Highlands Ranch, Colo. — A report released by Arcadis reveals that the volume and value of construction disputes in North America increased for the first time since 2013, while the average time taken to resolve these disputes also increased in 2019.
The data for this report was gathered prior to the COVID-19 pandemic, and how the industry collaboratively responds to the many challenges that flow from the pandemic will play a large role in the quantity, duration and value of construction disputes in 2020 and beyond.
The 10th annual report, “Global Construction Disputes Report 2020: Collaborating to achieve project excellence,” recognizes the industry’s future uncertainty surrounding COVID-19 and the unique challenges that will be posed when projects restart. In the short term, collaboration will play a vital role in the global response to the COVID-19 pandemic. Long term, adopting collaborative ways of working can help project participants avoid, mitigate and resolve disputes.
Global report highlights:
- 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 favor 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
- 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
Over the past 10 years, many of the leading causes of disputes still revolve around the parties’ failure to understand their contractual obligations related to contract administration. This is not surprising the industry has become more sophisticated and owners are requiring more formal dispute resolution processes. In some cases, this leads to more successful outcomes while extending the duration of time it takes to resolve the dispute.
With COVID-19’s impact on the construction industry, authors expect a further increase in claims related to delays and increased costs on projects.
“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.”
Research is based on construction disputes handled by Arcadis in 2019, with contributions from industry experts.
