CONSTRUCTION DISPUTES IN APAC: 2025 OUTLOOK
CD: Could you provide an overview of construction sector disputes in the Asia-Pacific (APAC) region? What issues and challenges are acting as catalysts for disputes?
Stephens: Engaging a supplier to assist in the construction processes is, at its core, a procurement and contract management exercise. Accordingly, there are similarities in the dispute thematics in construction and procurement disputes. More common causes include poor upfront estimation of costs and supplier capability, an inability to meet assumed lead times or delays, disruption to the supply of key inputs such as labour and materials, the potential for uncontrolled growth in a project’s scope, a misalignment on product and service quality, and issues with passing through fees and surcharges. Fee irregularities, whether borne from scope creep, input costs or delays, are becoming more common and forcing a rethink on the appropriateness of fixed price costing models. Likewise, an overreliance on key suppliers or material sources is necessitating heightened due diligence during partner qualification and ongoing counterparty risk management that can be improved through heightened communication and structured project monitoring. Though conducting financial capacity assessments may provide comfort for supplier liquidity, ensuring redundancies on core inputs and transparency on key milestones is critical, as is common in any procurement task. Contingencies, communication and transparency remain core dispute mitigants across most risk categories.
Hutton: Financial challenges and compressed markets for principals and construction firms are the key catalysts for disputes. Tight margins for both contractual counterparties ultimately means it is difficult for both participants in the market to meet their own financial hurdles. Then, when something goes askew, there is a heightened need for that counterparty to explore, and if required, to pursue, all options to improve their financial position. Less margin for all participants means less buffer for all, and therefore a heightened need for each party to get a larger slice of the pie. All of this is increasing the dispute environment.
Apr-Jun 2025 issue
McGrathNicol