The value of UK construction disputes has fallen by two million (12%) in the last year, with the average claim taking just 10.7 months to resolve – the shortest in the world, according to new figures.
According to Arcadis’ Global Construction Disputes: Don’t Get Left Behind report, the value of major construction project disputes fell for the second consecutive year, from £19 million in 2014 to £17 million in 2015.
Similarly, while the time it takes to resolve disputes has increased in line with the rest of the world, the UK still has the shortest time in the world, at 10.7 months.
This is Arcadis’ sixth annual study of the duration, value, common causes, and methods of resolution of construction disputes around the world. According to the report, failure to properly administer contracts or comply with their obligations is still 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 only 12.5% of cases in the region, which was half of the figure in 2014.
“It’s encouraging to see a slight drop in both the value and the relative length of UK construction disputes, indicating a far greater willingness by both parties to compromise before the onset of formal proceedings,” said Gary Kitt, head of UK contract solutions at Arcadis. Judicial pressure to limit costs, combined with commercial pressure on construction executives to reduce the cost of disputes, means that mediation and party-to-party negotiation are increasingly becoming the preferred method of resolution.
“Effective mechanisms for avoiding disputes must be implemented as early as possible within a project, involving the right expertise and support at the right time, so we expect the emphasis on mediation to be a trend that will continue to gain traction in the future.”
“In the UK, we have seen a number of disputes, particularly adjudications, caused by the paying party’s failure to correctly administer the payment provisions within its contract,” Gary added. As a result, a number of enforcement cases have been filed in the Technology and Construction Court.”
Looking at the big picture, the total value of major construction project disputes worldwide fell marginally in 2015, to an average of £31 million.
Construction disputes were the most expensive in the Middle East, costing £56 million, followed by Asia, costing £46 million. However, the time it takes to resolve a dispute has increased to an average of 15.5 months globally, affecting both parties involved in a dispute and the construction industry as a whole.
Globally, the property/real estate sector had the most disputes, closely followed by projects related to social infrastructure and the public sector. The natural resources sector has some of the largest disputes, such as the recent Van Oord UK Ltd and SCIM Roadbridge Ltd v Allseas UK Ltd case, in which Arcadis successfully defended £10 million in claims relating to the disruption and extension of an onshore gas export pipeline. The team’s largest global dispute in 2015 was worth £1.7 billion.