Global Construction Dispute Values Fell in 2011, but
More Than Doubled in the Middle East EC Harris Report
Finds
- Average value of
disputes down to $32.2m, but increased to US$112m in Middle
East
- Global construction disputes took longer
to resolve in 2011, up to 10.6months
- A failure to properly administrator the
contract was still the most common cause of disputes
28 May 2012
Disputes in the construction industry tended
to last longer but were of lower value in 2011 according to this
year’s ‘Global Construction Disputes´ report from EC
Harris, the global Built Asset Consultancy. However the
report found that disputes in the Middle East were bucking the
overall downward trend, with the average value of disputes
increasing to US$112m from US$56.25m in 2010.
EC Harris found that construction disputes
lasted 10.6 months in 2011, compared to 9.1 months in 2010.
Disputes in the US took the longest to resolve at 14.4months and
were resolved the quickest in the UK at 8.7 months.
Whilst the average value of construction
disputes fell globally to US$32.2m in 2011 from US$35.1m in 2010,
the UK, Europe and the Middle East saw a rise in dispute
value. Dispute values fell in Asia and the US, with the US
seeing the most dramatic fall from $US64.5m in 2010 down to
US$10.5m in 2011, which was due to the generally depressed
construction market in the US as well as the increasing emphasis by
both the public and private sector owners to avoid and mitigate
disputes through risk management and early, field level, resolution
of disputes. The highest value dispute handled by EC Harris during
2011 was for US$350m on a project in the Middle East.
Mike Allen, Global Head of Contract Solutions
at EC Harris said: “The Middle East saw a flood of major
disputes last year. Over the past few years we have seen a
reluctance to settle in the Gulf region, but this has been replaced
by a stronger desire to do business and resolve disputes as the
economies strengthen. On the whole, however, disputes are
still costing the industry time and money. Focusing on
avoiding the dispute from the outset through better mitigation and
contract design is always the better option.”
The research, which was conducted by EC
Harris’s Contract Solutions team, found that a failure to properly
administer the contract was the most common cause of a construction
dispute. The top five causes of disputes in construction
projects during 2011 were:
- A failure to properly administer the contract
- Ambiguities in the contract document
- A failure to make interim awards on extensions of time and
associated compensation
- Incomplete design information or employer requirements
- Conflicting party interests
The performance of the project manager or
engineer was also looked at in the report, with their conduct being
at the heart of how the dispute crystallised in 52% of cases.
The most likely problem with the project manager or engineer was
that they were too partial to the employer’s interests, followed by
a lack of understanding of the procedural aspects of the
contract.
When it came to dispute resolution, EC Harris
found that arbitration had actually become less popular as a means
of settlement. Instead, party-to-party negotiation was the
most common methods of resolution, followed by mediation.
Arbitration was the third most popular, with adjudication and
litigation completing the top five most common methods used.
Mike Allen continued: “It is promising to
see the shift for disputes to be settled without the need for
formal dispute resolution, which only adds to the cost and time
involved in resolving disputes through such methods. With so
many parties involved in a construction project, the need for
timely, progressive and contract compliant contract administration
is vital in ensuring that all current and relevant information is
considered and taken into account, especially when responding to
and addressing issues that arise. This will help to reduce
the likelihood of issues reaching the dispute stage.”
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, defects and building surveying experts. The
Contract Solutions team provides procurement, contract and dispute
avoidance and management strategies, management expertise 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.
EC Harris: Global Constructions Disputes Report 2011
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For a copy of the full report,
click here
Notes to editors
For further press information, please contact:
Andy Rowlands
Group PR Manager
EC Harris
T: +44 (0) 7833 6662
M: +44 (0) 7810 850 476
andy.rowlands@echarris.com
About EC Harris
EC Harris is a leading global built asset
consultancy. As an ARCADIS company, we have access to approximately
21,000 professionals worldwide operating in over 70 countries, 300
offices and generating in excess of €2.4 billion in revenue.
Working across a wide range of market sectors, we help our clients
make the most from the money they spend on their built
assets. For more information visit http://www.echarris.com/