By Andy Sambidge
Consultants EC Harris says slowdown, lack of funding partly to blame for increase in disputes
Construction disputes in the Middle East are valued at more than $20m higher than the global average, consultants EC Harris said on Tuesday in a new report.
The Global Construction Disputes Index showed the number of construction disputes in the region has increased over the past two years.
Among the main causes of disputes in the Middle East last year were problems associated with construction slowdown and the lack of project funding, EC Harris said.
Earlier this month, Dubai's property watchdog RERA said the number of real estate developments facing cancellation this year had risen from 300 to 500.
The projects and their backers are being assessed for financial viability and a list of the terminated developments would be released “very soon”, RERA said.
Globally, the average value of disputes handled by EC Harris was $35.1m in 2010, with the average value in the Middle East being $56.25m.
The highest value dispute handled in the Middle East during the course of 2010 was for $100m, 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, below the global average of 9.1 months.
Other major causes of disputes in the Middle East included the failure to properly administer the contract, an unrealistic contract completion date, poor choice of contract and employer imposed change.
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."
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, the report added.
When resolving their clients' disputes, EC Harris found that in the Middle East, arbitration was the most popular method, followed by party-to-party negotiation and litigation.