The role of the Standing Conciliator: Part II

In Part I of the paper considering the role of the Standing Conciliator under the Public Works Contract (PWC) as used by the Irish public sector for building and civil engineering projects since 2007, Ciaran Fahy first discussed the process of conciliation as used in Ireland and traced its evolution over the past 30 years or so.

In Part II, he deals with the PWC recommendation, and with the Standing Conciliator and project board and how the engagement of the two of them might minimise or avoid disputes.

PWC – the recommendation

Where a dispute, which has been referred to conciliation, is not resolved by agreement, subclause 13.2.8 provides: "[T]he conciliator shall give both parties a written recommendation. The conciliator shall base the recommendation on the parties’ rights and obligations under the contract."

Thus, in the absence of resolution by agreement, subclause 13.2.8 requires the conciliator to consider the dispute and set out in writing a recommendation for its resolution. Subclause 13.2.9 provides that either party may issue a notice within 42 days in effect rejecting the recommendation. If there is no such notice of dissatisfaction, subclause 13.2.10 states: "[T]he recommendation shall be conclusive and binding on the parties, and the parties agree to comply with it."

There is nothing in the PWC form of contract which requires a conciliator to give any indication of how the recommendation was arrived at. However, in practice, conciliators are often asked to provide the reasons for the recommendation and, in many instances, do so. Frequently, such reasoning is included within the recommendation so that it is laid out like an arbitrator’s award or an adjudicator’s decision.

This topic is covered extensively in the Engineers Ireland Conciliation Procedure 2013 (2020 version) where paragraph 1.14 says as follows: "The recommendation shall state the conciliator’s opinion as to the resolution of the dispute, based on the parties’ rights and obligations under the contract. The conciliator shall not be required to provide an explanation for the recommendation, unless requested to do so by both parties and agreed by the conciliator. If an explanation of the recommendation is requested and agreed by the conciliator, this explanation shall be issued as a separate document."

The thinking behind this approach is that the reasoning or explanation in a conciliator’s recommendation has a different status to the reasoning in an arbitrator’s award or an adjudicator’s decision. The parties may accept, and be bound by, the conciliator’s recommendation while rejecting the reasoning or explanation which led to it.

Paragraph 2.6 of the Guide to the Engineers Ireland Conciliation Procedure 2013 (2020 version), says: "The recommendation should set out the background of the dispute, how the conciliator was appointed, the date of appointment, what steps were taken in the conciliation, what issues were dealt with and, finally, what the conciliator recommends in relation to the issues. It is of the upmost importance that the recommendation is clear, unambiguous and ultimately capable of enforcement."

Paragraph 2.7 of the same document suggests that where a recommendation or reasons are required they should be provided in a separate document, and then paragraph 2.8 goes on to say as follows: "The procedure provides that the parties and the conciliator must agree if an explanation for the recommendation is to be provided and the conciliator is advised to consider carefully before agreeing to this. This is because in certain circumstances the explanation or basis for the recommendation may cause difficulties for a party, even where the provisions of the recommendation on its own would not. The conciliator should approach this issue on the basis of doing what is felt most likely to lead to acceptance of the recommendation by both parties."

Subclause 13.2.8 of the contract sets out the basis on which any recommendation is to be made, namely: "The conciliator shall base the recommendation on the parties’ rights and obligations under the contract."

This formulation was undoubtedly drafted with care and, interestingly, it differs from the basis on which an arbitral award or an adjudicator’s decision is written, where the requirement is that it would be "in accordance with the contract".

There is a subtle but significant difference between the formulations with, it is suggested, the PWC version offering the conciliator a latitude not available to an arbitrator or an adjudicator.

Project board/Standing Conciliator in practice

There have been a number of seminars and discussions involving practitioners since the introduction of the Dispute Management Procedure in 2016 and, from these, it is clear that the operation of the process varies widely from project to project.

The use of a Standing Conciliator is now widespread and the formalisation of the appointment is generally done using MF1.18. This envisages a fee in the form of a lump sum payment with separate payment for conciliations; in many instances, Standing Conciliators are paid on the basis of an hourly rate for all work done mainly because of the difficulty in specifying in advance what exactly is to be done by the Standing Conciliator.

