Legal

Will digitalisation end construction disputes?

2 May 2019 | By Charlie Woodley

The most common causes of legal disputes in construction will not surprise many – but what role could digitalisation play in solving them? Charlie Woodley explains.

Charlie Woodley

To understand claims and dispute causation better in the construction and engineering sector, and the likely impact of digitalisation, our team analysed data and expert opinion on 257 projects, together valued at more than $400bn, where HKA provided claims consulting and dispute resolution services.

We identified numerous causes, and the interrelationships between them, which we believe more truly reflects the constraints on parties and projects.

The top 10 causes of disputes will surprise few (see box). More interesting, however, is that our research showed an average of 13 interrelated causation factors per project, which debunks any attempt to reduce dispute causation to a few headline factors. There are primary, secondary, even tertiary causes, and they shift depending on which party in the dispute – owner, contractor, designer – is examined. Put simply, it’s complicated.

Looking at the top 10 causes, however, we believe that digitalisation in the industry will have an ameliorative effect on disputes as “information liquidity” extends through supply chains. By information liquidity, we mean the ease with which records, and the data they contain, can be converted into knowledge.

For instance, a major challenge in dispute resolution is trying to establish what the facts were on site.

Top 10 causes of construction disputes

  • Slow progress
  • Variations
  • Extensions of time
  • Late availability of information/design
  • Change of scope
  • Managing time
  • Interpretations of contract provisions
  • Adversarial culture
  • Design errors/buildability
  • Lack of communication

Retrieving data has traditionally relied on paper-based site diaries, which site agents can neglect to update, or can fill with inappropriate information.

Where there is ambiguity around the facts, parties entrench. The advent of relatively simple smartphone apps, complemented by photography, which can export data in a structured format, allows the facts to be established much faster, and with less expense.

So, rather than fight over the facts, parties can progress more efficiently to negotiating a settlement.

The savings in time and cost can be dramatic. Recently we assisted with a delay claim and used automation techniques to extract progress data and plot S-curves in about four hours, whereas a manual process might have taken three weeks.

Extrapolated, this type of time and cost saving supports the claim that the forecasted value-add of digitalisation is in the trillions of dollars.

The use of 3D models in the industry at large, and within dispute resolution, will only increase over time as BIM continues to gain traction globally and becomes business as usual.

As awareness of the value of information models grows, we expect them to be requested and their potential to connect with non-graphical data to be evaluated as a matter of course. This will be reinforced as the dispute resolution community shifts focus to data rather than documents.

With both industry and advisors digitally maturing, it is not unrealistic to expect 70% to 80% of future contentious commissions to have models available within the next five years, reversing the current position.

We do not hold that the industry in its entirety must digitalise all at once. Pockets of change spark more pockets of change. Information requirements that include machine-readable formats for data interchange will result in a trickle-down effect, improving data flow throughout the supply chain.

This process will accelerate as parties recognise the value of data flow, and such provisions become standard inclusions in contracts.

Charlie Woodley is director and CRUX programme lead at HKA, a consulting and advisory firm. A longer version of this article, with a link to the HKA report, is published in the current edition of Construction Research & Innovation and can be accessed free by CM readers until 24 June 2019.

Comments

The main contractor through Risk management, brought into being the sub contactor. Sub contracting there works out, which in turn reduced their profit they make from a contract, but in turn they reduce the risk they have.

Unfortunately managing this way adds many different management layers which adds significant costs. Mainly due to compounded over head and profit and length of time resolutions (Consultants).
This situation is now so bad that the sub contractor, should now be replaced with the Main Contractor building the buildings themselves, as employing sub contractors no longer reduces the risk for the main contractor, which was the reason the sub contractor was born.

For example if a single work process was to be sub contracted out 3 times, Main Contractor, Sub Contractor 1, Sub Contractor 2, all have reduced there risk, but also all have charged OHP @10-16%, giving an actual management cost of 30%.
I am sure this 30% instead of being used for risk management would be better off used for the construction works its self and would cover any eventuality ie Risk that may arise.

S.McGowan, 7 May 2019

We have been tracking progress and events from smart phones for two years now. There is still room for interpretation. It's not over yet.

Nick Baker , 7 May 2019

Very valid points made. Establishing the facts continues to be a challenge within the industry. Retrieving historic information is often hampered by the way data information is collected, whether it be written in a tablet or photographs being taken. Working in a fragmented industry where contractors rely upon sub-contractors, and vis versa for information and staff mobility results in site staff moving within the project duration, often leads to factual data and information being lost. Technical solutions that capture greater amounts of data and information, day to day, leads to greater certainty of historic events. Technologies such as openspace.ai captures information in a google maps style imagery, which allows a daily record of activity to be viewed historically, which as you suggest, results in disputes being avoided.

Edward Carolan, 17 May 2019

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