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The average cost of UK construction disputes is well below the global average, and the amount of time taken to resolve them is just 9.8 months – the fastest anywhere in the world.
Research by Arcadis found that the time taken to resolve UK construction disputes fell 23% in 2019 compared to 2018, when it was 12.8 months.
Meanwhile, the average value of UK disputes has remained
constant and, at just US$17.8m (£14.1m) in 2019. The global average was US$30.7m
The findings are revealed in the latest Arcadis Global
Construction Disputes Report 2020. The report examines the causes, duration and
value of construction disputes, while highlighting the best ways to avoid,
mitigate and resolve them.
According to the report, which relies on data gathered
before the covid-19 pandemic, the volume has remained consistent despite a
decline in their average length and no change in their overall value.
The majority of disputes across all sectors are caused by
those administering contracts, with a “lack of understanding of procedural
aspects of the contract” one of the most commonly cited reasons for problems
emerging. Over 60% of respondents stated that proper contract administration
would have the single largest impact in avoiding disputes.
When it comes to resolving disputes, adjudication has replaced party-to-party negotiation as the most common resolution method. The report said most effort now appeared to be expended on mitigating disputes, rather than focusing on the resolution stage which dominated the year prior.
Efforts spent in avoidance rank even lower in third place, with 58% of respondents reporting that settlement after a dispute had crystallised was the most common form of resolution.
However, there are signs that things are changing, with
major stakeholders, including contractors, indicating a desire to work together
through signing up to the industry Conflict Avoidance Pledge (CAP), which is
encouraging all organisations to consider their working practices and the way
they deal with disputes.
Gary Kitt, head of UK contract solutions at Arcadis, said: “The
construction industry has been grappling for decades with solutions to its
adversarial nature and inherently risk-averse attitude. Yet now more than ever
the entire supply chain – from employers right through to sub-contractors and
suppliers – needs to work together to keep projects moving and prevent disputes
“The downward trend in terms of both value and length of
disputes has been encouraging, but the more important concern is how we
maintain this in a post-pandemic environment. One solution would be to make the
administration of contracts easier for everyone involved. This calls for
industry-wide collaboration not only in terms of who is represented on drafting
bodies to make sure that everyone on the project understands the consequences
of their actions, but also by using more collaborative forms of contract that
will help to inspire longer term confidence in delivery.”
Sally Davies, managing partner at law firm Mayer Brown
International, added: “Time, cost, quality, health and safety are all key
ingredients of any construction project, but tension between them so often
results in disputes. It is therefore no surprise to see the classic
battlegrounds of time and money top of the survey list.
“If parties want to continue working together and resume
performance as soon as possible, where neither is at fault and both have
suffered, understanding on both sides will be required. Is collaboration,
rather than confrontational legal battles, a better way forward?”