A recent study by the engineering consulting firm ARCADIS revealed an interesting trend in the magnitude and duration of disputes in the construction industry. While the United Kingdom, Europe and the Middle East have all seen a rise in the value of construction disputes, the United States has seen a dramatic decrease in the value of disputes over its infrastructure projects. In just one year, the average value of construction disputes was reduced by nearly 84 percent, going from $64.5m in 2010 to $10.5m in 2011. ARCADIS attributed the steep decline in the value of disputes in the U.S. to the depressed construction market. This explanation is supported by the fact that the Middle East, which has not experienced as deep a reduction in infrastructure funding that the US has, saw a dramatic rise in the value of infrastructure disputes, with the average value of its disputes doubling from 2010 to 2011. The economic downturn may have also forced project owners to mitigate disputes at their early stages, which is a more cost effective approach than allowing an issue to fester until the end of the project when it has to be litigated in court or in an arbitration.

The causes of the disputes in infrastructure projects in 2011, as identified by ARCADIS, were: (i) ambiguities in the contract documents; (ii) incomplete design information or owner requirements; (iii) conflicting party interests; (iv) failure of owners to make interim awards on extensions of time and money; and (v) failure of proper contract administration. These are typical causes of disputes on construction projects, but they can be exacerbated in hard economic times.

Oct-Dec 2013 issue

SNR Denton