Highlands Ranch, Colo. — In its fourth annual Global Construction Disputes Report, ARCADIS reported that in 2013, the average claimed value of construction disputes in the U.S. tripled over 2012, to an average of $34.3 million. However, the U.S. was still well below average construction dispute values globally, behind Asia and the Middle East. At the same time, construction disputes in the U.S. took 1.8 months longer to resolve than in 2012, averaging 13.7 months.
This year’s ARCADIS report on the top trends driving the value, duration, causes and resolutions of construction disputes worldwide, “Global Construction Disputes: Getting the Basics Right,” also points to the No. 1 cause for disputes in the U.S. in 2013: alleged errors and omissions in the contract document.
Joe Seibold, executive vice president, ARCADIS U.S., comments, “Today’s major construction projects are fast paced, complex and involve a multitude of parties, so there are numerous points at which a dispute can occur. Many of these disputes are resolved out of the public eye but do often result in significant costs and time overruns. Our research confirms the scale of these problems and highlights the need for better contract administration, more robust documentation and a proactive approach to risk management to help avoid and mitigate the most common causes of disputes.”
The Panama Canal Expansion was one of the highest profile disputes in 2013, with the Panama Canal Authority in dispute with the GUCP contractor consortium about cost overruns, said to be worth $1.6 billion, and delays to the project. It was reported a deal was secured that freed up some funds earlier this year and this has allowed work to continue.
Joint ventures in the U.S. tended to result in disputes in just over a third of cases (36 percent), in line with the global average, which increased from 2012 where instances of JV disputes were less commonplace at 19 percent. The increased use of alternative project delivery approaches such as design-build, combined with the frequent involvement of joint ventures as the delivery entity, means that there is a high probability of a dispute either with the owner or within the joint venture team itself. This emphasizes the importance of proactive measures which will enable projects to mitigate or avoid altogether the potential impact of disputes.
Seibold continues: “As a result of an increasing active construction market, we are seeing the number of joint ventures increase as firms seek to distribute risk across major programs and blend specialist skills in the supply chain into one contract. This is clearly not an easy undertaking and our research shows it is leading to an increase in the number of disputes highlighting a need for some very careful focus around the selection, set up and management of the JV relationship.”
Download the full report at www.arcadis.com/Content/ArcadisGlobal/Docs/publications/Research/8824_Construction_Disputes_Report_WEB.pdf.