However, contracting joint ventures have a one in four chance of into turning messy disputes.
These are among the findings of the first EC Harris Global Construction Disputes Report.
EC Harris says that the average value of construction disputes in the UK is £4.6m, which is the lowest of all the countries in which it operates. The global average value was £21.4m in 2010. The highest value dispute handled in the UK during the course of 2010 was for £65m.
EC Harris found that disputes in the UK were lasting, on average, 6.75 months from beginning to resolution. This was considerably quicker than the global average of 9.1 months primarily due to the use of statutory adjudication and collaborative forms of contract. In Asia, the average length of disputes was 11.4 months.
In the UK the number of disputes in construction projects had increased over the previous year, reflecting the global trend.
The research, compiled by EC Harris’s Contract Solutions team, found that a failure to properly administer the contract was the most common cause of construction dispute in 2010, demonstrating poor governance during the course of the construction project. The top five causes of dispute in construction projects in the UK during 2010 were:
- A failure to properly administer the contract
- Ambiguities in the Contract Documents
- Failure to make interim awards on extensions of time and monetary relief
- Incorrect contract selection when compared on a best fit with the project characteristics
- Incomplete design information or Employer requirements (for design and build forms of contract)
EC Harris head of contract solutions, UK, Gary Kitt said: “Resolving these disputes represents an extremely expensive, time consuming and often unnecessary distraction for clients and contractors alike. In an age of ever slimmer margins, the industry needs to focus far more attention on anticipating and preventing complex disputes in the first place and where disputes have already arisen, to resolving them swiftly and effectively, before they disrupt – or even jeopardise – construction projects.”
Where a joint venture was in place to deliver a construction project, EC Harris found that in the UK a quarter of these JVs had disputes within the JV itself. The conduct of the project manager or engineer was very often found to be at fault in the UK. This reflects the rest of the world where their conduct was found to be at the heart of the dispute on more than half (53%) of occasions. In these cases EC Harris found that a lack of understanding of the procedural aspects of the contract was the most common reason for the dispute, followed by too limited an involvement from the named PM or engineer.
When resolving its clients’ disputes, EC Harris also tracked the most common means of dispute resolution. In the UK, adjudication (contract or ad hoc) was the most popular method, followed by party-to-party negotiation and mediation.
Mr Kitt added: “In addressing most of the main causes of disputes, applying the right skills at the right time and being targeted on delivering what the employer needs and delivering that in accordance with the contract, would go a long way to reduce the nature and extent of any dispute. An early involvement by independent specialist consultants focused on business outcomes, can significantly assist in achieving this.”
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