Like NEC 3, NEC 4’s dispute resolution process is dealt with under Option W. There are now 3, rather than 2, options - W1,W2 and W3. W3 is the new option.
Options W1 and W3
W1 and W3 deal with the situation where the United Kingdom Housing Grants Construction and Regeneration Act (the Act) does not apply. That will be the case where for instance the contract is not a construction contract or where the works are not being carried out in England, Wales or Scotland (care should be taken if works are taking place in either Northern Ireland or the Republic of Ireland, both of which have provisions for adjudication).
W1 provides for adjudication outside of the Act and like W2 introduces the concept of Senior Representatives, which are dealt with in this article in relation to Option W2 below.
W2 applies where adjudication under the Act does apply.
NEC4 introduces the concept of Senior Representatives. The idea is that Senior Representatives of the parties meet and attempt to resolve the dispute before there is an adjudication. This applies to both options W1 and W2. So far as option W2 is concerned, NEC does not make it a condition that the Senior Representative route must be followed - it can’t, that would be in breach of the Act which states that a party may refer a dispute to adjudication at any time. The Senior Representatives route is merely an option if the parties agree.
The Senior Representatives for each party are named in the Contract Data. There is provision for two Senior Representatives from each party. This can be problematic in lengthy construction projects. Those named as Senior Representatives may move on. There is nothing obviously within the contract to allow for replacements.
Although NEC does not specify who the representatives should be, they need to be senior enough to have authority to settle while at the same time being sufficiently divorced from the detail of the contract and the dispute so that they can take an objective view.
As stated above, both parties have to agree to a dispute being referred to the Senior Representatives. The party referring the dispute then notifies the Senior Representatives, the other party and the Project Manager. Note it is not enough simply to notify the other party’s Senior Representative, the other party has to be notified as well (presumably at the address stated in the Contract Data.
Each party submits to the other their statement of case within one week of the notification.
It is not clear how this will work for a Responding Party. How is the Responding Party supposed to submit its case without knowing exactly what the Referring Party is going to say? This process also gives a Responding Party less time to put its case together than it would get in adjudication. The appeal of the process to a Responding Party (other than where the parties genuinely want to maintain good relations) is likely to be to buy time ahead of an adjudication.
Although NEC does not say so, it is assumed that the submissions of statements of case by each party will be simultaneous. The statements of case are limited to ten sides of A4 together with supporting evidence. This may simply result in parts of the parties' cases being contained within the supporting evidence. The parties are free to agree to reduce or increase the number of pages allowed.
The Senior Representatives have to attend as many meetings and use any procedure they consider necessary to try to resolve the dispute over a period of up to three weeks. There is no provision for extension of this period. This is a very short time period especially as Senior Representatives are likely be busy people.
At the end of the three weeks the Senior Representatives produce a list of issues that are agreed and those that are not agreed. The Project Manager and Contractor put into effect the issues agreed.
If this process does not work, adjudication proceedings can be issued. Adjudication can in any event be commenced by either party during the Senior Representative process. If one party does not believe the process is going well they can simply issue adjudication proceedings. This is always a risk. It is difficult to see how such an action would not hijack the Senior Representative process.
No evidence of the statement of case or discussions are disclosed, used or referred to in to the adjudication or in any other subsequent proceedings. This seems ripe for arguments in adjudications, arbitrations or the court as to what is, and what is not, admissible.
It is worth remembering that with both NEC3 and NEC4, any dispute must be referred to adjudication first, before being referred to arbitration or court, as appropriate.
Under clause W2 of NEC4, an adjudicator is appointed under the NEC Dispute Resolution Service Contract (DRSC) current at the starting date. The starting date is the date stated in the Contract Data Part 1. The current DRSC was issued by NEC in June 2017.
The adjudication process pretty much follows that set out in NEC3. As with NEC 3 any further information has to be provided to the adjudicator within 14 days of the Referral unless the parties and the adjudicator agree otherwise.
One slight change is the time frame within which an adjudicator can correct their decision to remove a clerical or typographical error. Under NEC3 it was two weeks. Under NEC4 it is five days. This is in order to comply with the Act.
As with NEC3, remember if a party is dissatisfied with an adjudicator’s decision they only have four weeks from being informed of adjudicator’s decision to commence arbitration or court proceedings as appropriate.
This is a new option and can be used where the Act does not apply but the parties choose a Dispute Avoidance Board (DAB) rather than adjudication. This is an entirely new concept for NEC. The DAB procedure must be followed before referring to court or arbitration as appropriate.
The DAB consists of either one or three members. The number of members is stated in the Contract Data Part 1. If there are to be three members, both the Client and the Contractor nominate a specific individual who is named in the Contract Data and the parties jointly chose the third member. There is also provision for dealing with a member not being able to act.
The DAB is appointed under the NEC DRSC. The DRSC is relevant to all three W option clauses.
The DAB visit the Site at intervals. The frequency is specified in the Contract Data. The aim is that the DAB inspect the progress of the works and become aware of potential disputes, thereby resolving issues before they become disputes.
A potential dispute is notified to the DAB between two-four weeks after notification to the other party and the Project Manager.
The DAB makes recommendations. It visits site and inspects the works and prepares a note of its visit. Unless the parties have resolved the issue by the end of the visit, the DAB provides a recommendation for resolving the issue.
Only if a party is dissatisfied with the recommendation is the dispute referred to either court or arbitration (as appropriate). The dissatisfied party must notify the other party of the matter which it disputes and state that it intends to refer to court or arbitration (as appropriate) within four weeks of notification of the DAB recommendation.
NEC4 alters the dispute resolution process quite substantially from NEC3.
While the principles behind the Senior Representatives are commendable, in practical terms unless the parties are fully committed to resolving disputes in this way it may simply add another layer of complexity to the dispute resolution process and the opportunities for it to be used as a tactical weapon are manifold.
So far as option W3 and the use of DAB is concerned, this follows a similar approach adopted by FIDIC. It can work well if operated properly.