7th annual study from Arcadis sheds light on the latest trends around disputes in the regional construction market. The results offer insight on the most common causes, most effective solutions and the average length and value of a dispute.
Ongoing liquidity issues within the Middle East construction market, due to a sustained low oil price, has led to a very active claims and disputes market over the last twelve months.
A selection of the key findings from this year’s study include the below:
1. Average value and length of time needed to resolve a dispute is decreasing:
Over the last year, the average length of time needed to resolve a dispute in the Middle East fell to just 13.7 months. This is 10% quicker than in the two previous years, and is now less than the global average. Similarly, the average value of a construction dispute also decreased, dropping from$82m in 2015 to $56m in 2016.
Rob Nelson-Williams, Regional Head of Contract Solutions, Arcadis Middle East said: “This trend towards swifter resolution is particularly welcome as it helps to improve liquidity across the wider supply chain. In a tight market, we’re seeing an increase in the number of claims submitted as contractors take a tougher approach to entitlements to help protect their cash flow position.”
2. Basic contract understanding is still at the heart of most disputes:
A failure to properly administer the terms of the contract remained the most common cause of disputes on construction projects in 2016, closely followed by poorly drafted, incomplete, and unsubstantiated claims. This once again underlines the need to get the basics right, and the importance of seasoned technical and commercial advice when it comes to contract and claims strategy.
“Every year, we see the same basic issues repeatedly cropping up when we analyse the causes of disputes on construction projects. Within the industry, there’s a pressing need for better education on how to avoid these pitfalls. A sharper focus on removing ambiguity from within a contract at the very outset, and better training on how to prepare a robust and credible claim are two relatively simple steps that would make a significant difference,” added Nelson-Williams.
3. Proper contract administration is still key to avoiding disputes:
In this year’s report, proper contract administration was once again pinpointed as the single biggest factor that would help to reduce the number of future disputes. The other two factors that the Arcadis team called out also related to contract issues, namely the production of accurate contract documents and a more balanced approach to risk allocation.
4. Party-to-party negotiation still the preferred method for resolving disputes:
Consistent with previous years, party to party negotiation and arbitration remained the two most common methods of dispute resolution in the Middle East.
You can view the full findings by downloading this year’s report at the link below.
The world is a complex place, Arcadis helps you navigate this complexity by understanding the bigger picture. Click here to read our latest thinking.
Arcadis is committed to providing a healthy and safe work environment for all our employees.