The NEC4 suite of contracts has expanded its dispute resolution framework with the introduction of the Conflict Avoidance Panel (CAP) and greater flexibility around Dispute Avoidance Boards (DAB), offering parties more proactive and collaborative mechanisms to resolve disagreements and avoid costly disputes.

The NEC4 suite of contracts provides for three dispute resolution procedures:

• Option W1: Intended for use on projects not subject to the Housing Grants, Construction and Regeneration Act 1996 (the "Construction Act").
• Option W2: Designed for UK-based projects governed by the Construction Act.
• Option W3: Establishes a Dispute Avoidance Board (DAB) and is intended for projects not subject to the Construction Act.

Option W2 is the most commonly used procedure in UK construction projects. However, Option W1 may be applicable where construction operations fall within the exclusions specified in Section 105(2) of the Construction Act. For example, this may include the erection of steelwork to provide access to plant on a site primarily used for power generation or water treatment.

NEC4 Option W2 contains a tiered dispute resolution process. This begins with an initial escalation step whereby disputes are referred to senior representatives of the contracting parties. These representatives have up to four weeks to meet and attempt to resolve the dispute through negotiation before adjudication proceedings may be initiated.

As parties retain the statutory right to refer disputes to adjudication at any time, this escalation step is voluntary. This approach aligns with best practices on major UK projects, encouraging early resolution and collaborative problem-solving.

Conflict Avoidance Panel (CAP)

In March 2025, NEC introduced a new conflict avoidance mechanism that can be incorporated into Option W1 and Option W2 via a Z clause. The clause permits the parties to refer a disagreement to a Conflict Avoidance Panel (CAP).

Under Option W1, a party who disagrees with a matter relating to the contract may notify the other party within two weeks of the disagreement arising (clause Z1.3(1)).

Under Option W2, the drafting is more consensual: "If the Parties agree, a disagreement concerning a matter in relation to the contract is referred to a Conflict Avoidance Panel…" This reflects the need to maintain compliance with the Construction Act 1996. As a result, a CAP may only be appointed under Option W2 with mutual agreement.

Within one week of notification (under Option W1) or mutual agreement (under Option W2), the parties must:

• Define the disagreement and the desired outcome.
• Agree on one or three panel members. If agreement is not reached, a nominating body appoints the panel.

A scoping meeting must be held within one week of the panel's appointment. The process then follows these steps:

• Referral issued within one week of the scoping meeting.
• Response issued within one week of the referral.
• Panel may request additional information.
• Within two weeks of receiving the response, the panel provides a recommendation.

The procedure may be amended by agreement. Costs for the panel and nominating body are shared equally. If both parties accept the recommendation, it becomes legally binding. If not, the matter can be escalated to senior representatives or referred to adjudication.

Dispute Avoidance Board (DAB)

NEC4 ECC Practice Note 5 provides Z clauses to enable the inclusion of a DAB even on contracts subject to the Construction Act.

The DAB supports early and informal resolution of disputes through regular engagement with a neutral panel. The board comprises one or three impartial members named in the Contract Data. If three members are appointed, the third is selected jointly by the parties. All members are appointed under the NEC Dispute Resolution Service Contract.

From the starting date to the defects date (unless otherwise agreed), the DAB conducts regular site visits to monitor progress and proactively identify potential disputes. The agenda for each visit is proposed by the parties and finalised by the DAB.

Potential disputes must be referred to the DAB within two to four weeks of being notified to the other party and the Project Manager. Relevant documentation should be provided in advance of site visits. During visits, the DAB:

• Reviews and discusses potential disputes.
• Attempts to facilitate informal resolution.
• Prepares a written note of the visit.
• Issues a recommendation if the issue remains unresolved.

CAP vs DAB: Key differences

Activation and Use:

CAP:

• Activated only by mutual agreement (especially under Option W2).
• Formed in response to a specific disagreement.
• Issues recommendations that are binding only if both parties agree.

 DAB:

• Established at project outset and active throughout the contract duration.
• Conducts regular site visits to monitor and resolve emerging issues.
• Plays a proactive role in dispute avoidance.

Nature and role:

CAP:

• Ad hoc panel addressing a single disagreement.
• Reactive by design.
• Issues non-binding recommendations unless accepted by both parties.

DAB:

• Standing board with continuous involvement.
• Proactive in identifying and resolving issues.
• Can facilitate informal dispute resolution throughout the project.

Formality and contractual structure:

CAP:

• Informal process introduced via Z clause.
• Flexible and adaptable, particularly under Option W2.

DAB:

• Formal mechanism governed by the NEC Dispute Resolution Service Contract.
• Best suited for complex or high-risk projects.

Enforceability:

CAP:

• Recommendations are not binding unless agreed and implemented.
• Disputes can proceed to senior representatives or adjudication if unresolved.

DAB:

• Primarily focused on informal resolution.
• Binding decisions can be issued if expressly agreed by the parties.

Further considerations

Dispute Avoidance Boards are generally most effective when engaged from the outset and maintained throughout the project lifecycle. Their regular site presence and proactive monitoring help to defuse tensions and resolve disagreements early.

Conversely, the Conflict Avoidance Panel is typically convened after a disagreement has arisen, making it inherently more reactive. This may limit its capacity to prevent disputes in the same manner as a standing DAB.

Nonetheless, a standing DAB may not be practical or cost-effective on smaller or less complex projects. In such cases, the CAP offers a more flexible and scalable solution, with the added advantage of allowing the parties to appoint panel members with relevant expertise tailored to the dispute.

In either case, the effectiveness of both mechanisms depends heavily on the parties' genuine willingness to engage constructively. These processes tend to be far less effective when parties adopt a passive approach, resist participation, or treat the procedures as a mere formality.

The Conflict Avoidance Panel is a relatively new addition to NEC4, and data on its use and success remains limited. While DABs are well established on international construction projects, they are less commonly used in UK domestic contracts. It remains to be seen whether users of NEC4 in the UK will adopt either of these dispute avoidance tools more widely.