Construction Contract Disputes are Getting Longer, More Complex

A new report released by Arcadis reveals that although the value of construction disputes in North America dropped for the fourth consecutive year, the average time taken to resolve these disputes increased in 2017, far exceeding the global average.

The report, entitled “Does the construction industry learn from its mistakes?”, provides insight into the causes, duration and value of construction disputes while highlighting the best ways to avoid, mitigate and resolve them. This year’s report focuses on human behaviors, highlighting the need to be proactive and exploring new ways to avoid disputes at the onset.

Report Highlights

-Average value of North American disputes decreased to US $19M in 2017 ($21M in 2016). Globally, the figure stood at US $43.4M ($32.5M in 2016).

-Time taken to resolve disputes in North America increased in 2017, to an average of 17.7 months, an increase of two months from 2016 (15.6 months). Globally, the length of time stood at 14.8 months, a one month increase over 2016 (13.9 months.)

-Contract errors and/or omissions were the top cause of disputes in North America. Poor contract administration, failure on the part of an owner, contractor or subcontractor to understand or comply with contractual obligations were also cited as reasons for disputes.

-The most effective technique for claims avoidance was contract and specification review. Owner or contractor’s willingness to compromise was cited as the most critical for mitigating or resolving disputes early on in the process.

-Project teams that use early resolution techniques reach a settlement with 82% success.

-The highest value dispute handled by the Arcadis team in 2017 was worth $2 billion USD.

With positive economic drivers and larger and more complex projects anticipated this year, there is a critical need to embrace more sophisticated risk management and claims avoidance techniques, including leveraging digitalization.

“Getting project participants to think differently and utilize the latest tools such as risk management modeling provides an enormous opportunity to help the industry here in North America,” said Roy Cooper, operations leader, Arcadis. “If companies can thoroughly understand the root challenges of their disputes, they will learn from the industry’s mistakes and improve the process moving forward.”

Download the full Arcadis Global Construction Disputes 2018 here. Research is based on construction disputes handled by Arcadis in 2017 as well as contributions from industry experts.