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Construction disputes being resolved quickly now, says study

DUBAI, August 13, 2018

Ongoing liquidity issues within the Middle East construction market have resulted in a steady flow of claims being submitted as contractors take a tougher approach to entitlements, however the industry continues to make progress in resolving them more swiftly, said a report from leading global design and consultancy firm Arcadis.

The average value of construction disputes increased over the last year due to the small number of higher-value claims, stated the expert in its "2018 Global Construction Disputes Report."

This annual study from Arcadis examines the most common causes of dispute on construction projects, as well as the average duration and value of disputes, and the method of dispute resolution most commonly deployed. The findings are based on an assessment of the construction disputes handled by the Arcadis Contract Solutions team in various regions over the previous 12 months.

The study found that the length of time needed to resolve disputes continues to fall, however the average value is rising:

Over the last year, the average length of time needed to resolve a dispute in the Middle East fell to just 13.5 months, it stated.

This trend towards swifter resolution was also observed last year, and reflects the industry’s focus on trying to improve liquidity across the wider supply chain, it added.

On a less positive note, the average value of disputes increased over the last year, rising to $91 million. This was due to a small number of high-value disputes and a flow of ‘mid value’ final account claims, said the report.

According to Arcadis, a failure to make interim awards on extensions of time and compensation emerged as the most common cause of disputes on construction projects in the Middle East.

This new trend, however, was very closely followed by a failure to properly administer the terms of the contract which has been a recurring issue in previous years and lastly owner-directed changes, it added.

Rob Nelson-Williams, the regional head of Contract Solutions, Arcadis Middle East,  said: "In analysing the causes of disputes on construction projects in the Middle East, we continue to see a lot of the same issues crop up."

"This underlines the need to get the basics right, and the importance of seasoned technical and commercial advice when it comes to contract or claims strategy," noted Nelson-Williams.

He pointed out consistent with previous years, party to party negotiation and arbitration remained the two most common methods of dispute resolution in the Middle East and the last method was dispute adjudication board.

Nelson-Williams said: "Over the next 12 to 18 months, major regional construction related events loom ever closer. As pressure to meet fixed deadlines rises, the need to make smart decisions around contract and procurement strategies will be even more important."

"Embracing lessons from the past is key to reducing the risk of disputes, but also in helping the industry move towards a more harmonious and less confrontational contracting environment for all parties," he added.-TradeArabia News Service




Tags: Middle East | Design | arbitration | arcadis |

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