Sweeping Changes to Government Contracts: Part 2 The New DRAd System

SCC 59 and ArchSD’s Dispute Resolution Advisor (DRAd) System Handbook (August 2019)

Sweeping Changes to Government Contracts: Part 2 The New DRAd System

Sweeping Changes to Government Contracts: Part 2 The New DRAd System 1400 787 Cocking & Co


Readers may be surprised to hear a DRAd system described in terms as if it was something very new. However, the scale of the changes will be apparent from the flowchart that can be found at Appendix 4.2 of the Handbook which is produced below. The paragraph numbers follow the “Contract Administration Procedures” at Part 4 of the Handbook which mirror the provisions of SCC 59. You may download the handbook from the Architectural Services Department.

Flowchart of the new dispute resolution process

The DRAd System – An Overview

The core provisions are to be found in SCC 59(4) – 59(6). In summary:

The DRAd meets with the parties on a monthly basis in the normal way (or more frequently at the parties’ written request) either separately or together  to attempt resolve problems that arise before they become formal disputes and to anticipate problems which may arise (SCC 59(4)(b)).

However, if either the Employer or the Contractor dispute any decision, instruction, order, direction or certificate of the Supervising Officer (“SO”) or certificate or valuation by the Surveyor, the dispute must be resolved pursuant to the procedures set forth in sub-clauses (5) and (6) of SCC 59 (SCC 59(5)(a)). These provide that the parties’ site level representatives must first attempt to resolve the dispute within 28 days on their own without the DRAd (SCC 59(5)(b)). Given that the DRAd’s role is to attempt resolve problems that arise before they become formal disputes, it is odd that there appears to be nothing that the DRAd can do to avoid the issuance of a Notice of Dispute. The parties must settle the dispute without him or issue a Notice of Dispute. The circumstances may be such that the DRAd will not always be able to anticipate a decision of the SO or know that the decision will be controversial. It is only after the issue of the Notice of Dispute that the DRAd becomes involved.

If the parties’ site level representatives cannot settle the dispute, the aggrieved party must file a Notice of Dispute (with only a copy to the DRAd) following the termination of such efforts to reach agreement but in no event later than the end of the 28-day period. If the Notice of Dispute is not served within the prescribed time period, the SO’s decision, instruction, order, direction or certificate or the Surveyor’s certificate or valuation, crucially, becomes final and binding on the parties. The dispute process is therefore easily triggered and rapidly crystalises into a Notice of Dispute, failing which the parties will be bound (SCC 59(5)(b)).

It is only at this stage, after the issue of a formal Notice of Dispute that the DRAd shall promptly meet with the site level representatives of the parties (including those of Specialist or Nominated Sub-contractors if appropriate) to attempt to resolve the dispute at site level (SCC 59(5)(c)).

However, the dispute is now on a fast track. Despite the emphasis upon site level discussion, once a dispute has, of necessity, become the subject of a Notice of Dispute, it is on course to potentially become a final and binding arbitration. If the dispute cannot be resolved with the DRAd’s participation at the site level within only 14 days of the service of the Notice of Dispute, the DRAd must send a written report (“Report”) to non-site senior officers of the parties within 3 days (SCC 59(5)(e)(i)).

The Report is required to be concise and must analyse the dispute. It should identify the key issues in dispute and the perceptions of the DRAd as to the obstacles to settlement. If requested in writing by both parties, the DRAd must also provide a non-binding recommendation for a resolution or a non-binding evaluation of the merits of the dispute within only a further 3 days.

The distinction made between “site level personnel” and “non-site senior officers” is a regular theme and yet seems to be an artificial one since neither the Contractor, and especially the Employer will be able to issue a formal Notice of Dispute without a requisite level of internal approval. There is no such distinction between “site level personnel” and “non-site senior officers” in the Task Force’s recommendation.

It is therefore unclear what the intended significance is of the DRAd being allowed to show a draft of the Report to the site level personnel before it is served to the non-site senior officers (SCC 59(5)(e)(i)).