Project boards tend to meet every four to six weeks and, in many instances, such meetings are chaired by the Standing Conciliator but that is not always the case and, indeed, some Standing Conciliators are reluctant to attend meetings of the project board.

Where the Standing Conciliator is to attend a project board meeting, this would normally be coordinated with a site visit with onsite personnel beforehand.

Where the Standing Conciliator chairs the project board meetings, it will assist the parties if the Standing Conciliator could prepare an agenda beforehand and, subsequently, record in writing anything agreed in relation to disputes referred.

It is very important that there is a clear record of disputes referred to the project board as well as the outcome from such consideration bearing in mind that subclause 13.1.2(2) requires the parties to be notified of unresolved disputes on the day following the project board meeting.

While the remit of the project board is extremely narrow, it brings together senior personnel from both the employer and contractor which provides an invaluable opportunity to discuss the progress of the project and anticipate any difficulties likely to arise. In many cases, the Standing Conciliator will facilitate this by way of an informal discussion once the formal business of the project board has been completed.

The number of disputes referred to a project board tends to vary greatly from one project to another with very few disputes being referred in some instances, whereas another project board may be faced with a steady stream of disputes at each meeting.

In such circumstances, the Standing Conciliator may be able to assist by bundling disputes together and also by dealing with disputes expeditiously. Subclause 13.2.8 of the contract provides that disputes referred to conciliation are to be dealt with within 42 days or "… a longer period proposed by the conciliator and agreed by the parties".

In many instances the Standing Conciliator may feel it would be of assistance to the project to extend the 42-day period for conciliation; on the other hand, there may be matters to be resolved without delay to ensure the smooth running of the project.

A good example of this is the approach to valuation under subclause 10.6 where the parties are likely to find it of considerable advantage to have a consistent approach which has either been agreed or which has emerged from conciliation early in the project.

Dispute avoidance

Dispute avoidance is very much in fashion these days and, for example, this is epitomised by the FIDIC move from DAB model (Dispute Adjudication Board) to a DAAB model (Dispute Avoidance/Adjudication Board) introduced in the 2017 version of the contracts with the introduction of a new subclause 21.3.

Much work has been done in the UK in the same area, for example the Conflict Avoidance Pledge and publication of Conflict Avoidance Toolkit by Transport for London and Network Rail with a group of professional bodies. The Chartered Institute of Arbitrators (CIArb) is also promoting early dispute resolution through Conflict Avoidance Boards (CAB).

The key point to be made in relation to dispute avoidance is that it is not something to be switched on when the project starts. This point is made clear in the Conflict Avoidance Toolkit which states: "Thorough preparation of project documentation, and appropriate risk allocation, is the first step in conflict avoidance."

In my experience, dispute avoidance generally requires four elements:

A good contractor;
A good price;
Good documentation; and
Good contract administration by both parties.

The import of the above four elements is fairly self-explanatory. In the case of the contractor, the requirement is not only that the contractor is capable of doing the project but that it has allocated the necessary and appropriate personnel/resources to complete it satisfactorily and on time. The second element means that the contractor has priced for all work and risk in the project and has done so to achieve a profit.

Good documentation means that what is to be done has been clearly and comprehensively set out, while good administration means that matters are dealt with as and when they arise by both parties in a spirit of cooperation and with the emphasis on getting the project done.

Unfortunately, in many PWC contracts, some of the above elements tend to be deficient, at least to some extent, and this inevitably leads to difficulties and disputes.

There are other issues which arise with dispute avoidance, the first being that it is difficult to deal with matters before the ER determination has been made and disputed.

Strictly speaking, this means the dispute has not been avoided; however, there is still great benefit if the matter can be resolved rapidly and informally.

It must be borne in mind that, where disputes are referred to conciliation and dealt with in a formal manner, this will almost certainly have a disruptive impact on the project by distracting the parties and also by encouraging an adversarial approach.

Another issue which arises in relation to dispute avoidance is that of authority. Paragraph 1.3 of GN 3.1.1 says: "All members of the project board must have the capacity and authority to negotiate agreements that will be binding on the party that they represent."

