Road to early resolution
It should be no surprise that the theme of this year’s Global Construction Disputes Report from Arcadis is preventing disputes from occurring in the first place. When the global average value of disputes has increased to a staggering US$54.3m (from US$30.7m in 2019), it is not in anyone’s interest to end up in litigation.
We are seeing an increase in construction activity globally to jumpstart economies in the wake of Covid-19. These projects are becoming bigger and more complex, with more stakeholders, sophisticated delivery techniques and requiring tremendous innovation. Coupled with shortages of labour and materials, this smells like a perfect storm for projects to go off the rails if there is not a huge emphasis on high-quality projects and risk management.
Avoiding Disputes
In the survey, the main cause of disputes has consistently been a failure to properly understand and/or comply with the contract. Whilst this is relatively easy to fix with proper training, both on and off the job, disputes are more complex than this – and if this were truly the case, surely the industry would have tackled this by now?
The report suggests a simple roadmap to avoid disputes or nip them in the bud – by the early identification of risks, proper training of the project team, resolving disputes as early as possible, and being prepared by keeping accurate records. No rocket science here but sound advice.
An interesting output from the survey addresses the most important factors in mitigation or early resolution of disputes. They are:
- Owner/contractor willingness to compromise
- Accurate and timely schedules and reviews by project staff or third parties
- Contractor transparency of cost data in support of claimed damages
Trust is at the core of these factors. Trust between the owner and contractor that neither party feels taken advantage of and openness in being able to disclose potentially bad news and have that dealt with professionally.
A follow-on question asked what the most effective claims avoidance techniques were. Top of the list was risk management, followed by reviews… of the contract, specification, schedule and constructability. Good common sense and I am sure that these are done on most projects. So why are we still in this position of falling into costly and damaging disputes? It comes back again to the incredibly high stakes on many of these complex mega projects coupled with a lack of trust between the main players.
The picture painted by this Report does vary around the world, and all regions have not been equally impacted by Covid-19. It will be a year or two before disputes from the pandemic filter through to the courts. Let us hope that most owners and contractors have an appetite to resolve the impacts from this once in a generation event amicably and reasonably – if not, we may see dispute values hitting new heights.