UAE. The average value of disputes in the Middle East construction industry more than doubled in 2011 according to this year’s ‘Global Construction Disputes´ report from EC Harris, the global Built Asset Consultancy.
Whilst the average value of disputes fell around the world, the Middle East bucked the trend, with disputes having an average value of US$112.5 million, compared to US$56.25 million in 2010.
EC Harris found that construction disputes in the Middle East lasted, on average, 9 months in 2011, compared to 8.25 months in 2010. This was one of the lowest in the report, with only the UK seeing a quicker resolution of disputes at 8.7 months. Disputes in the US took the longest to resolve at 14.4months, with the global average being 10.6months.
The average value of construction disputes fell globally to US$32.2m in 2011 from US$35.1 million in 2010. As well as the Middle East, the UK and Europe saw dispute values rise, albeit by smaller amounts.
Dispute values fell in Asia and the US, with the US seeing the most dramatic fall from $US64.5 million in 2010 down to US$10.5 million in 2011, which was largely due to the generally depressed construction market in the US as well as the increasing emphasis by both the public and private sector owners to avoid and mitigate disputes through risk management and early, field level, resolution of disputes.
The highest value dispute handled by EC Harris during 2011 was for US$350 million on a project in the Middle East.
David Dale, Head of Contract Solutions, Middle East at EC Harris said: “The Middle East saw a flood of major disputes last year. Over the past few years we have seen a reluctance to settle in the Gulf region, but this has been replaced by a stronger desire to do business and resolve disputes as the economies strengthen.
On the whole, however, disputes are still costing the industry time and money. Focusing on avoiding the dispute from the outset through better mitigation and contract design is always the better option.”
The research, which was conducted by EC Harris’s Contract Solutions team, found that a failure to properly administer the contract was the most common cause of a construction dispute in the Middle East. The top five causes of disputes in Middle East construction projects during 2011 were:
1.A failure to properly administer the contract
2.Incomplete design information or Employer requirements
3.Employer imposed change
4.Failure to make interim awards on extensions of time and associated compensation
5.Unrealistic risk transfer from Employers to Contractors
The performance of the project manager or engineer was also looked at in the report, with their conduct often being at the heart of how the dispute crystallised. The most likely problem with the project manager or engineer was that they were too partial to the employer’s interests, followed by a lack of understanding of the procedural aspects of the contract.
When it came to dispute resolution, arbitration was the most common method used in the Middle East, followed by party to party negotiation and adjudication.
David Dale continued: “With so many parties involved in a construction project, the need for a strong and independent voice at the centre of the programme is vital in ensuring that all views are taken into account, from client to sub-contractor, which helps to avoid the likelihood of issues reaching dispute stage.”
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.
About EC Harris
EC Harris is a leading global built asset consultancy. As an ARCADIS company, we have access to approximately 21,000 professionals worldwide operating in over 70 countries, 300 offices and generating in excess of €2.4 billion in revenue. Working across a wide range of market sectors, we help our clients make the most from the money they spend on their built assets.
For more information visit www.echarris.com.