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Colossal Costs Lost To Construction Claims And Disputes

by HKA on

The astonishing toll of overrunning costs and schedules on major engineering and construction projects worldwide is laid bare in an analysis of claims and disputes published today by HKA.

CRUX Insight 2020 is the product of investigations into more than 1,100 projects across 88 countries by HKA, the construction and engineering industry’s leading specialists in consulting, expert and advisory services.

Design conflicts are eclipsing scope change as the main disruptors of major projects. As well as ranking the causes of claims and disputes, HKA’s third CRUX Insight report provides a regional analysis with actionable advice to pre-empt these recurring problems – from its expert consultants in the Americas, Asia Pacific, Europe, and the Middle East & Africa.

The analysis reveals the eye-watering sums of money and time being lost, as well as the patterns of root causes. Already observing a surge in spurious claims conflated with the impacts of COVID-19, HKA consultants warn that the pandemic will be detrimental for the industry, and potentially lethal for already weakened contractors, without the corrective actions.

CRUX 2020 facts and figures:

  • 1,185 projects with a combined CAPEX worth more than US$1.8 trillion analysed.
  • Cumulative value of sums in dispute exceeded US$48.6 billion.
  • On average, claimed values reached almost 56% of projects’ planned capital cost.
  • Extensions of time claimed together would amount to 593 years.
  • Resultant delays would typically extend original schedules by more than 71%.
  • While changes in scope are still most often to blame, design-related problems are now entrenched near the top of the rankings.
  • The other most often recurring causes are: poor management of third parties, inadequate contract management, and deficiencies in workmanship.

Simon Moon, HKA Chief Operating Officer, said:

“The wealth of data captured in this year’s CRUX Insight report is unparalleled. Our findings are also timely for the industry, as we confront an unprecedented global challenge.

“The pandemic is afflicting all industries and territories. Already mired in project overruns and cost escalations, construction faces rising uncertainty and further impacts from COVID. Now is the time to learn the lessons and re-set the industry by tackling the root causes with practicable measures that will result in more mature designs, robust schedules and effective governance of major projects.”

Read the report: https://www.hka.com/2020-crux-insight/