Value of construction disputes drops by 47% | Construction Buzz #223
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The average value of UK construction disputes fell by 47% in 2018 although they are now taking longer to resolve.
That’s according to Arcadis, which put the average value of UK construction disputes at $17.9m (£14.1m) last year, which is below the international average of $33m (£26m), marking a significant decrease over the last six years.
The findings are revealed in the latest Arcadis Global Construction Disputes Report 2019: Laying the Foundation for Success, which examines the causes, duration and value of construction disputes, while highlighting the best ways to avoid, mitigate and resolve them.
The report also found that the UK had the shortest average length of time to solve a dispute, at 12.8 months. However, this is up 28% on last year and consistent with the global trend, whereby disputes are taking longer on average to resolve.
Failure to administer a contract properly, or human factors were often be the main cause of disputes, the report found. And it warned that as mega-projects continue to expand around the globe, the procurement, contracts and construction involved become more complex. “Projects are ultimately at risk of failing when uncertainty and expectations are inadequately managed,” Arcadis said.
Nonetheless, recognition of human factors in disputes meant that early dispute resolution techniques - such as dispute avoidance - would become increasingly common, the report added. Currently in the UK, most disputes are resolved after they have crystallised, rather than parties seeking to avoid or mitigate potential dispute situations as they arise. And when it asked research respondents they named a willingness to compromise as the number-one factor which could have the biggest impact in avoiding disputes.
Gary Kitt, head of UK contract solutions at Arcadis, said: “In some cases, it could be argued construction contracts are simply too complex for administrators to understand, and better training for everyone involved would go some way towards avoiding disputes as they arise. However, our results show the UK to be a world leader in effective avoidance and mitigation strategies, and as we continue to transition towards greater use of digital technologies like BIM and 4-, 5- or 6D modelling, we are likely to see an improvement in risk allocation much earlier on in the process. This could help all parties to collaboratively resolve any difficulties before cost and time pressures start to escalate.”
Adrian Bell, partner at CMS Cameron McKenna Nabarro Olswang, added: “While the fact that the report shows the UK to be one of the leading jurisdictions for dispute resolution should be applauded, there is still clearly work to be done. There is scope for quicker, cheaper and more bespoke forms of dispute resolution, supported by more collaborative behaviour, fairer risk sharing and a better understanding of how contracts are intended to be operated.”
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