Construction disputes often involve several overlapping issues or questions. For example, a disagreement about whether work constitutes a variation may affect the contractor’s entitlement to additional payment, extensions of time, delay costs, and relief from liquidated damages.
Parties often try to avoid litigation for disputes like these, choosing alternative forums such as expert determination or arbitration instead. But the two processes serve different purposes. Expert determination generally suits discrete technical, valuation, or specialist issues. Arbitration is better suited to complex disputes involving competing evidence, contractual interpretation, and broader legal rights and obligations. Choosing the wrong process can increase costs, prolong the dispute, and place important issues before an unsuitable decision-maker.
What is the dispute actually about?
The first step is to identify each issue that the decision-maker will need to resolve.
A dispute may appear to concern the value of a variation but also require a decision about whether the principal directed the work, whether the contractor complied with notice requirements, whether a contractual time bar applies, and whether the work caused critical delay. Those connected issues involve more than valuation and may be better suited to arbitration, as the decision-maker must interpret the contract, assess evidence, and determine the parties’ legal entitlements.
By comparison, the parties may agree that a variation occurred but disagree about the reasonable value of the work. They may need a quantity surveyor to assess the applicable rates, quantities, and supporting records. That is a defined specialist question that may be resolved efficiently through expert determination.
The same distinction applies to delay and defects disputes. An expert may determine a confined question about the impact of an event on the critical path or about technical compliance. Arbitration is more appropriate where the dispute also involves causation, concurrent delay, contractual notices, competing expert opinions, or the responsibility of several parties.
When should you choose arbitration?
Arbitration is a contractual dispute resolution process conducted by one or more arbitrators. It commonly involves pleadings, document disclosure, witness statements, expert reports, a hearing, and written submissions. Unlike an expert, an arbitrator determines the parties’ legal rights and obligations by assessing the evidence and arguments they present. This structure suits disputes involving several factual, technical, and legal questions.
Account for all relevant project participants
An arbitration agreement only binds the parties that agreed to it. If the principal and head contractor must arbitrate, but the relevant subcontractor, consultant, or supplier is not subject to a compatible clause, the head contractor may have to defend one claim in arbitration while pursuing another in court.
Running related claims through separate processes can produce:
- duplicated evidence, costs, and delay;
- inconsistent findings by different decision-makers; and
- difficulty allocating responsibility and recovering losses from downstream parties.
Parties should therefore review the dispute resolution provisions across all project contracts. Compatible flow-down, joinder, and consolidation provisions may allow related claims to be heard together.
When should you choose expert determination?
Expert determination allows a specialist to decide a defined issue by applying their own knowledge, skill, and experience. The expert may consider submissions and project records, inspect the works, conduct an independent investigation, and issue a written determination. With fewer procedural steps than arbitration, the process can often resolve matters more quickly and at a lower cost where the issue falls squarely within the expert’s field.
Expert determination commonly suits disputes concerning:
- variation valuations, rates, prices, quantities, or measurements;
- technical compliance or defects;
- defined programming issues; or
- calculations under an agreed contractual formula.
The expert’s qualifications should correspond with the issue. A quantity surveyor should determine a valuation issue, an engineer should assess technical compliance, and a programmer should determine a confined delay question.
Expert determination becomes less suitable as a dispute expands across several disciplines or turns on contractual interpretation. That risk is greater because the result is usually final and binding, and courts generally will not intervene merely because the expert made an error of fact or law.
Can the processes be used together?
Expert determination and arbitration do not need to operate as competing alternatives for the entire dispute.
A contract can refer defined technical or valuation issues to expert determination while reserving broader legal disputes for arbitration. For example, an arbitrator may decide whether a direction constituted a variation, while a quantity surveyor may determine the value of that variation if entitlement is established.
The contract should specify:
- which questions go to each decision-maker;
- whether the expert’s determination binds the arbitrator;
- when each process commences; and
- how overlapping issues will be managed.
Without that clarity, the parties may spend additional time disputing jurisdiction rather than resolving the underlying claim.
Draft the clause around the project
A dispute resolution clause should identify the process, or combination of processes, the parties will use before a dispute arises. Reaching agreement after the commercial relationship has deteriorated will usually be more difficult.
The drafting ultimately determines whether either process works as intended. A broad expert determination clause may place a complex dispute before an unsuitable specialist, while an uncoordinated arbitration clause may leave related parties in separate proceedings. The clause should direct each issue to the process best equipped to resolve it.
This is why we recommend having a lawyer review your dispute resolution clauses before you execute the contract. Getting it wrong often means spending more time and money on disputes than either party intended.
