project”.(2.5)

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Innovation

• Has the further potential to benefit from

Adjudication.

• Innovating Practice:
• “encouraging innovation in building design

and construction to facilitate market and industry transformation”.(2.6)

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Estidama

• I propose to you; that Adjudication would be

the most effective dispute resolution procedure; for Abu Dhabi, as it:

– Integrates the team – Results in a contractually binding decision – Gives a quick solution at moderate cost.

• Adjudication achieves Integration and would

be regarded as Innovative at present times.

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Implementation

• Currently the focus of the Pearl rating system

appears to be on design and construction.

• The benefits of adopting the most efficient

dispute resolution process are not usually considered.

• The UPC could help to facilitate the adoption
• f adjudication; by awarding significant credit

points for its demonstrable and beneficial use.

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How?

• “An essential part of the strategy for achieving

Estidama is to …

• fundamentally change
• …the way we approach design, construction

and real estate development”.(2.7)

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Comfort Break

• Help yourself to the refreshments.

Please wait until the end

• f

the presentation before completing the questionnaire in your folder.

• We will continue in 10 minutes!

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Dispute Resolution Survey 2012

• Carried out between 14th June 2012 and 14th

July 2012.

• Issued by the ICES, RICS and associated

institutions in the UAE.

• Specific to the dispute resolution culture in

Abu Dhabi.

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Survey Results Generally

• Unless stated otherwise; the results in this

presentation, are expressed in terms

• f

percentages of the combined results of all respondents.

• Fractions of percentages and the “It Depends”

category are not shown, for clarity. Therefore, the sum of the following percentages, does not add up to 100% .

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(1) Survey Results

• 31 survey returns were made by the closing date;

comprising:

• The detailed results can be viewed now on the

ICES UAE web site; http://www.cices.org

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. Clients - 21% Contractors - 31% Consultants - 48%

(2) Project Cost

• The majority of our projects cost in excess of

US$ 100 million (AED 360 million).

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.

Agree 61% Disagree 6% Sometimes 13%

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(3) Base Contract

• A substantial proportion of projects use:

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0% 50% 100% FIDIC 4th 1987 FIDIC 1999 R&Y NEC3 Bespoke 68% 52% 3% 39% Agree Disagree Sometimes

(4) Dispute Resolution Procedures

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45% 3% 32% 68% 23% 29% DAB or adjudicator is appointed on an ad-hoc basis. DAB or adjudicator is appointed at commencement. Agree Disagree Sometimes

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(4) Dispute Resolution Procedures cont’d

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74% 39% 16% 6% 39% 19% 13% 16% 48% Employer's own procedures are used. Mediation / counselling is used. An independent expert is appointed. Agree Disagree Sometim es

(5) Settlement of Disputes

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39% 35% 32% 29% 42% 26% 29% 23% 39% The Engineer / CA acts fairly. The Engineer / CA acts impartially. An amicable settlement is reached. Agree Disagree Sometim es

84% of Contractors disagree 64% of Contractors disagree Majority 42% of Contractors disagree

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(5) Settlement of Disputes cont’d

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65% 0% 48% 3% 61% 26% 26% 32% 19% Disputes are usually settled before reaching arbitration. Litigation is the preferred method. Arbitration is the preferred method. Agree Disagree Sometim es

But see later statistics!

(6) Disputes Relate to:

Contract 74% Specs 68% Variations 74% EOT 97% Design 48% Const 29% 0% 20% 40% 60% 80% 100% 120%

Type of Dispute

Contract Specs Variations EOT Design Const

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(7) Impact of Disputes

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48% 32% 58% 19% 16% 13% 13% 32% 19% Increased costs more than 10%. Increased costs more than 5%. More than 3 months delay. Agree Disagree Sometim es

74% Contractors Agree 85% of Clients Agree

(8) Quicker Settlement

• f Disputes Would

Reduce Delay 74% Reduce Cost 84% Improve Design 32% Improve Const 32% 0% 20% 40% 60% 80% 100% Agreed Impact Reduce Delay Reduce Cost Improve Design Improve Const

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Cognizance of previous questions and answers!

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(9) Effective Methods

• f Dispute Resolution

Arbitration 16%

Mediation 61%

Adjudication 68%

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Litigation 0%

(B) DISPUTES (C) COST (A) TRUST

Summing up the Statistics

In my opinion, the key statistics fall under the following heads: which I suggest are correlated with the dispute resolution procedure in the contract.

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Trust

• FIDIC contract is used, without the use of the

adjudication provisions.

• Client’s own dispute procedure is mainly used.
• Engineer / CA; does not usually act impartially;

and sometimes acts unfairly.

• The lack of impartiality by the dispute resolver;

leads to mistrust; a priceable Risk!

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Disputes

• Disputes mainly relate to:

– Extension of time. – Interpretation of contract. – Valuation of variations. – Interpretation of drawings & specifications.

• Which are all interrelated; resulting in risks to

time, cost and quality.

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Cost to the Parties

• Projects typically cost more than U.S. $100

million.

