The Arcadis survey of construction disputes has been running for four years, and the latest survey shows no sign that the global market for construction lawyers is slowing down.
Far from it in fact. The average value of sums under dispute has risen by some US$400,000 to $32.1 million according to Arcadis’ ‘Global Construction Disputes: Getting the Basics Right’, which covers 2013. Not only that, but the year also saw the emergence of the ‘mega dispute’, with Arcadis’ own teams working on three disputes each of which concerns over £1,000 million.
The Panama Canal dispute is probably the most high profile of them, summarised by Charles Tomlinson of Weightmans in last month’s guest editor column. The lesson to be drawn there was that even well drafted contracts might not provide much protection when so much is at stake as on this $58,000 million project.
The values of disputes were highest in Asia, at $41.9 million, then the Middle East at $40.9 million. United States dispute values trebled to $34.3 million. The UK didn’t escape the escalating trend with disputes rising to their highest value since the survey started, at $27.9 million.
Disputes are at least taking less time to resolve, falling to an average of 11.8 months compared to 12.8 months in 2012. Middle East disputes take the longest to resolve, 13.9 months, while Europe – excluding the UK – took only 6.5 months.
Th e number of points at which a dispute can occur is increasing, Arcadis points out, as the typically fast paced and complex construction programmes involve a host of suppliers. Even those disputes that flare up and are resolved away from the public gaze can result in heavy costs and time overruns.
Common causes of disputes are failures in contract administration and to understand or comply with contractual obligations; incomplete design information or definition of client requirements; failure to make interim awards; and poorly drafted or incomplete and unsubstantiated claims.
To improve the situation Arcadis’ survey results suggest that more effort has to be devoted to better contract administration, more robust documentation practices and proactive approach to risk management – all good advice widely available from your local construction law specialist, but routinely ignored on projects of all types and sizes here and overseas.
Another lesson from Panama was that driving the price as low as possible while transferring all possible risk to the contractor and relying on contractual remedies perhaps isn’t the best recipe for successful contract delivery. The client at the Panama Canal was faced with a bid some $1,000 million below the next lowest; yet patted itself on the back for securing this price.
It is well documented that this is precisely what happens every day in construction and the industry and its clients constantly bemoan the prevalence of disputes. Why keep committing the same old sins then? Repeatedly doing the same thing in the same way while expecting a different result has been said to be a symptom of madness. According to Arcadis’ survey, there is plenty of madness out there already – and the malaise is spreading.
Nick Barrett
Editor