The significant scale of cash and time lost on construction and engineering projects around the globe is revealed in a new analysis of claims and disputes by HKA, the global risk mitigation and dispute resolution consultancy.
CRUX Insight 2021 distils real-world intelligence on more than 1,400 projects across 94 countries to identify the primary causes of overruns approaching half of projects’ capital value and three quarters of their scheduled programmes.
The fourth annual CRUX report combines a regional analysis of this unique knowledge bank with actionable insights from industry-leading consultants.
Headline statistics from this year’s report include:
- 1,401 projects analysed
- $2 trillion – combined capital expenditure
- $73bn – total value of claims
- $100m – the average disputed costs per project
- 46.3% – the value of claims as a proportion of planned cost
- 17 months – the average time extension claimed
- 71.4% – the typical prolongation for programmes
- 750 years – the cumulative overruns faced by all projects
The dominant drivers of claims and disputes are changes in scope, conflicting interpretation of contracts, design failures and mismanagement of subcontractors. The Covid pandemic has caused additional disruption, restricting access to sites and labour, constricting cashflow and exposing the limitations of contract provisions on force majeure and changes in law. This has intensified claim and dispute risks, even as the industry rebounds and governments across the world embark on ambitious infrastructure and development plans.
Beyond Covid, CRUX Insight reports that skills shortages, supply chain disruption, cost inflation, increased market volatility and the climate crisis are increasing the potential for conflict on projects.
Skills: Over a third of projects (35.6%) were hindered by skills and experience gaps, and associated workmanship deficiencies
Supplies: Late delivery of materials and equipment impacted one in nine projects (11.3%) (even before the report’s August 2021 cut-off and ongoing global materials shortages)
Climate: A tenth of projects (10.3%) were affected by exceptionally adverse weather. Like other global uncertainties, the climate emergency requires recalibration of capital project delivery risks.
“Capital projects are haemorrhaging billions of dollars each year to recurrent, predictable and often avoidable claims and disputes,” said Renny Borhan, CEO of HKA. “CRUX Insight 2021 not only diagnoses these failings and quantifies the impacts, but also identifies corrective actions to stem these losses. Project stakeholders and the industry can learn lessons from CRUX to operate more effectively amid this heightened uncertainty.”