2013 saw a decline in the average value of disputes, from $65m in 2012 Disputes taking slightly less time to resolve - 13.9months 46 per cent of ME joint ventures lead to disputes
Disputes relating to major Middle East construction projects decreased in value to, $40.9million in 2013, a value significantly higher than global construction disputes, which increased in value to $32.1million, according to Arcadis, an Arcadis company and built asset consultancy firm. This value is $24.1million less than in 2012 when disputes were valued at $65million in the region. Arcadis also saw the discrepancy of disputes when involved with joint ventures (JV) in the Middle East, showcasing 46 per cent ended up in disputes during the year.
This year’s report ‘Global Construction Disputes: Getting the Basics Right’ is Arcadis’ fourth annual study into the duration, value, common causes and resolutions of construction disputes across the globe. The report found that construction dispute values were the highest in Asia at $41.9milllion, closely followed by the Middle East at $40.9million. In the US, disputes values tripled in value to $34.3millionand also rose in the UK to their highest value since the report started at $27.9million.
The findings showed that Middle East disputes took, on average, less time to revolve in 2013 at 13.9months, down from 14.6months in 2012. The Middle East along with US showcased the longest to resolve compared to Asia, UK and Continental Europe. Disputes in Continental Europe tended to be resolved the quickest at 6.5months. On a global scale, disputes took, on average, 11.8 months to resolve, slightly less time than the Middle East.
“One of the critical decisions executives must face with any new project in the Middle East is determining how the project will be administered in design, management and administration, and selecting the best contractor and consultant for the planned project,” said David Dale, Head of Contract Solutions in the Middle East at Arcadis. “Many of these disputes are resolved away of the public eye, but do often result in heavy costs and time overruns. Our research indicates the scale of this problem and highlights the need for better administration and a proactive approach to risk management to help mitigate against the most common causes of dispute.”
The research found that many of the most common causes of construction disputes in the Middle East related to the administration of contracts. The top five causes in 2013 were:
- 1. Failure to properly administer the contract
- 2. Employer imposed change
- 3. Failure to understand and/ or comply with its contractual obligations
- 4. Errors and/or omissions in the contract document
- 5. Unrealistic contract completion date being defined at tender stage
Arbitration was deemed the most popular method of alternative dispute resolution in 2013 in the Middle East, followed up by party to party negotiation and expert determination
The likelihood of a JV ending in dispute was also reviewed in the report. Arcadis found that, where a JV was in place, it had a one in three (35%) chance of driving a dispute. This is an increase from 2012 where instances of JV dispute were less commonplace at 19%.
Dale continued, “All too often, we are witnessing a great deal of time and effort placed in selecting, negotiating and agreeing contract terms and conditions, only for them to be placed in a dusty drawer and not implemented, by both parties. Selection of the right form of contract is a crucial first step along with identifying the best contractor and consultant who is capable for performing in accordance with the contract. This should be followed by diligently administering the whole contract conditions by both parties from inception to close out.”
The full report can be downloaded from here
Arcadis’ Contract Solutions team helps clients avoid, mitigate and resolve disputes. The 160 strong team is based around the globe and encompasses one of the industry’s largest pool of procurement, contract, risk management and also quantum, delay, project management, engineering defects and building surveying experts. The team provides procurement, contract and dispute avoidance and management strategies, management expertise as well as dispute resolution and expert witness services. This is delivered through a blend of technical expertise, commercialism, sector insight and the use of live project data, combined with a multi-disciplined and professional focus.
