The value of UK construction disputes have fallen by two million (12 per cent) in the past year with the average claim taking just 10.7 months to resolve – the lowest in the world, new figures reveal.
For the second second consecutive year, the value of major construction project disputes decreased from £19 million in 2014 to £17 million in 2015, according to the Global Construction Disputes: Don’t get left behind report by Arcadis.
Equally, although the time taken to resolve disputes has continued to rise in keeping with the rest of the world; at just 10.7 months in the UK this is still the shortest time globally.
This year’s report is Arcadis’ sixth annual study into the duration, value, common causes, and methods of resolution of construction disputes across the globe. The report found that failure to properly administer contracts or comply with their obligations remains the most common cause of dispute in the UK. However, where a Joint Venture was in place, JV related issues were the root cause in just 12.5 per cent of cases in the region; half that of 2014.
Gary Kitt, head of UK contract solutions at Arcadis, said: “It’s encouraging to see a slight dip both in value and the relative length of UK construction disputes, which indicates a far greater willingness by both parties to compromise before the onset of formal proceedings. Judicial pressure to limit costs, combined with the commercial pressure on construction executives to minimise the cost of disputes, means that mediation and party-to-party negotiation is increasingly becoming the preferred method of resolution.
“Effective mechanisms for avoiding disputes need to be employed as early as possible within a project, and involve the right expertise and support at the right time, so we expect the focus on mediation to be a trend that will continue to gain traction in future.”
Gary added: “In the UK we have seen a number of disputes, particularly adjudications, brought about by the failure of the paying party to administer the payment provisions within its contract correctly. This, in turn, has led to a number of enforcement cases reaching the Technology and Construction Court.”
Looking at the global picture, the total value of disputes relating to major construction projects worldwide also reduced marginally to, on average, £31 million in 2015.
Construction disputes were the highest in the Middle East at £56 million, followed by Asia at £46 million. However, the length of time to resolve a dispute increased to an average of 15.5 months worldwide, impacting parties involved in a dispute as well as the overall construction industry.
The property/real estate sector had the most disputes globally, closely followed by projects related to social infrastructure and the public sector. The natural resources sector has some of the largest disputes, including the recent Van Oord UK Ltd and SCIM Roadbridge Ltd v Allseas UK Ltd case, in which Arcadis successfully defended £10 million of claims relating to the disruption and prolonging of an onshore gas export pipeline. The highest dispute handled by the team globally in 2015 was worth £1.7 billion.