With uncertainty reigning in markets around the world and construction projects more complicated than ever before, construction disputes are a major risk and can have far reaching consequences.
The average length of global construction disputes increased to a record of 15.5 months in 2015, according to the sixth annual Arcadis Global Construction Disputes Report 2016: Don’t Get Left Behind. This is the sixth consecutive year the length of disputes have increased. The report suggests this is likely due to a mix of factors, including an increase in the size of disputes and in the number of large and complex Engineering, Procurement and Construction (EPC) contract disputes.
Meanwhile, the value of disputes relating to major global construction projects marginally reduced to, on average, US$ 46million. However, the Middle East still saw an increase in value, overtaking Asia as the region with the highest valued disputes in 2015, with an average of US$ 82million.
Mike Allen, Global Leader of Contract Solutions at Arcadis, comments: “In 2015 the construction industry faced head winds in particular with commodity and currency volatility. This resulted in many projects and programs being faced with a very different economic business case than had been planned, which contributed to some of the issues and disputes that have materialized.”
The property/real estate sector was found to have the most disputes globally in 2015, closely followed by the social infrastructure and the public sector. Mirroring last year’s report, the most common cause of dispute was failure to properly administer the contract. Additionally, Joint Ventures (JVs) were found, once again, to be at particular risk, with 25.5% of JVs ending in dispute. Meanwhile, when it came to resolving disputes, party to party negotiation remained the most popular method of alternative dispute resolution, while mediation and arbitration ranked 2nd and 3rd respectively.
Mike Allen commented: “We must continue to embrace the many initiatives that are being deployed by construction professionals, lawyers and the judiciary across the globe, and do all we can to facilitate the settlement of such disputes. This means that effective dispute avoidance mechanisms need to be actively deployed as early as possible within a project, and involve the right expertise and support at the right time.”
This year’s report is Arcadis’ sixth annual study into the duration, value, common causes, and methods of resolution of construction disputes across the globe. The research was conducted by the Arcadis Contract Solutions experts and is based on construction disputes handled by the teams during 2015. For the full findings and insights, download the report below.
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