Regional construction dispute values drop
Average value of disputes declines compared with 2018 but causes of contention persist
The value of construction disputes increased in the Middle East in 2019 even as the average time taken to resolve them reduced compared with 2018.
Netherlands-headquartered consultancy Arcadis’s 2020 Global Construction Disputes Report states that disputes were valued at $62m in 2019, compared with $57m in 2018 and $91m in 2017.
Globally, the value of disputes reduced to $30.7m in 2019 from $33m in 2018 and a five-year peak of $43.4m in 2017.
On average, global disputes lasted for a 15-month period in 2019, compared with 17 months in 2018.
The average length of time needed to resolve a dispute in the Middle East decreased to 17 months in 2019, down from 20 months in 2018.
Arcadis’s report attributes the reduced timeline to improved market maturity and stakeholders realising that claimants in the future will not be “capable of withstanding long periods of time of uncertainty on the conclusion of their disputed amounts”.
The consultancy says two of the top three causes of Middle East construction disputes – poorly drafted or incomplete and unsubstantiated claims, and improper administration of the contract – were unchanged between 2018 and 2019.
Failure to make interim awards on extensions of time and compensation also led to disputes last year, Arcadis says, adding that these causes underscored the “chicken or the egg causality dilemma that is common on many construction projects”.
The report continues: “For example, if you asked an engineer as to why he or she is not able to make an interim award on extensions of time and compensation, they would reply by saying that is due to a poorly drafted or incomplete and unsubstantiated claim.
“Situations like these require participants to strike a challenging balance.”