This is the Eighth Annual Arcadis Global Construction Disputes Report 2018: Does the construction industry learn from its mistakes? which gathers insight and captures dispute trends to determine the leading causes for global construction disputes the team handled throughout 2017.
Construction programs today are fast paced, complex and involve a multitude of parties, creating numerous points at which a dispute can occur. This year’s report is focused on human behaviors, and the impact those behaviors can have on a project team’s ability to avoid, mitigate and resolve disputes.
North America Overview
The report indicates that while the average value of disputes in North America has dropped slightly for the fourth consecutive year and is well below the average value in other regions, the average time it takes to resolve disputes continues to rise and is among the highest globally. Last year, the North American Contract Solutions team predicted a decline in both the value and duration of disputes, which begs the question and theme of this year’s report, is the industry learning from its mistakes when it comes to disputes?
As many cities across the nation are investing in much-needed infrastructure and we begin to see larger and more complex projects materialize, project teams will need to work with claims professionals to more proactively assess, avoid and mitigate risk, as well as improve the early dispute resolution process. Additionally, addressing the human factors such as failure to understand contracts or tenuous relationships between parties will remain key to decreasing the value and amount of time spent on disputes.
Increased spending on infrastructure means North America will see an explosion of new construction projects, with many mega-projects currently in the planning and design phases.
Uncertainty around Brexit will continue to challenge UK construction, as it faces a potential loss for its current workforce, which will significantly impact existing and future projects. Major events such as the collapse of Carillion plc will also have an extensive effect as stakeholders attempt to recoup related losses.
Increased public investment in infrastructure projects will serve as a key driver in consistent growth over the next several years. Cities across the region are expected to see major public and property projects, as well as growth in the residential, commercial and industrial sectors.
As the region continues to experience a comparatively low oil price, a lack of liquidity in the market and resulting cash flow constraints mean many firms are experiencing very different economic circumstances than expected when projects and programs were initially planned.
The Global Construction Disputes Report 2018 reveals that both dispute values and the time taken to resolve disputes increased noticeably in 2017. Our research reiterates last year’s results and the need for better contract administration and more robust documentation and highlights the need for employers, contractors and subcontractors to better understand their contractual obligations.
The top three causes for disputes in 2017 were:
1. Failure to properly administer the contract
2. Poorly drafted or incomplete/unsubstantiated claims
3. Employer/Contractor/Subcontractor failing to understand and/or comply with its contractual obligation
These causes echo the same findings from last year’s report, with failure to properly administer the contract at number one for the fifth year in a row. As the industry continues to struggle with these issues, the need for involved parties to understand the critical nature of contract administration continues to be a critical factor in avoiding, mitigating and resolving disputes.
Summary of Findings
The volume of disputes Arcadis contract solutions experts handled in 2017 remained consistent with 2016 numbers, however both the time it takes to resolve disputes and the value of these disputes increased. This demonstrates the trend of larger and more complex disputes than the team has seen in previous years.
Below are details on the Global Construction Disputes Report 2018 key highlights and overall findings.
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