Download PDF

Construction disputes – avoiding conflicts with the NEC4

August 2025

The delivery of any modern construction project is fraught with the risk of disputes between the parties involved. Regardless of their roles and contract values, the complex nature of project scheduling and commercial management means that even the smallest missing puzzle piece from a single party can have significant impacts to cost and completion dates, which almost inevitably gives rise to disputes.

Construction disputes are becoming ever more common; this is evident when evaluating adjudication referrals under the Construction Act[1]. With year-on-year rises and a peak of 2,264[2] for the 12-month period running to May 2024, disputes under construction contracts are only trending up. In evaluating these referrals, Kings College London found that 50% were as a result of inadequate contract administration[3].

To tackle this issue head-on the Institute of Civil Engineers (ICE) are promoting the Conflict Avoidance Pledge[4] and the accompanying RICS Conflict Avoidance Toolkit, and have incorporated principles from both into their NEC suite of contracts. This, in tandem with the UK government’s 2022 publication of a model NEC clause for public sector contracts, has informed the NEC’s approach to conflict avoidance; and it is upon this backdrop that the NEC published its Conflict Avoidance Practice Note. We’ve outlined the key takeaways from this development below, and go into further detail in the remainder of the article.

Key takeaways

• Construction disputes are on the rise, adjudication referrals are at an all-time high, with project complexity, decreasing profitability and a skills shortage all to blame.
• To address these issues, ICE and the NEC are promoting their new NEC Conflict Avoidance Note and its accompanying conflict avoidance clauses, incorporating NEC options W1 and W2.
• The aim of the clauses is to promote cost-effective and collaborative resolutions to disagreements. Parties are encouraged deal with disagreements before a dispute crystallises in a non-adversarial manner.
• The new clauses introduce a Conflict Avoidance Panel, nominated by the parties and intended to oversee and advise on disagreements related to the contract. The Panel can provide resolution suggestions, these become legally binding if accepted by the parties in disagreement.
• It is yet to be seen how the contents of the Note will impact the industry but at Beale & Co we are confident it will have a positive impact on early resolution.

The aim of the Practice Note

Released in March 2025 to coincide with Conflict Avoidance Week 2025, the Practice Note aims to provide guidance on conflict avoidance clauses and processes to aid the resolution of disagreements at ‘an early stage by using a conflict avoidance panel’.

Reinforcing the 2018 Conflict Avoidance Pledge, the note sets out commitments to:

• Promote collaborative working and proactive conflict avoidance;
• Embed conflict avoidance mechanisms into projects; and
• Identify, promoting and utilising conflict avoidance mechanisms.

The contents of the Note

The new conflict avoidance panel and its authority are derived from new clauses available to NEC contracts incorporating dispute resolution Options W1 and W2, noting that Option W3 already provides for a Dispute Avoidance Board (which carries out very similar functions).

A notable difference between the Conflict Avoidance Panel and the Dispute Avoidance Board is the permanence of the appointment. A DAB under Option W3 is intended to be appointed at the outset of a contract, identified in the contract data, and to continue in existence throughout the project’s lifetime. The DAB is to visit the relevant site periodically, with a view to facilitating early identification and informing resolution of disputes ideally before they crystallise. Once a dispute arises it is referred to the DAB who acts to assist resolution between the parties, without the need for senior representatives or dispute-by-dispute nominations for resolution bodies.

These new clauses detail the process for appointing a Conflict Avoidance Panel and subsequent referrals; this process is as follows:

• The parties are to agree and select their Conflict Avoidance Panel.

If the parties fail to reach an agreement on the nomination of their Conflict Avoidance Panel, they can request that the conflict avoidance nominating body nominate the Conflict Avoidance Panel for their disagreement.

• The party who has a disagreement with the other party (which disagreement must be in relation to the contract) can then notify the other party of the dispute. The note goes on to advise that a referral to the Panel should be made ‘when necessary’. Without the Note providing further explanation it is left to the parties to decide when the necessity has arisen.
• Within one week, the parties are to meet to discuss a clear definition of the disagreement and the outcome sought, as well as the member, or members (if there are to be three) of the nominated Panel who will oversee the dispute.

Irrespective of how they are selected, each Panel member must:

1. Be a natural person (acting in a personal capacity);
2. Have the requisite qualifications and experience on the relevant subject matter; and
3. Declare any interest in any matter related to the disagreement or the relevant contract.

Once appointed, Article 6 of the Conflict Avoidance Panel rules[5] binds each Panel member(s) to keep information confidential.

Once the Conflict Avoidance Panel is appointed and the member or members are selected, the parties can begin to move through the resolution process. The Panel is to meet with the parties within one week of its appointment, to agree a process that is appropriate and suits both parties. This meeting is known as the scoping meeting. The Practice Note sets out clear objectives for the scoping meeting, which include clearly defining the disagreement and the recommendation sought, deciding the timings and particulars of the referral process, and providing a common understanding of the conflict avoidance procedure.

