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Construction Disputes Taking Over a Year to Resolve, EC Harris Report Finds

- Duration of disputes up 20% on 2011, Middle East, Asia & UK taking longest
- Average value of disputes down slightly at US$31.7m, Middle East with highest value at US$65m
- One in five (19%) of joint ventures resulting in disputes

20 May 2013

Legal disputes in the construction industry now take over a year to be resolved, according to study from EC Harris, the global built asset consultancy.  EC Harris found that construction disputes are taking, on average, 12.8months to be settled compared to 10.6months the previous year, an increase of 20%.

This year’s report ‘Global Construction Disputes: A Longer Resolution’ is EC Harris’s third annual study into the duration, value, common causes and resolutions of construction disputes across the globe during 2012.    Overall, dispute values fell by US$500,000 to US$31.7m, down from US$32.2m in 2011.  The Middle East continued to experience the highest value disputes at US$65m, followed by Asia at US$39.7m. Disputes in the US had the lowest value at US$9m, whilst in the UK disputes more than doubled in value from US$10.2m to US$27m.

Mike Allen, Global Head of Contract Solutions at EC Harris said: “Construction projects are increasing in complexity, so when a dispute materialises its duration is not necessarily linked to its value, and so complex disputes can take equally as long to unravel, which is resulting in many disputes spanning a year or more.  Dispute values tend to vary year on year and but the regional differences do indicate that with many billions of dollars being spent on construction, particularly in Asia and the Middle East, it is likely that high value disputes will continue to be a feature in international markets.”

One the highest profile disputes in the UK during 2012 involved the construction of the Shard in London.  The dispute between steelwork companies Cleveland Bridge UK and Severfield-Rowen Structures first came to light in early 2010, but was only resolved in January 2013 following a lengthy dispute that ended up in the High Court.   Cleveland Bridge was ultimately ordered to pay over US$1m (£824,478) in damages to Severfield-Rowen for delays and defects which were estimated to cause a delay of 42 days on the Shard’s construction. 

The research found that all of the top five causes of construction disputes revolved around a mistake or failure making them all avoidable to varying degrees.  The top causes were:

1. Incomplete and/ or unsubstantiated claims
2. Failure to understand or comply with contractual obligations
3. Failure to properly administer the contract
4. Failure to make interim awards on extensions of time and compensation
5. Errors/ omissions in the Contract Document

Party-to-party negotiation was again the most common methods of resolution, followed by mediation and then arbitration.

Mike Allen continued: “It is interesting to note that all of the most common causes are all directly related to contract administration, so tightening this up is clearly an important area of focus.  Better communication via negotiation and mediation are the preferred methods of resolution which would appear to support the view that that parties who are dealing with a dispute wish to retain control and endeavour to settle the dispute themselves rather than go through formal proceedings which is why many disputes are settled confidentially and in private. ”

The research also explored the frequency of disputes amongst Joint Venture (JV) arrangements.  EC Harris found that, where a JV was in place, a JV related difference was likely to drive a dispute on approximately one in five (19%) occasions.

Mike Allen commented: “Joint venture agreements are becoming more prevalent, particularly where a project is of such a large size and scale or where there is a need because of licensing requirements for a local JV Partner.  These JVs are causing a significant number of cases, so more needs to be done in order to ensure that the JV itself does not end up in dispute.”

EC Harris’s specialist Contract Solutions team helps clients avoid, mitigate and resolve disputes. The 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.

This research was conducted by the EC Harris Contract Solutions and ARCADIS Construction Claims Consulting experts and is based on construction disputes handled by the teams during 2012.

A full copy of the report can be downloaded here.

- ends -

Notes to editor

Global construction disputes – summary of results

Region

 

Dispute values (US$ millions)

Length of dispute (months)

2010

2011

2012

2010

2011

2012

Middle East

56.3

112.5

65

8.3

9

14.6

Asia

64.5

53.1

39.7

11.4

12.4

14.3

US

64.5

10.5

9

11.4

14.4

11.9

UK

7.5

10.2

27

6.8

8.7

12.9

Mainland Europe

33.3

35.1

25

10

11.7

6

Global average

35.1

32.2

31.7

9.1

10.6

12.8

Source: EC Harris Global Construction Disputes 2013: A Longer Resolution

Notes to editors
For further press information please contact: 
Andy Rowlands,
Group PR Manager
EC Harris
andy.rowlands@echarris.com
T: +44 (0) 207 833 6662/ M: +44 (0) 7810 850 476

About EC Harris
EC Harris is a leading global built asset consultancy. As an ARCADIS company, EC Harris has access to approximately 22,000 professionals worldwide operating in over 70 countries, 300 offices and generating in excess of €2.5billion in revenue. Working across a wide range of market sectors, EC Harris helps clients make the most from the money they spend on their built assets.  For further information, contact www.echarris.com


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EC Harris
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