By Andy Sambidge
New study says average regional dispute valued at $40.9m compared to global average of $32.1m
Disputes relating to major Middle East construction projects decreased in value to $40.9m in 2013 but remained well above the global average, according to a new report by EC Harris.
Although the value of disputes in the region dropped from an average of $65m in the previous year, the value was still significantly higher than the average of $32.1m seen globally.
The study also revealed that the length of time disputes took to resolve in the region fell to 13.9 months compared to 14.6 months in the previous year. The global average was lower at 11.8 months.
The Middle East along with US showcased the longest to resolve compared to Asia, UK and continental Europe. Disputes in continental Europe tended to be resolved the quickest at 6.5 months.
EC Harris, an Arcadis company and built asset consultancy firm, said it also saw the discrepancy of disputes when involved with joint ventures in the Middle East, showcasing 46 percent ended up in disputes during the year.
The findings were published in its fourth annual study into the duration, value, common causes and resolutions of construction disputes across the globe.
The report found that construction dispute values were the highest in Asia at an average of $41.9m, closely followed by the Middle East at $40.9m.
In the US, disputes values tripled in value to $34.3m and also rose in the UK to their highest value since the report started at $27.9m.
David Dale, head of contract solutions in the Middle East at EC Harris, said: "One of the critical decisions executives must face with any new project in the Middle East is determining how the project will be administered in design, management and administration, and selecting the best contractor and consultant for the planned project.
"Many of these disputes are resolved away of the public eye, but do often result in heavy costs and time overruns. Our research indicates the scale of this problem and highlights the need for better administration and a proactive approach to risk management to help mitigate against the most common causes of dispute."
The research found that many of the most common causes of construction disputes in the Middle East related to the administration of contracts.
The top five causes in 2013 were failure to properly administer the contract; employer imposed change; failure to understand and/ or comply with its contractual obligations; errors and/or omissions in the contract document; and unrealistic contract completion date being defined at tender stage.
Arbitration was deemed the most popular method of alternative dispute resolution in 2013 in the Middle East, followed up by party to party negotiation and expert determination.
Dale added: "All too often, we are witnessing a great deal of time and effort placed in selecting, negotiating and agreeing contract terms and conditions, only for them to be placed in a dusty drawer and not implemented, by both parties.
"Selection of the right form of contract is a crucial first step along with identifying the best contractor and consultant who is capable for performing in accordance with the contract.
"This should be followed by diligently administering the whole contract conditions by both parties from inception to close out."