Bridging the Gap: What Can Be Done to Ease Construction Disputes?

It is a familiar picture to us all. A major project gets commissioned, the budget is drawn-up, contractors appointed and timelines agreed.

It is a familiar picture to us all. A major project gets commissioned, the budget is drawn-up, contractors appointed and timelines agreed. Then, a few months down the line, a potential issue or breach of contract comes into play and the whole plan is thrown up in the air. Today’s major construction programs are fast paced, complex and involve a multitude of supplier parties, meaning there are numerous points at which dispute of all shapes and sizes can occur. All in all, construction disputes are a big problem for all concerned.

On the plus side – in an industry where the age-old mantra of ‘time is money’ rings more true than most – disputes are generally taking less time to resolve. In fact, according to our annual Global Construction Disputes report, the average resolution time globally has fallen by around a month over the last couple of years to 11.8 months in 2013. On the face of it, this is most certainly a good thing. Less time spent in litigation means reduced costs, increased goodwill and, crucially, fewer project overruns. However, if we look a bit closer it becomes clear that there are big discrepancies depending on where you are in the world.

While in Continental Europe, a more proactive approach towards risk management and more comprehensive documentation keep the average dispute length down to less than seven months, in the Middle East the time spent is almost double. In a market with so many major construction projects constantly changing the region’s skyline, and with the Qatar World Cup only a matter of years away, it is easy to see why the topic of dispute-driven overruns is a hot one.

What’s more, while the time spent on disputes globally may be getting less the value of these disputes is, in fact, increasing. In 2013, the average value rose by around $400,000 to a staggering $32m. Throw into the mix the emergence of the new ‘mega-dispute’, where claimed sums exceed one billion dollars and you can see the scale of what we are dealing with. Last year, our contract solutions team worked on three such disputes, including that of the Panama Canal expansion project.

Clearly, in such a fast-paced industry with so much potential risk disputes are always going to occur. However, for the sake of all involved in the construction process, from investors to contractors and clients to their customers, we need to find a way of speeding up the process and keeping a measure of control on the time and associated costs. The overwhelming majority of disputes are resolved out of the public eye but often result in heavy costs and time overruns, impacting on parties at each and every stage of the process.

More often than not, breakdowns revolve around poor document preparation and ineffective contract administration. So, if we are to improve the dispute cycle, more emphasis needs to be placed on the front end preparation and also post contract administration for both Employers and Contractors. It may all seem like a lot more effort at the start of a project but it may well be time well spent.

Gary Kitt

Head of Contract Solutions +44 (0)207 812 2310 Ask me a question