Construction disputes in Asia are valued at almost US$30m higher than the global average according to the first „Global Construction Disputes Report’ released by EC Harris, the international Built Asset Consultancy.
Globally, the average value of disputes handled by EC Harris was US$35.1m in 2010, with the highest average value being in Asia (US$64.5m). The highest value dispute handled in Asia during the course of 2010 was for US$200m; which was also the highest handled by EC Harris globally, albeit EC Harris did work on a major dispute in the Middle East where the disputed value was higher but undisclosed.
EC Harris found that disputes were lasting, on average, 11.4 months from beginning to resolution. This was well above the global average of 9.1 months and almost double the duration in the UK.
Globally, the number of disputes in construction projects has increased over the past two years. Despite the relative high value and duration of disputes in Asia, the research found that the region bucked this trend as the average number of disputes has remained constant in 2010 when compared to the 2009 figure.
The research, compiled by EC Harris‟s Contract Solutions team, found that a failure to make interim awards on extensions of time and monetary relief 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 Asia during 2010 were:
1. Failure to make interim awards on extensions of time and monetary relief
2. Unrealistic risk transfer from Employers to Contractors
3. Ambiguities in the Contract Document
4. A biased PM or Engineer
5. A failure to properly administer the contract
Mike Allen, Global Head of Contract Solutions 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.”
Where a Joint Venture was in place to deliver a construction project, EC Harris found that just over a quarter (28%) of these JVs had disputes within the JV itself. The conduct of the Project Manager or Engineer was only occasionally found to be at fault in Asia. This marks a significant difference from 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 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 Asia, party-to-party negotiation was the most popular method, followed by arbitration and mediation.
Mike Allen continued: “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.”
EC Harris‟s specialist Contract Solutions team helps clients avoid, mitigate and resolve disputes. The team is based around the globe and encompasses one of the industry‟s largest pool of procurement, contract, risk management and also quantum, delay, project management, defects and building surveying experts. 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.
