The average value of disputes on major construction projects increased +1.2% last year to US$ 32.1 million, according to consultant Arcadis. The company added that last year saw the first ever US$ 1 billion+ disputes in the industry, with Arcadis working on three ‘mega disputes’, including the Panama Canal expansion project.
According to Global Construction Disputes: Getting the Basics Right, the fourth annual report by Arcadis on this topic dispute values were the highest in Asia last year at an average of US$ 41.9 milllion, closely followed by the Middle East at US$ 40.9 million. In the US, dispute values more than tripled compared to last year, to US$ 34.3 million, and also rose in the UK to their highest value since the report started at US$ 27.9 million.
The report also said disputes took, on average, less time to resolve in 2013 at 11.8 months, down from 12.8 months in 2012. They took longest to resolve in the Middle East and US at 13.9months and 13.7 months respectively. Disputes in Continental Europe tended to be resolved the quickest at 6.5 months.
Mike Allen, Global Head of Contract Solutions at Arcadis said, “Today’s major construction programmes are fast paced, complex and involve a multitude of supplier parties, so there are numerous points at which a dispute can occur. Many of these disputes are resolved out of the public eye but do often result in heavy costs and time overruns. Our research indicates the scale of this problem and highlights the need for better contract administration, more robust documentation and a proactive approach to risk management to help mitigate against the most common causes of dispute.”
The research found that the most common causes of construction disputes related to the administration of contracts. The top five causes in 2013 were failure to properly administer the contract, failure to understand and/or comply with its contractual obligations, incomplete design information or employer requirements, failure to make interim awards on extensions of time and compensation; an and poorly drafted or incomplete and unsubstantiated claims.
Party to party negotiation was deemed the most popular method of alternative dispute resolution in 2013, followed by arbitration and adjudication.
Read the results of last year's study here.