CONSTRUCTION DISPUTES
CD: Could you provide an overview of the extent and type of disputes generally pervading the construction industry? Have any significant global or regional trends impacted this space in recent months?
Grantham: The causes of disputes are very consistent. They include a failure to properly administer the contract, poorly drafted or incomplete and unsubstantiated claims, errors or omissions in the contract and parties failing or simply not understanding their or other’s requirements and obligations under the contract. Each of these causes will have an effect on the commercial considerations which, while not a cause in itself, might have a bearing on the parties’ mindsets during the construction period. Against this backdrop, you can therefore understand the current interest as to the extent to which the volatility in commodity and currency exchange rates will have on the commercial and financial position of both owners and contractors. If hedging arrangements have been set up then this will mitigate the risk but, if not, then this might lead to disputes because the commercial metrics come under increasing pressure.
M. Lowes: Generally, we are seeing three types of disputes. First, there are always disputes over change orders. These disputes are not new, but we are seeing an increase in claims from subcontractors and more rejections or disputes with the owners. Second, we see owners trying to avoid funding obligations on contracts as the scope and cost of a project grows. We believe this is just symbolic of the budget pressure everyone is feeling. Third, we are seeing more derivative type claims where owners, as well as subcontractors are trying to find ways to avoid contractual obligations or limitations. In our experience these claims are not limited to specific regions.
Apr-Jun 2017 issue
AlixPartners UK LLP
BAM Nuttall Limited
KBR
King & Spalding