Construction_Disputes-Large city building construction site, taken at dusk.

Global Construction Disputes Report 2017: Avoiding The Same Pitfalls

With uncertainty reigning in markets around the world and construction projects more complicated than ever before, construction disputes are a major distraction that tie up key personnel and cash flow.

This is the seventh annual Arcadis Global Construction Disputes Report 2017: Avoiding the Same Pitfalls. It has been compiled using data and insights from the Arcadis Contract Solutions experts and reviews the causes, financial value, length and means of resolution of global construction disputes that the team dealt with during 2016.

This report provides insights into market conditions and behaviors that are driving market trends for construction disputes both globally and regionally.

Today's construction programs are fast paced, complex and involve a multitude of parties, creating numerous points at which a dispute can occur.


North America Overview

The Arcadis report highlights that for the third consecutive year the average value of construction disputes in North America have dropped slightly in 2016 to US$21 million. This average dispute value is lower than most parts of the world; however, the average time taken to resolve disputes increased by two months over the previous year. It appears the U.S. construction industry has become more sophisticated in their approach to managing risk and early intervention appears to be an effective means to keep average dispute values in check.

"The construction industry solves technical problems and develops innovative methods every day. I think formal, early intervention forums and robust contract provisions are the industry's technical answer to avoiding disputes."
— Roy Cooper, Vice President, Arcadis North America

The North American Contract Solutions team continues to stress the importance of addressing disputes early in their life cycle. The core reasons for this approach remain unchanged and are even more relevant now than in the past. All parties involved should resolve dispute issues early on to:

  • maintain cash flow within the supply chain
  • preserve productive relationships
  • keep the respective delivery teams focused on delivering the project
  • avoid a cumulative effect of minor issues being aggregated into large disputes

Arcadis Regional Spotlight

North America

The new administration and the anticipated increase in infrastructure spending means the North American construction market may be changing as many of these new projects could be structured using non-traditional delivery methods.

United Kingdom

Brexit will continue to affect the number of new project starts or current projects being cancelled due to the market volatility. The drop in the UK sterling pound’s value could counteract that trend and increase the country’s level of foreign investment.

Central Europe

A stable market economy between 2015 and 2016 meant a consistent number of disputes. Europe was the only global region to experience a reduction in both average dispute value and dispute resolution time.

Asia

New infrastructure projects are commencing and that will bring an increase to disputes this year. Transportation projects are typically long running, high value and high risk. Also, some major programs are due to wind down approaching the end of their construction phase.

Middle East

The region is still experiencing sustained low oil prices which is having an impact on the construction industry and many projects and programs are facing very different economic business case than when they were initially planned.

Global Highlights

The global construction disputes report 2017 shows dispute values have remained steady but the time taken to resolve disputes has declined. Our global dispute resolution research highlights the need for better contract administration, more robust documentation and a proactive approach to risk management to help mitigate the most common causes of disputes.

Regional Findings

The Global Construction Disputes Report 2017 shows that both the dispute value and the time taken to resolve a dispute has declined slightly. The social infrastructure/public sector was found to have the most disputes. Meanwhile, when it came to resolving disputes, party to party negotiation remained the most popular method of alternative dispute resolution.

  • North America’s dispute duration is the longest of all the Arcadis regions at an average of 15.6 months
  • Asia took the top spot from the Middle East with the highest average construction dispute value at US$84 million
  • The UK saw a double-digit increase in both their average dispute value at US$34 million and dispute duration  of 12 months

Dispute Causes

This year, for the fourth year running, failure to properly administer the contract  persists as the No 1 cause of construction disputes globally. Moving up the rankings two spots to No 3 is the employer, contractor or subcontractor failing to understand and/or comply with contractual obligations. Both are key indicators that experienced industry advisors are not being sought at the outset of a project.

The five most common causes of disputes 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
  4. Errors and/or omissions in the contract document
  5. Incomplete design information or employer requirements (for Design and Build and D&C)

Summary of Findings

Arcadis contract solutions experts handled more construction disputes in 2016 than the previous year. If global markets see increased construction demand, continued hyper-competitive markets and major projects; our team expects the number of construction disputes to increase further this year.

Below are details on the Global Construction Disputes Report 2017 key highlights and overall findings.


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