Asia has the world’s most expensive construction disputes with an average value of US$85.6 million
Hong Kong — Disputes relating to major global construction projects increased significantly in value to, on average, US$51 million in 2014 with Asia topping the ranking with an average dispute value of US$85.6 million according to ARCADIS, the global natural and built asset design and consultancy firm. This represents the second consecutive year in which values have increased with the global average now reaching $51 million, up almost $19 million on 2013. Significantly, the number of projects going into dispute is also expected to rise during 2015, with low margins agreed during the economic downturn and labor shortages in some markets likely to prove a catalyst for disputes.
This year’s report, Global Construction Disputes: The Higher the Stakes, the Bigger the Risk, is ARCADIS’ fifth annual study into the duration, value, common causes and methods of resolution of construction disputes across the globe. The global average time taken to resolve disputes rose to 13.2 months, up from just under a year in 2013. Significantly, all regions of the world saw the resolution process take longer, with the exception of Asia, where the average length of dispute took two months less than the previous year.
Mike Allen, Global Lead of Contract Solutions at ARCADIS, said: “Right across the world, governments and developers are commissioning large-scale construction programs with levels of investment reaching the tens of billions. These programs are often highly complex, with a combination of tender pricing made during the recession and online casino low availability of resources, disputes are not only much more likely, but also potentially more costly. While many of these situations are resolved behind closed doors, the time taken to do so and the expense involved can create huge problems for all parties involved.”
In Asia, the research found that the most common causes of construction disputes related to the administration of contracts. The top three causes in 2014 were:
- Failure to properly administer the contract
- Failure to make interim awards on extensions of time and compensation
- Poorly drafted or incomplete and unsubstantiated claims
The likelihood of a joint venture (JV) ending in dispute was also reviewed in the report. Joint ventures were more likely to end in dispute in Asia than some other regions with 44% of JVs likely to do so (compared with a global average of 31%).
Gary Howells, Head of Contract Solutions, Asia at ARCADIS, said: “This is one of the largest recorded rises in the average value of dispute values within Asia’s construction market. It doubled the 2013 figures and far outstripped anything seen over the past 5 years. This reflects the continued growth in activity in the Asia construction market, particularly in Singapore and Hong Kong, and the size and complexity of some of the world’s largest infrastructure projects being executed in the region. With the rise in Joint Venture arrangements in Asia, the risk of dispute is also higher than ever.”
Global construction disputes – summary of results
Source: ARCADIS Global Construction Disputes: The Higher the Stakes, the Bigger the Risk
Read the full report: ARCADIS Global Construction Disputes 2015. This research was conducted by the ARCADIS Contract Solutions experts and is based on construction disputes handled by the teams during 2014.