• With delays of

more than 3 months; due to disputes.

• and increased costs of 5% - 10%; due to disputes.
• That’s a Substantial Loss!

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Cost to the Environment

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One of the many costs: With an estimated annual construction expenditure for Abu Dhabi in 2011, of U.S. $100+ billion; funded substantially from oil revenue, at $80 per barrel; based on the dispute statistics, this equates to around 100+ million barrels of oil, consumed due to disputes, in just one year!

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Dispute Resolution

• Arbitration is not the preferred method.
• A quicker settlement of disputes would reduce

delays and cost; as well as improving the quality

• f design and construction.
• Adjudication would be the preferred method for

settling disputes.

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Adjudication

• Settles disputes impartially and quickly, which

builds trust; resulting in time and cost savings, as well as improved quality.

• Is contractually binding, giving certainty.
• Achieves Estidama’s tenets of Integration and

Innovation, at reduced cost; as well as being the preferable method of dispute resolution.

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Reflection

“We need not all agree, but if we disagree, let us not be disagreeable in

• ur

disagreements” (Martin R. DeHaan).(6.0)

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Closing Thought

• “An essential part of the strategy for

achieving Estidama is to fundamentally change …” (UPC).(2.2)

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Conclusion

• Does my Hypothesis stand?
• Based on my research and the findings of the

dispute resolution survey; I maintain my assertion that:

• “Adjudication can significantly assist Abu

Dhabi in achieving its Estidama goals!”

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End of Presentation

Please return the questionnaire with your opinions; before you leave.

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Questions Integration Learning

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Afterward

• Your response will form part of an article on

the survey and following CPD presentation; to be published in the ICES Civil Engineering Surveyor magazine. This article will also be used as part of my dissertation for a Masters Degree in Construction Law and Arbitration.

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Bibliography

• Kindly note the following that have been cited

throughout this presentation:

– (1.0) Crook JA & Betancourt JC, What is Alternative Dispute Resolution (ADR)? (CIArb, London WC1A 2LP, 2010).

• (1.1) Ibid. @
• p. 5; citing,

Reynolds, Michael et al. Construction Litigation Practice, (Welwyn Garden City, 2000, p.57.

• (1.2) Ibid. @ p. 19; citing, Forgas Joseph ‘On Feeling Good

and Getting Your Way: Mood Effects on Negotiator Cognition and Bargaining Strategies’, (1998) 74 Journal of Personality and Social Psychology, p. 565.

• (1.3) Ibid. @ p. 15; citing, Menkel-Meadow, Carrie, ‘Lawyer

Negotiations: Theories and Realities-What we Learn from Mediation’, (1993) 56 Modern Law Review, p. 372.

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Bibliography cont’d

– (1.0) Crook JA & Betancourt JC, What is Alternative Dispute Resolution (ADR)? ; cont’d

• (1.4) Ibid. @ p. 5; citing, Levine, David, ‘Early Neutral

Evaluation: A Follow-Up Report’, (1986) 70 Judicature,

• p. 237.
• (1.5) Ibid. @ p. 9; citing, Jones, Doug, ‘Expert

Determination in Commercial Contracts’ in Cato, Mark, The Expert in Litigation and Arbitration (London, 1999),

• p. 789.
• (1.6) Ibid. @ p. 9; citing, Wright, Ian, et al. ‘Alternative

Dispute Resolution’ in Ramsey, Vivian et al., Construction Law Handbook (London, 2009), p. 905.

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Bibliography cont’d

– (2.0) Abu Dhabi Urban Planning Council (UPC), The Pearl Rating System for Estidama, Version 1.0 (UPC, Emirate of Abu Dhabi, April 2010).

• (2.1) Ibid. @ p. 14.
• (2.2) Ibid. (emphasis added).
• (2.3) Ibid.
• (2.4) Ibid. @ p. 1.
• (2.5) Ibid.
• (2.6) Ibid.
• (2.7) Ibid. @ p. 14. (emphasis added).
• (2.8) Ibid.

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Bibliography cont’d

– (3.0) Abu Dhabi Commercial Conciliation and Arbitration Center (ADCCAC), Procedural Regulations 2005. – (4.0) Gaitskell R QC, Trends – dispute resolution in the credit crunch (Construction Law International Journal, Vol. 6, issue 3, October 2011) @ p. 6-12.

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Bibliography cont’d

– (5.0) Giblin L, The Art of Dealing With People (Embassy Books, Mumbai 400 023, 2001); at p. 48. – (6.0) Taddeo D, Notable Quotables “3,000 Quotations from A to Z” (Creation House Press, Florida 32746); at p. 39.

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Disclaimer

This survey and/or presentation material may not be used for any commercial purposes whatsoever. The

• pinions

expressed in this survey and/or presentation, do not necessarily reflect the views of the Chartered Institution

• f

Civil Engineering Surveyors (ICES), its Council of Management or

• ther committees or members, or those involved in

conducting the survey. No material may be reproduced in whole or in part without the written permission of the ICES. END.

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