Value of UK construction disputes at all-time high
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The value of construction disputes in the UK remains stuck at an all-time high, according to new figures.
It means that construction disputes in the UK are now costlier on average than those in North America and Europe, according to a report released by design and consultancy firm Arcadis.
The report, entitled Does the construction industry learn from its mistakes?, found that the average amount in contention between two parties in construction disputes in the UK was £26m ($34m) in 2017.
That was the same figure as the year before, although the amount of time it took to resolve disputes fell by an average of two months to ten months in 2017 – the shortest amount of time in any region studied.
The average value of disputes in the Middle East was even higher at $91m (£69.3m), while disputes took an average of 13.5 months to resolve.
In the UK, the most common cause of disputes was “failure to properly administer the contract”, while parties failing to understand and/or comply with contractual obligations has become the second most common cause of disputes.
Third among the most common cause of disputes was a failure to serve the appropriate amount of notice under the contract.
Disputes likely to increase
Meanwhile, Arcadis warned that the number of disputes in the UK was “highly likely” to increase in 2018 with stakeholders and supply chain members seeking to recoup losses sustained following the collapse of Carillion.
John Morris, global head of projects and construction at international law firm Clyde & Co said: “As the UK construction industry continues to grapple with a severe skills shortage, the collapse of one of the biggest tier-one contractors and the countdown to Brexit, it is new projects and recently completed work that remains the primary driver of disputes.
“It’s somewhat unsurprising that adjudication remains the preferred method of alternative dispute resolution. It offers the benefit of early cash, which is of course hugely beneficial to those operating in the industry, albeit the outcome can be a lottery given the calibre of some adjudications.
“We’re also seeing an increasing amount of party to party negotiation and mediation, particularly among claimants who want to avoid the courts and preserve relationships.
“It’s also popular among claimants pursuing technical claims for late notices. It’s important to mention arbitration, which many of our clients now prefer as a method to resolve high-value disputes. Arbitration is often attractive because the two parties usually agree on the arbitrator, it can be more cost-effective than going through the courts, it provides the benefit of privacy, and the arbitration is binding, so there are limited opportunities to appeal the decision. The courts too are becoming busier, so arbitration can offer a quicker resolution.”
Gary Kitt, head of UK contract solutions at Arcadis, said: “The primary causes of disputes are all matters that could be avoided by a more integrated and collaborative approach to project procurement.
“The fact that many of the leading causes of disputes remain the same as in previous years begs the question of whether construction professionals are learning from their mistakes when it comes to disputes.
“However, investment in technology represents an enormous opportunity to help the industry. If companies can thoroughly understand the root challenges of their disputes, technology can help them overcome the status-quo by co-creating the solutions and strategies to tackle elusive and recurrent problems.”