RICS publishes new Conflict Avoidance Process rules

Construction has long suffered from an unwanted reputation as a conflict-riven industry. The reality is that contractual claims and disputes cause immense damage – and it's not just about the financial costs. Commercial relationships, brand reputations, project timescales and mental well-being all suffer because of disputes.

In preparing its seventh annual CRUX insight report, consultancy HKA examined more than 2,000 projects across 107 countries, with a total capital expenditure of more than $2.25tr. It found that the total value of sums in dispute on these projects was in excess of $84bn.

While this paints a gloomy picture of the construction industry, there is nonetheless growing support for conflict avoidance and management techniques, such as RICS' Conflict Avoidance Process (CAP).

CAP is an early intervention measure that is being increasingly used in construction and engineering projects, both in the UK and internationally.

The process ensures emerging issues that might escalate into long, drawn-out disputes are addressed early and resolved by the contracting parties without recourse to costlier adversarial processes such as adjudication, arbitration or litigation.

Incorporating CAP provisions into contracts will continue to become more routine with the recent launch of the new CAP Rules, 15 articles that define and underpin the programme, now available for download.

Following CAP's introduction in 2016 the process has continued to evolve, and the new rules have been developed to clarify the way it works now.

The executive director of RICS' Dispute Resolution Service (DRS) John Fletcher remarks: 'The new CAP Rules mark a significant advance in improving conflict management in construction.

'By embedding CAP provisions into contracts and encouraging their routine adoption, the industry can move towards a more collaborative, cost-effective and less adversarial future.'

This means that, unlike litigation, it is not conducted in a public forum and the outcome is not published; neither does it involve a tribunal or lawyers, instead engaging mainly with commercial directors who determine the outcome.

A panel of either one or three impartial professionals versed in the CAP procedures and rules is introduced at the point where contracting parties differ in their views about how an issue should be resolved.

This process is effective not only at dealing with established disputes but also emerging issues, preventing disagreements from being referred to costly and adversarial means of dispute resolution with uncertain outcomes.

Once appointed, the CAP panel will liaise with the parties either in a face-to-face or virtual setting. This initial meeting enables the panel to understand the issues in more detail, and the questions the parties want to have answered.

The panel also establishes a timetable and procedure that everyone involved in the matter considers to be appropriate.

 The next stage typically involves both parties providing some form of position paper or statements and responses, identifying the key issues on which they are unable to agree.

This may be followed by further consultation between the parties and the panel, typically a mixture of inquisitorial, caucus and plenary sessions.

In inquisitorial sessions the panel will ask questions to inform their report and recommendations; caucuses meanwhile are private meetings between the panel and each party in turn, and plenaries are open sessions with all parties present, moderated by the panel.

With the permission of the parties, the panel may also visit the relevant site and speak with people who are involved in the project on a day-to-day basis. They will draw on what they have learned from the parties and apply their own considerable subject area expertise to prepare a report.

This report is normally delivered at a face-to-face meeting with the parties. It will reiterate the issues the parties have been grappling with, along with the panel's conclusions and fully reasoned recommendations for settlement.

The meeting enables those involved to discuss the report and recommendations in detail with each other, and means the panel can answer any questions.

Emerging disputes can be nipped in the bud before they escalate, meaning that working relationships can be maintained and legal costs minimised, if not avoided altogether.

CAP also offers parties flexibility in terms of timetabling and procedure, so that they can use it economically to address issues ranging from the straightforward to highly complex.

There are several other benefits to using CAP.

• It helps maintain a positive relationship between the contracting parties, and reduces the potential for future conflict.
• Because it proceeds quickly, outcomes are often achieved in just a few weeks.
• The process provides both parties with impartial and objective information on questions where they have not previously been able to agree answers, and this helps them negotiate an agreed outcome.
• Both sides are able to assess realistically the risks of taking matters to litigation, arbitration or adjudication.

Putting a CAP provision into a contract will cost nothing upfront, and it gives parties the option to use it if they want to.

Both parties must agree to use CAP, though, so that, unlike adjudication, the other party is not bound into the process once one party starts it.

The updated CAP Rules help to clarify that panel members: 

• are highly credible subject matter experts
• are free from conflicts of interest
• are recognised as being independent
• follow a structured procedure, timetable and fee regime.

RICS will not charge a fee to the parties for assisting in CAP panel appointments.

Panel members work on an agreed hourly or daily rate, with a portion allocated to RICS for administration costs. In addition, parties can raise a complaint to DRS if they experience issues with a panel or procedural matter.

With the new CAP Rules, RICS is leading the way in creating more efficient, fair and constructive dispute resolution.