Tuesday 19 March 2024
 
»
 
»
Story

Mideast construction disputes value hits $77m

DUBAI, July 5, 2015

The total value of disputes relating to major construction projects in the Middle East increased significantly to $76.7 million in 2014 compared to the previous year, Arcadis, the global natural and built asset design and consultancy firm.

This represents the highest value increase in Middle East disputes since 2011, dipping by 31.8 per cent from $112.5 million in 2011 to $76.7 million in 2014.

The region saw a number of high-value claims being initiated for projects undertaken in 2008 and 2009 due to money made available to pursue those claims, stated the expert in its report "Global Construction Disputes: The Higher the Stakes, the Bigger the Risk."

This is Arcadis’ fifth annual study into the duration, value, common causes and methods of resolution of construction disputes across the globe.

The report found that construction dispute values were the highest in Asia at $85.6 million where values more than doubled, closely followed by the Middle East at $76.7 million. However, in the North America and the UK, dispute values dipped to $29.6 million and $27 million respectively, the report added.

The research found that the most common causes of construction disputes in the Middle East related to the administration of contracts. The top three causes in 2014 were failure to properly administer the contract; poorly drafted or incomplete and unsubstantiated claims and a biased project manager (PM) or engineer.

The transportation sector witnessed the largest number of disputes in 2014, followed by social infrastructure and real estate.

According to Arcadis, the average time taken to resolve disputes in the region rose to 15.1 months, up by eight per cent from just under a year in 2013.

Significantly, all areas of the world saw the resolution process take longer with the exception of Asia where the average dispute length took two months less, it added.

Edward McCluskey, the head of Alternative Dispute Resolution (Middle East) at Arcadis, said the Middle East construction market was back in full swing and the contractors and employers were seeing more liquidity in the market.

"With this though, those parties that parked their losses now have the funds to pursue those claims that were parked. We forecast that this trend shall continue into 2015 as more parties have the required liquidity to pursue those claims that were put on ice," he stated.

The Arcadis report also put spotlight on the likelihood of a joint venture (JV) ending in dispute. The report found that where a Middle East joint venture was in place, almost half were driven by a JV-related difference for the second year running as the highest of any region covered in the report.

"Joint ventures are becoming more commonplace as developers opt to divest risk across major programmes and blend specialist skills in the supply chain into one contract," observed McCluskey.

"However, this approach comes with many potential risks attached. Joint ventures can be typically described as a compromise agreement and our research shows that almost a third enters dispute proceedings," he added.-TradeArabia News Service




Tags: Construction | Middle East | dispute |

More Construction & Real Estate Stories

calendarCalendar of Events

Ads