ME construction disputes on the rise
Dubai, May 30, 2011
The number of construction disputes in the Middle East region has increased over the past two years, reflecting the global trend, according to a study by international built asset consultancy EC Harris.
The disputes are valued at over $20 million higher than the global average, said the first ‘Global Construction Disputes Index’ released by EC Harris.
Globally, the average value of disputes handled by EC Harris was $35.1 million in 2010, with the average value in the Middle East being $56.25 million.
The highest value dispute handled in the Middle East during the course of 2010 was for $100 million, although EC Harris did work on one dispute in the Middle East where the disputed value was higher but undisclosed.
EC Harris found that disputes were lasting, on average, 8.25 months from beginning to resolution. Despite their high monetary value, this was below the global average of 9.1 months.
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 2010 were:
*A failure to properly administer the contract
*Incorrect contract selection when compared on a best fit with the project characteristics
*An unrealistic contract completion date being defined at tender stage
*Employer imposed change *Problems associated with construction slow down and project funding
David Dale, head of Contract Solutions, Middle East at EC Harris 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,' he explained.
Where a joint venture was in place to deliver a construction project, EC Harris found that half 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 Middle East. 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 per cent) of occasions.
In these cases EC Harris found that being too partial to the employer’s interest was the most common reason for the dispute, followed by a lack of understanding of the procedural aspects of the contract.
When resolving their clients’ disputes, EC Harris also tracked the most common means of dispute resolution. In the Middle East, arbitration was the most popular method, followed by party-to-party negotiation and litigation.
Dale said, '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,' he added.
EC Harris specialist Contract Solutions team helps clients avoid, mitigate and resolve disputes.
The Contract Solutions team provides procurement, contract and dispute avoidance and management strategies, management expertise and expert witness services.
This is delivered through a blend of technical expertise, commercialism, sector insight and the use of live project data, combined with a multi disciplined and professional focus.-TradeArabia News Service
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