In practical terms, public sector representatives rarely have such a level of authority because of layers of governance and delegated authority.

A further issue in relation to dispute avoidance is that, unfortunately, the parties do not always engage fully for the benefit of the project. Some employers tend to rely unduly on the contract and see all problems which arise as the contractor’s risk; on the other hand, some contractors underprice the risk associated with the project which encourages claims under the contract.

Despite the above reservations, there is still much that can be done in relation to dispute avoidance within the PWC where much responsibility for this falls on the Standing Conciliator.

In this regard, it is essential that the Standing Conciliator gains and maintains the confidence of both parties and works to promote a good working relationship with an emphasis on getting the project done for the benefit of all.

The Standing Conciliator has considerable procedural latitude and, for example, is entitled to meet the parties separately. This allows for informal building of relations and trust; such personal interaction is not available under most forms of dispute resolution and this flexibility, available in conciliation, should be exploited.

There is much the Standing Conciliator can do to avoid costly and lengthy dispute resolution and, for example:

The Standing Conciliator can provide the parties with an opinion or advice in line with subclause 13.1.2(7). This is a most useful option and it is normally provided on the basis that it is neither limiting nor binding on the Standing Conciliator or the parties.
In any conciliation the Standing Conciliator controls the procedure as provided in subclause 13.2.5(5). This opens the way for shortened and simplified conciliations which are likely to be suitable for most disputes.

In dealing with dispute avoidance, the PWC does not go as far as the latest version of FIDIC. The FIDIC Red Book 2017 edition provides that the parties may jointly request the DAAB (in writing with copy to the engineer): "… to provide assistance and/or informally discuss and attempt to resolve any issue or disagreement that may have arisen between them during the performance of the contract"(16).

The same subclause also states: "The parties are not bound to act on any advice given during such informal meetings, and the DAAB shall not be bound in any future dispute resolution process or decision by any views or advice given during the informal assistance process, whether provided orally or in writing."

The corresponding provision in the PWC states the project board: "… may agree to seek advice or opinion from the Standing Conciliator at the project board meeting, where one is appointed, either orally or in writing, in an effort to resolve disputes referred.(17)"

It will be seen from the above that the PWC envisages the Standing Conciliator only becoming involved in such an informal way where disputes have actually arisen and been referred to the project board, in other words, the contract makes no reference to an involvement with issues and disagreements which may precede and ultimately lead to disputes.

The PWC should probably be amended in this area to bring it more in line with the FIDIC version; that said, there is really nothing to stop the Standing Conciliator, with the agreement of the parties, becoming involved and attempting to deal with matters which may ultimately lead to disputes but which have not yet done so.

Conclusions

The PWC form of contract, introduced in 2007, uses a tiered form of dispute resolution involving a version of conciliation, a process widely used in Ireland since the mid-1990s, followed by arbitration.

In 2016, this was modified by the dispute resolution management procedure which introduced a project board and also a Standing Conciliation for all projects above a certain value. Details are provided in a new PWC clause 13.1 and also in Guidance Note 3.1.1, Dispute Resolution, published by the OGP.

There is no express provision in the PWC dealing with dispute avoidance; however, the incorporation of the dispute management procedure in 2016 provides considerable scope in this regard.

Guidance Note 3.1.1 limits the role of the project board to dispute resolution based on negotiated agreements of disputes referred to it; on the other hand, a role in dispute avoidance is clearly envisaged for the Standing Conciliator.

Strictly speaking, dispute avoidance requires intervention before an ER determination is disputed; in reality, this means before such a determination is issued, and that is very difficult to achieve. However, there is considerable scope to bring matters to a resolution without engaging in costly, lengthy and formal procedures.

The Standing Conciliator is central to this aspect of dispute avoidance/minimisation and is best placed to seek to achieve this. Finally, dispute avoidance is not something that comes into play when work starts on site. In fact, most of the factors governing dispute avoidance will have been put in place before then.

Author: Ciaran Fahy is an arbitrator, conciliator, adjudicator and mediator based in Dublin. Part I can be viewed here.