The average value of disputes in the U.S. construction industry fell to $10.5 million during 2011, down from $64.5 million in 2010, according to this year’s ‘Global Construction Disputes’ report from ARCADIS, an international design, consulting, engineering and management services company and its subsidiary EC Harris, a global built asset consultancy.
While this reduction reflected a wider global trend, the U.K., Europe and the Middle East saw rises, with disputes in the Middle East more than doubling in value to $112 million, compared to $56.25 million in 2010.
ARCADIS found that construction disputes in the U.S. lasted, on average, 14.4 months in 2011, compared to 11.4 months in 2010. The global average was 10.6 months. Disputes in the U.K. were resolved the quickest at 8.7 months.
Globally, the average value of construction disputes in 2011 fell to $32.2 million from $35.1 million in 2010. The highest value dispute handled by ARCADIS during 2011 was $350 million on a project in the Middle East.
“The dramatic fall in the value of U.S. construction disputes was largely due to a generally depressed construction market,” said Joe Seibold, executive vice president at ARCADIS U.S. “We also saw an increasing emphasis from both public and private sector owners to avoid and mitigate disputes through risk management and early, field level, resolution of disputes. Nevertheless, despite this drop, disputes are still costing the industry significant time and money.”
The most common causes of disputes in global and U.S. construction projects during 2011 were:
- Ambiguities in the contract document;
- Incomplete design information or employer requirements;
- Conflicting party interests;
- Failure to make interim awards on extensions of time and monetary relief;
- A failure to properly administer the contract
The performance of the project manager or engineer was also examined within the report, with their conduct often at the heart of how the dispute crystallized. The most typical problem with the project manager or engineer was that they were too partial to their employer’s interests, had a lack of understanding about the procedural aspects of the contract or had too limited involvement.
When it came to dispute resolution, party-to-party negotiation was the most common method used in the U.S., followed by mediation and arbitration.
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