HIGHLANDS RANCH, COLO. — A study released recently by U.S.-based Arcadis reports that the volume and value of construction disputes in North America increased last year for the first time since 2013.
The report, Global Construction Disputes Report 2020: Collaborating to Achieve Project Excellence, notes as well that the average time taken to resolve disputes also increased in 2019.
The data for the report was gathered prior to the COVID-19 pandemic, stated a June 3 release, and thus does not reflect the industry’s future uncertainty surrounding COVID-19 and the challenges that will be posed when projects restart.
The report states that “long term, adopting collaborative ways of working can help project participants avoid, mitigate and resolve disputes.”
Highlights of the report:
- The value and length of disputes continue to differ from region to region.
- All regions saw an increase in mega disputes related to larger capital programs and private projects.
- Sophisticated forms of dispute avoidance such as risk management continue to gain favour across the industry.
- The industry is facing an uncertain economy, with some regions experiencing significant growth and others encountering tighter markets.
- Consistent with previous years, human factors and misunderstanding of contractual obligations continue to be a primary cause of disputes.
The most common cause for disputes in North America was “contractor/subcontractor failing to understand and/or comply with its contractual obligation.” Globally, the most common cause was “poorly drafted or incomplete and unsubstantiated claims.”
In North America, the average value of construction disputes increased from $16.3 million in 2018 to $18.8 million in 2019. Globally, the average decreased from $33 million in 2018 to $30.7 million in 2019.
As well in North America, the average time taken to resolve disputes increased from 15.2 months in 2018 to 17.6 months in 2019. Globally, the average decreased from 17 months in 2018 to 15 months in 2019.
With COVID-19’s impact on the construction industry, the authors expect a further increase in claims related to delays and increased costs on projects, states the release.
“It is very difficult to predict the true widespread impact of this global pandemic, but with construction projects shutting down in some areas of North America, we know projects will experience delays and disruption,” said Roy Cooper, head of contract solutions for Arcadis in North America.
“Contractors and owners recognize this and understand that the construction industry will be vastly different in 2020. Looking ahead, collaboration among project participants will be essential and will be a key driver in the success of projects.”