The non-site senior officers of the parties are then required to meet within 7 days after receipt of the Report to attempt to settle the dispute (SCC 59(5)(e)(ii)). The DRAd shall only attend this meeting if the parties request in writing that he do so. The DRAd shall be available to attend separate meetings with the Employer or with the Contractor to respond to questions about the Report.

If the dispute is not settled within 21 days of the date of service of the Report to the non-site senior officers, the DRAd has the ability to recommend to the Employer and the Contractor another form of dispute resolution that in his judgment may be a more effective means of resolving the dispute than the short form arbitration (SCC 59(5)(f)(i)). The parties are not obliged to accept the recommendation of the DRAd, and the other options that might be available are not set out or Rules incorporated. This creates a significant uncertainty at the beginning when a party issues a Notice of Dispute as to the ultimate destination of the process, particularly whether the journey being embarked upon will end in an undisclosed process or a final and binding decision.

In the absence of a settlement or of the agreement of another voluntarily adopted dispute resolution approach, the Employer and the Contractor must participate in the short form arbitration provided for under SCC59(6). The Employer and the Contractor including any Specialist Sub-Contractor or Nominated Sub-Contractor who may be obliged to participate in the arbitration shall be bound by the determination of the arbitrator (SCC 59(5)(f)(ii)).

This can be contrasted with the Task Force’s recommendations, where adjudication would be the default procedure meaning that any outcome would always be subject to a right to review the decision through post-completion arbitration, although the parties could agree to a final and binding process if they wished.

Short Form Arbitration

SCC 59 mandates that the short form arbitration shall take place within a highly ambitious 28 days of the date that non-site senior officer settlement efforts have terminated.

It further requires that the hearing shall involve only one claim or issue. It is only with the written agreement of the Employer and the Contractor that the hearing shall involve “at most, a limited number of distinct claims or issues” (SCC 59(6)(a)). This is an important restriction and there is no further guidance provided. It is uncertain whether an extension of time claim (comprising various delay events) or an interim payment application claim (comprising various variation items) would be allowed or be suitable for this short form arbitration, and what will then happen if it is not.

If the hearing involves one claim or issue, it is stipulated that the arbitration shall be conducted and concluded in, at most, one day. If it involves more than one distinct claim or issue, the parties shall agree on a maximum length of time for the hearing, which “shall be as short as possible”. Failing agreement, the arbitrator shall fix the time (SCC 59(6)(b)). Short Form Arbitration Rules have been incorporated which themselves set out a very aggressive timetable for the exchange of documents and materials during the 28-day period. These also address whether there shall be a hearing or a documents-only procedure, and even how the time is to be divided at the hearing.

Subject to section 72 of the Arbitration Ordinance (i.e. the court may extend time), the arbitrator shall have 7 days from the date of the hearing to make an award. The decision of the arbitrator shall be final and binding.

Time Frames for Claims Evaluation, Ascertainment and Determinations by Surveyor

Included within the ambit of SCC 59 is also a series of new contract conditions that relate to early valuations by the Surveyor. SCC 59(10)(a) – (c) set out tight time frames in relation to the Contractor’s submission and the Surveyor’s determination / evaluation in respect of (1) variation claims, (2) payment claims arising out of a grant by the SO of an extension of time (e.g. prolongation claims) and (3) Cost claims.

If the Surveyor does not provide an evaluation, ascertainment or determination within the time period prescribed (i.e. 56 days from receipt of the Contractor’s notice or claim), the Contractor may submit a written notice of “appeal” as of the expiration of that period, or he may wait until the evaluation, ascertainment or determination is provided. In either event, the Contractor has 28 days from the evaluation, ascertainment or determination, or the end of the 56-day period within which to submit a Notice of Dispute (SCC 59(10)(d)). Failing which, the Surveyor’s certificate or valuation shall become final and binding (SCC 59(5)(b)).

