The average value of construction disputes in the UK fell by a massive 47% last year, with a “willingness to compromise” having the biggest impact in avoiding disputes, according to a new report by Arcadis.
The value of disputes averaged US$17.9m in 2018; well below the global average of US$33m, and marking a significant decrease over the last six years.
The findings are revealed in the latest Arcadis Global Construction Disputes Report 2019: Laying the Foundation for Success. The report provides insight into the causes, duration and value of construction disputes, while highlighting the best ways to avoid, mitigate and resolve them.
The report found that:
- Despite values falling, disputes are taking longer on average to resolve;
- Failure to administer contracts and human factors revealed as primary causes of disputes;
- Greater use of digital technology could improve allocation of risk;
According to the report, the UK also has the shortest average length of time to solve a dispute – 12.8 months. However, this is up approximately 28% on last year, and consistent with the global trend of disputes taking longer on average to resolve.
The report highlights that most UK construction disputes are resolved after they have crystallised, rather than parties seeking to avoid or mitigate potential dispute situations as they arise. While it is encouraging that negotiation remains the preferred method of resolution, research respondents said that the number one factor which could have the biggest impact in avoiding disputes at all would be “a willingness to compromise in the dispute.”
Gary Kitt, head of UK contract solutions at Arcadis, said: “In some cases, it could be argued construction contracts are simply too complex for administrators to understand, and better training for everyone involved would go some way towards avoiding disputes as they arise. However, our results show the UK to be a world leader in effective avoidance and mitigation strategies, and as we continue to transition towards greater use of digital technologies like BIM and 4, 5, or 6D modelling, we are likely to see an improvement in risk allocation much earlier on in the process. This could help all parties to collaboratively resolve any difficulties before cost and time pressures start to escalate.”
Adrian Bell, partner at CMS Cameron McKenna Nabarro Olswang LLP, added: “While the fact that the report shows the UK to be one of the leading jurisdictions for dispute resolution should be applauded, there is still clearly work to be done. There is scope for quicker, cheaper and more bespoke forms of dispute resolution, supported by more collaborative behaviour, fairer risk sharing, and a better understanding of how contracts are intended to be operated.”
The report’s research is based on construction disputes handled by Arcadis in 2018, as well as contributions from industry experts.