Construction Disputes Fall in Value, Grow in Length 2

Monday, August 3rd, 2015
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A global design, engineering, and consultancy firm has released a report stating disputes relating to major construction projects in North America decreased in value while the length of time to resolve conflict increased significantly last year.

Global Construction Disputes: The Higher the Stakes, the Bigger the Risk is ARCADIS’ fifth annual study looking into the duration, value, common causes, and methods of resolution in construction disputes across the world. The firm found construction disputes decreased in value from an average of $34.3 million in 2013 to an average of $29.6 million in 2014. At the same time, the length of resolution increased from an average of 13.7 years to an average of 16.2 months over the same year.

For the second year running, errors and/or omissions in the contract document were the most common causes for disputes in North America in 2014. Differing site conditions was ranked second, and third was failure to understand or comply with contractual obligations on the part of an employer, contractor, or subcontractor.

“The industry has recognized that the cost of counsel, consultants, and internal resources to proceed with formal litigation is extremely expensive,” said vice president of ARCADIS US, Roy Cooper. “Therefore, there is willingness on behalf of all the involved parties to try and try again to arrive at a settlement.”

According to the report, the three most common methods of alternative dispute resolution used in North America in 2014 were party-to-party negotiation, mediation, and arbitration.

The continent with the highest value of construction disputes is Asia with $85.6 million, followed by the Middle East with $76.7 million. Aside from Asia having the most expensive disputes, the continent’s resolution processes on average are two months shorter than the global average.

“With big projects ahead, the industry is now seeing a program of interconnected projects, rather than discrete projects,” said Cooper. “With big programs come even bigger risks and increased political and public attention. As owners consider these factors, failure and high visibility disputes are not an option. Owners have turned to alternate project delivery, increased project controls, and early intervention to mitigate disputes to help manage that risk.”

The number of projects going into dispute is expected to rise in 2015. Lower margins during economic downturns and labour shortages in some markets are likely to be the catalysts.

To view the complete report, click here.

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  1. Michael Billings

    Given that one would have thought lower dollar value disputes would have been less worth fighting over, one would have thought that a reduction in the average value of disputes would have corresponded with a reduction in the time taken to resolve these disputes, but obviously that hasn't proven to be the case.

    What this shows is the necessity in terms of getting documentation right, first time, so that everyone knows exactly what is respected of each party.

  2. Jurgen S.

    Guys in the industry really need to learn that it just doesn't pay to be petty and disputatious.