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Early resolution remains critical to reducing dispute costs going forward
Highlands Ranch, Colo., June 17, 2021– A report released today by Arcadis reveals a significant increase in the cost of construction disputes in 2020, while the time taken to resolve disputes decreased. The average value of disputes globally rose from $30.7 million in 2019 to $54.26 million in 2020, while the length of disputes fell from 15 months in 2019 to 13.4 months.
The data, featured in Arcadis’ 11th annual “Global Construction Disputes Report 2021: The road to early resolution,” illustrates industry-wide ripple effects of the COVID-19 pandemic. While trends in the value and length of disputes varied from region to region, all regions surveyed saw an increase in “mega disputes” related to bigger capital programs and private projects. Notably, more than 60% of survey respondents encountered project impacts due to COVID-19.
Owners, contractors, or subcontractors failing to understand and/or comply with their contractual obligations became the leading cause of construction disputes in 2020, followed by owner-directed changes and third-party or force-majeure changes as the second and third-leading causes, respectively.
Highlights from the report include:
- Proper contract administration was a theme across the globe for the successful and early resolution of disputes.
- Most disputes were settled through party-to-party negotiation, and a willingness to compromise played a key role in early resolution.
- Among regions surveyed, the buildings (education, healthcare, retail/commercial, government) sector saw the most disputes.
- In North America, construction dispute value rose from $18.8 million in 2019 to $37.9 million in 2020, while the length of disputes shortened from 17.6 to 14.2 months.
While cost and length have changed since 2019, risk management was still seen as the most effective claims avoidance tactic, while owner/contractor willingness to compromise was once again the top-ranked factor for the mitigation/early resolution of disputes.
“COVID-19 irrevocably changed every industry,” said Roy Cooper, head of contract solutions for Arcadis North America. “Construction disputes experts will have to continue to adapt, even post-pandemic, as workforce expectations, climate events and government infrastructure funding change how projects are designed and contracted in the future.”
The research presented in the report was compiled by Arcadis based on survey responses, global construction disputes the team handled in 2020 and contributions from industry experts.