EC Harris sees rise in disputes
By Chris Sleight23 May 2011
Consultant EC Harris said it saw a rise in the global number of construction disputes around the world in 2010, compared to 2009. Data from the company's Contract Solutions division showed that the average value of disputes it handled was US$ 35.1 million, and disputes took more than nine months on average to resolve.
Mike Allen, global head of Contract Solutions at EC Harris said, "Resolving these disputes represents an extremely expensive, time-consuming and often unnecessary distraction for clients and contractors alike. In an age of ever slimmer margins, the industry needs to focus far more attention on anticipating and preventing complex disputes in the first place and where disputes have already arisen, to resolving them swiftly and effectively, before they disrupt - or even jeopardise - construction projects."
EC Harris said the biggest cause of disputes was a failure to properly administer contracts. This was followed by ambiguities in the contract document, failures to make interim awards on time extensions and monetary relief, unrealistic risk transfer from clients to contractors and changes imposed by the client or employer.
Disputes took the longest to resolve in Asia, with an average length of 11.4 months. This was followed by Europe (10 months), North America (9 months) and the Middle East (8.25 months). As well as being the longest to resolve, Asian disputes were the highest value, at an average of US$ 64.5 million. The region was followed by the Middle East (US$ 56.3 million), Europe (US$ 33.3 million) and North America (US$ 17.5 million). The largest dispute EC Harris handled in 2010 was worth US$ 200 million, and this was in Asia.
Joint ventures were also cited as a source of difficulty. EC Harris found that where a joint venture was in place, differences within the joint venture were likely to drive a dispute on 31% of occasions. This phenomenon was particularly marked in the Middle East, where joint venture-related issues led to disputes in 50% of occasions.
The full results of EC Harris' studies are available in its Global Construction Disputes Report.