If there is one thing most of the construction industry can agree on today, it’s that we are experiencing unprecedented impacts. Ongoing effects of the COVID-19 pandemic, supply chain issues, material price escalation, labor shortages, and the war in Ukraine have simultaneously impacted the global construction market. Understanding the volatility in the industry and working collaboratively with other parties accordingly can help you successfully navigate these challenging times.
Each year, our Global Construction Disputes Report provides a look back on the year before and allows us to evaluate trends and experiences in the industry, which helps us better prepare for the future. Unsurprisingly, a common theme in 2021 was the impacts felt from the ongoing pandemic and supply chain issues. Nearly 76% of survey respondents encountered disputes or claims specific to COVID-19, a 12% increase since 2020, and 72% of respondents encountered impacts related to supply chain issues, which led to an overall increase in disputes compared to 2020.
Though we all recognize that the pandemic and supply chain issues, among other influences, will likely impact our current projects in some way, the unpredictable nature of each can make it difficult to prepare for and avoid them. Owners and contractors have struggled to find the right balance when it comes to risk allocation and accommodating for the fluctuations in today’s market, causing tension in the industry as both sides attempt to protect themselves. Consequently, the top causes of construction disputes in 2021 were poorly drafted, incomplete and unsubstantiated claims, followed by errors and/or omissions in the contract document.
It's unsurprising, then, that contract and specification reviews, risk management, and constructability reviews were named as the most effective claims avoidance techniques, in reaction to the main causes for disputes.
As times remain uncertain, we continue to focus on methods for early dispute resolution
Even when taking appropriate measures to avoid claims and disputes, the uncertain times we face today mean that disputes over construction costs and delays are sometimes inevitable, and emphasis should be placed on early dispute resolution. In this regard, identified as the top factor in the mitigation or early resolution of disputes was owner and contractor willingness to compromise, the same as the last two years.
Something we learned from last year’s survey, following the first year of the COVID-19 pandemic, was that owners and contractors who prioritized frequent communication and documented project impacts were much more able to successfully resolve disputes early on. Further, these parties understood that a global pandemic was not reasonably foreseeable and were flexible and cooperative as they resolved such impacts. In many respects, the challenges we’re experiencing today have been no more predictable than the pandemic was before it began, and it will continue to be essential for all parties to be flexible and understanding and to communicate with their counterparts to come to resolutions.
Together, we can successfully navigate these turbulent times
For more on the state of global construction disputes, download the full report. We’ll also be sharing insights like these at future events and webinars. Send me an email or connect with me on LinkedIn if you’d like updates on upcoming presentations.