The Practice Note continues, to set out the conflict avoidance process itself:

• Within one week of the scoping meeting, the referring party is to submit its referral to the Panel and to the responding party. It must include within that referral brief particulars of the disagreement, the relief sought, and the basis for such relief, each evidenced with relevant documents.
• The respondent must submit its reply within one further week.
• The Conflict Avoidance Panel may request further submissions from either party.
• Within two weeks of receiving the response the Panel is to notify the Parties of its recommendation for resolving the issue.

The process can be changed by agreement of the parties and the Panel.

The Panel’s recommendation is to include a summary of the Panel’s findings, the reasons for its recommendation, and how the recommendation should be implemented. If the parties are satisfied with the recommendation, then it is implemented and becomes legally binding on the parties.

If a party does not accept the Panel’s recommendation, the disagreement is referred to the parties’ senior representatives within two weeks. Regardless of the outcome, both parties bear an equal proportion of the costs of the Conflict Avoidance Panel and any fees of the conflict avoidance nominating body.

Expectations

It is hoped that the new process will aid the resolution of disagreements at an early stage by, amongst other things:

• Alleviating cash flow issues brought on by extended disputes and expensive adjudication procedures; and
• Reducing the risk of relationship breakdown brought on by contentious proceedings.

In addition, the shared-burden approach to the costs of the Panel, together with the fact that those costs should be limited, aims to promote parties’ analysis of the factual position, without the need to consider financial outlay in raising a disagreement.

The Practice Note does not say whether the intention is for the Conflict Avoidance Panel to be a ‘standing panel’ maintained throughout the project’s lifetime, or whether a nomination is intended to last until the resolution of a given disagreement (via either the Panel’s suggestion or the parties’ implementation of the same).  However, the comparisons to Option W3 in the Practice Note would suggest that the NEC is advocating for a permanent and more involved avoidance panel.

Regardless of the outcome, upon completion of the conflict avoidance process both parties should have a better understanding of each other’s positions, as well as a recommendation provided by a conflict avoidance specialist. Even if they do not accept and implement the Panel’s recommendation, the hope is that this will enhance the efficiency of any dispute resolution process that may follow.

Looking at dispute resolution in the industry as a whole, it seems clear that the clauses in the Conflict Avoidance Practice Note are the NEC’s take on the FIDIC Dispute Avoidance and Adjudication Board (DAAB) regime, with strong similarities between the two. The construction industry now has access to a wide range of conflict avoidance procedures, with multiple standard forms of contract providing for flexible regimes under which early detection of disagreements and proactive action by the parties provides them with the opportunity to avoid (or, at least, to reduce the scope of) full-scale disputes and the impact they have on projects.

With construction disputes on the rise and a wide range of dispute resolution procedures now available to parties entering construction contracts, firms can look to Beale & Co to help navigate the rising complexities of construction across the globe:

• Our Contracts and Project advisory team apply their considerable expertise advising on, negotiating and drafting the full suite of standard form contracts, including the NEC, JCT & FIDIC to ensure firms can enter their agreements with confidence. Under the Guidance note and accompanying NEC dispute avoidance clauses our support gives project stakeholders the confidence that any dispute resolution option selected, as well as the Conflict Avoidance Panel nominated, will provide them with a conflict avoidance procedure that will be efficient, cost effective and beneficial to the client’s interests.
• Once a dispute is in the contemplation of the parties, Beale & Co can ensure contractual avoidance procedures are being followed, nominations are made correctly, parties to the disagreement are participating, and there is positive movement toward resolution.
• If the disagreement cannot be resolved, our Construction Disputes team can step in to support clients as disagreements crystalise and a dispute becomes inevitable. The team’s market leading expertise in adjudication, mediation, arbitration and judiciary disputes guarantee that a client’s needs can be met and a resolution can be sought. If a recommendation from the Conflict Avoidance Panel is not accepted, our disputes team can prepare a party for their next steps, aid them in understanding their options, whether that be:
  • Extended negotiations with other parties to the disagreement
  • Progressing towards adjudication
  • Engaging in pre-action communications
  • Preparation for a mediation or other alternative dispute resolution; and
  • Readiness for a legal claim under the judiciary.

For any and all Construction support, please contact Beale & Co.

[1] Housing Grants, Construction and Regeneration Act 1996

[2] Kings College London 2024 Construction Adjudication in the United Kingdom: Tracing trends and guiding reform.

[3] Kings College London 2024 Construction Adjudication in the United Kingdom: Tracing trends and guiding reform. Page 9.

[4] Conflict Avoidance Coalition, The Pledge.

[5] RICS CAP Rules March 2025, Page 4.

Download PDF