Words by Megan Avard, Founder and CEO
When it comes to major construction projects, disputes are often unavoidable. But the size and impact of these disputes can be managed to protect the overall project outcome – and avoid major budget blowouts and missed milestones.
According to the 11th Arcadis Global Construction Disputes Report, the average value of disputes rose globally from $30.7 million in 2019 to $54.26 million in 2020. This was despite the actual number of disputes remaining relatively unchanged, and the average length of disputes actually decreasing.
We are coming up to two years of major project impacts from COVID-19, with forced lockdowns impacting labour and extending shipping times. Projects have stalled and costs have soared, with 60% of the Arcadis survey respondents reporting that they encountered impacts due to COVID-19.
As countries get on top of the health crisis, construction projects are rebooting, with governments pinning the projects on jumpstarting and recovering economies that have been impacted by COVID-19. But tensions are high, supplies and labour are limited and increased stakeholder pressure is weighing on deliveries.
These factors have induced a pressure cooker-like effect, creating an environment ripe for disputes to occur.
What is causing the disputes
According to the report, the main cause of disputes was owners, contractors or subcontractors failing to understand and/or comply with their obligations under their contracts. Additionally, proper administration of the contract was a theme across the globe for the successful and early resolution of disputes.
“Over the past 11 years of gathering insights and capturing dispute trends, one of the leading causes of disputes still revolves around the parties’ failure to understand their contractual obligations related to dispute resolution,” said Roy Cooper, PE, Head of Contract Solutions in North America.
This leading cause was closely followed by errors and/or omissions in the contract documents, owner-directed changes, and third-party or force majeure events – a topic we recently covered here.
Reducing the impact of disputes
Disputes are often unavoidable, especially under the current circumstances. However, there are time-tested techniques that can guide you toward early resolution. Effective dispute resolution should be built into the entire project management process, starting at the beginning of each project and proceeding through to completion.
The Arcadis report highlights the most common factors in the mitigation or early resolution of disputes. In order, they include:
- Owner/contractor willingness to compromise
- Accurate and timely schedules and reviews by project staff or third parties
- Contractor transparency of cost data in support of claimed damages
While we can not necessarily manage or change owners and contractors’ willingness to compromise, SurePact provides a solution to manage schedules and reviews, ensure contract transparency and assess and mitigate risk.
Effective project management includes understanding contracts and the risks associated with them. In particular, early identification of risks, proper training of the project team, robust document management, and retention and analysis processes can all help to reduce the likelihood and severity of disputes in a project.
SurePact offers a 360-degree suite of project and portfolio risk identification, meaning that risks are identified and can be managed before disputes arise. The platform’s centralised document repository allows all the components of a construction project to be housed in one place, from the initial concept, pre-construction phase and tender submission process, through to contract administration and asset realisation.
With the administrator’s permission, external contractors can access this information – ensuring nothing is lost in paper trails and lengthy email threads, miscommunication is avoided, and disputes can be diffused before they derail your project.