So, if the SO issues a variation, the Surveyor is required to determine the sum which shall be added to or deducted from the Contract Sum within 56 days. If the Surveyor considers that he reasonably requires information from the Contractor to assist in the determination, the Surveyor shall request such information in writing within 7 days of the issuance of the variation by the SO. The Contractor shall provide any information that the Surveyor may reasonably require within 7 days of receipt of the request. In the absence of the information requested, the Surveyor may make his determination based on the information otherwise available to him. After receiving the Surveyor’s valuation, the site level representatives of the parties shall have the obligation to attempt in good faith to resolve the dispute within 28 days. The rest of the DRAd System explained above will follow if no agreement can be reached.

Time Frames for Assessment of Extension of Time by the SO

In a similar manner, SCC 59(10)(e) sets out the time frames for the Contractor’s application for and the SO’s decision in relation to extension of time. The Contractor shall give notice to the SO within 28 days of the delaying event that will give rise to a possible claim. The SO shall provide his decision within 56 days of the Contractor’s notice. If the SO considers that he reasonably requires further information, the SO shall request such information within 7 days of receipt of the Contractor’s notice. The Contractor shall provide any information the SO may reasonably require within 7 days of receipt of the request. In the absence of the information requested, the SO may make his determination based upon available information (SCC 59(10)(e)).

In the event that the delay has a continuing effect and the SO is unable to determine the full extent of the extension of time, the SO may first grant an interim extension of time. If the circumstances are such that it is unclear if an extension of time will be required then the Employer and the Contractor may extend the time frame for the SO’s grant.

Time Limits

The parties may agree to extend any of the time frames set out in SCC 59. However, such agreement must be in writing and copied to the DRAd. If the parties are unable to agree such extension then either party shall inform the DRAd in writing prior to the expiry of the deadline in question that there is a disagreement and the DRAd shall be empowered to determine whether an extension of the time frame is in all the circumstances reasonable and if so, the amount of such extension. Both parties shall be bound by the DRAd’s determination (SCC 59(10)(f)).

Notices of Dispute Given After Expiry of the Maintenance Period

If any dispute or difference shall arise including any dispute as to any decision, instruction, order, direction, certificate of the SO or certificate or valuation by the Surveyor of which Notice of Dispute is not given until after the expiry of the Maintenance Period or after termination or abandonment of the Contract, whichever is later and which dispute or difference cannot be resolved under the provisions of sub-clause (5) of SCC 59, the dispute or difference shall be resolved in mediation or arbitration pursuant to SCC 59(14). In the event of different Maintenance Periods having been named for different Sections or in the event of more than one Maintenance Period for different Sections or parts of the Works under the Contract, the expression “Maintenance Period” shall mean the last of such Maintenance Periods (SCC 59(14)).

Either party may within 28 days of the service of the Notice of Dispute refer the dispute or difference  to mediation (SCC 59(14)).

Finally, if either Party does not wish for the matter to be referred to mediation or if the mediation fails, then the dispute may be referred to arbitration. Any reference to arbitration shall be made within 90 days of:

  • the receipt of a request for mediation and subsequently the recipient of such request having failed to respond, or
  • the refusal to mediate, or
  • the failure of the mediation to produce a result acceptable to the parties, or
  • the abandonment of the mediation

However while these provisions for arbitration/mediation after the expiry of the Maintenance Period might resemble the current provisions of GCC 86 which permit a final account dispute to be referred to arbitration after completion, it is likely that the potential to refer disputes to arbitration after the Maintenance Period will be much more limited.


SCC 59 potentially provides a faster track mechanism to resolve Contractor’s claims for variations, prolongation costs and extensions of time. Once a Contractor has submitted a claim for additional time and/or money, the SO / Surveyor must follow the tight timeframe in SCC 59(10) to make a decision / valuation within 28 days (subject to any extension agreed by the parties or granted by the DRAd), failing which the Contractor is entitled to issue a Notice of Dispute.

However, a dispute is easily triggered and the tight time frames for the dispute resolution process will be a challenge to both parties, especially when the dispute involves technical and complicated factual and legal issues. Triggering the process may also seem like a gamble when a dispute will end in a quick fire arbitration and a final and binding result. It is difficult to envisage conducting and concluding the short form arbitration in one day unless the issue is a discreet point or very contained.

By Ian Cocking, Partner

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