May 30, 2014 Articles

Use of Dispute Review Boards on the Rise for DOT Projects

Dispute Review Boards (DRB) are becoming more common with many states’ Departments of Transportation (DOT).

by Doreen M. Zankowski and Gregory M. Boucher

Dispute Review Boards (DRB) are becoming more common with many states’ Departments of Transportation (DOT). A 2013 American Association of State Highway and Transportation Officials (AASHTO) survey found that 18 state DOTs utilize DRBs and further research reveals that at least four other state DOTs use DRBs for their construction projects. Construction attorneys (and their clients) who fail to recognize and appreciate this trend likely will be left on the outside looking in as future DOT large-scale construction projects are bid and awarded.

DRBs generally consist of a panel of three independent neutrals who serve throughout a construction project in an effort to defuse disputes before they arise, or deflate and resolve disputes before they ruin an otherwise successful construction project. The cost of the neutrals typically is shared by the owner and contractor. Neutrals usually have at least 10 years of construction experience, and they are trained by the Dispute Review Board Foundation (DRBF) or by the American Arbitration Association (AAA). Any dispute first must be brought to the DRB for a decision; however, the DRB’s decisions generally are not binding. Feedback from DRB projects is almost universally positive. (For more information about DRBs generally, the authors refer readers to Deborah Bovarnick Mastin, Esq.’s “Dispute Review Boards to the Rescue” article found in the November 2013 ABA Construction Forum Newsletter, Vol. 15 No. 4.)

The rise in the use of DRBs by DOTs is recognized by the AASHTO’s recent attention to DRBs. The AASHTO represents highway and transportation departments in all 50 states and considers itself the “voice of transportation.” Put simply, if the AASHTO is taking interest, you can bet that state DOTs are too. The AASHTO’s most recent Subcommittee on Construction meeting in August 2013 included a panel discussion on DRBs with presentations by representatives of the DRBF, the Florida DOT, the Ohio DOT, and a contractor that has successfully completed several projects within the Ohio DOT DRB framework.

The Florida DOT has been using DRBs since 1992 with great success. While DRBs are available on all Florida DOT projects, project-specific DRBs are used on all construction projects in excess of $15 million. Although Florida’s DOT does not require DRBs on projects of less than $15 million, Florida DOT utilizes DRBs on a large percentage of projects in excess of $1 million. The Florida DOT reports that DRBs cost only 10 percent of overall construction costs, a small price to pay for a procedure that potentially can avoid exponentially larger damages and attorney fees when disputes are not resolved at their early stages.

The Ohio DOT began using DRBs in 2002 and also reports success. Ohio reports the use of DRBs on 18 projects, half of which were served by the same contractor. This contractor served on the recent AASHTO panel alongside the Ohio DOT representative. The relationship this contractor gained with the Ohio DOT clearly provides it with a leg up on its competition when bidding Ohio DOT projects. Importantly, the contractor appears to maintain a good business relationship with the Ohio DOT despite taking an adversarial position on a large changed conditions claim in which the DRB ruled in the contractor’s favor. It is clear that attorneys working with general contractors would be wise to encourage their clients to be open-minded to the benefits of working with DRBs and the long-term impact to their success and to future business with DOTs. Even if a contractor has not worked with a specific state’s DOT, past success with DRBs will likely work in a contractor’s favor when bidding future DOT projects requiring DRBs.

State DOTs are not the only venue to expect DRBs; federal construction projects also employ DRBs. In fact, it is widely reported that DRBs first were used on the federally funded Eisenhower tunnel project in Colorado. More recently, in December 2001, the U.S. Department of Transportation, Federal Highway Administration (FHWA) authored an article championing the use of DRBs, “Dispute Review Boards: Resolving Construction Conflicts.” One FHWA success story was the use of DRBs on Boston’s “Big Dig” multi-billion dollar construction project that rerouted an interstate highway through downtown Boston. It has been reported that the “Big Dig” involved more than 25,000 claims and 46 different DRBs heard nearly seven billion dollars’ worth of claims. The success of DRBs on the “Big Dig” project likely is a model for the use of DRBs on future large-scale, federally funded construction projects.

Lastly, it is important to note that the DRB programs are not uniform from state to state. Many state DOTs only require DRBs on large construction projects. For example, DRBs are required on contracts in excess of $10 million in California and Washington, $15 million in Florida, and $25 million in West Virginia. Additionally, small claims and smaller projects often have claims review boards that are not project specific, and in other instances a single-party neutral is assigned for relatively small disputes.

In conclusion, construction attorneys working with or on the opposite side of the table from DOTs must familiarize themselves with DRBs and advise their clients as to their benefits. DRBs currently are favored by many DOTs and likely will be utilized by many more DOTs given the AASHTO’s recent attention to DRBs. Those contractors and clients who are not familiar with DRBs likely will be left behind as DOTs employ DRBs on future large-scale construction projects.

Doreen M. Zankowski is a partner and Gregory M. Boucher is an associate with Saul Ewing LLP, in Boston, Massachusetts.

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