The average cost of UK construction disputes is well below the global average, and the amount of time taken to resolve them is just 9.8 months – the fastest anywhere in the world.
Research by Arcadis found that the time taken to resolve UK construction disputes fell 23% in 2019 compared to 2018, when it was 12.8 months.
Meanwhile, the average value of UK disputes has remained constant and, at just US$17.8m (£14.1m) in 2019. The global average was US$30.7m (£24.4m).
The findings are revealed in the latest Arcadis Global Construction Disputes Report 2020. The report examines the causes, duration and value of construction disputes, while highlighting the best ways to avoid, mitigate and resolve them.
According to the report, which relies on data gathered before the covid-19 pandemic, the volume has remained consistent despite a decline in their average length and no change in their overall value.
The majority of disputes across all sectors are caused by those administering contracts, with a “lack of understanding of procedural aspects of the contract” one of the most commonly cited reasons for problems emerging. Over 60% of respondents stated that proper contract administration would have the single largest impact in avoiding disputes.
When it comes to resolving disputes, adjudication has replaced party-to-party negotiation as the most common resolution method. The report said most effort now appeared to be expended on mitigating disputes, rather than focusing on the resolution stage which dominated the year prior.
Efforts spent in avoidance rank even lower in third place, with 58% of respondents reporting that settlement after a dispute had crystallised was the most common form of resolution.
However, there are signs that things are changing, with major stakeholders, including contractors, indicating a desire to work together through signing up to the industry Conflict Avoidance Pledge (CAP), which is encouraging all organisations to consider their working practices and the way they deal with disputes.
Gary Kitt, head of UK contract solutions at Arcadis, said: “The construction industry has been grappling for decades with solutions to its adversarial nature and inherently risk-averse attitude. Yet now more than ever the entire supply chain – from employers right through to sub-contractors and suppliers – needs to work together to keep projects moving and prevent disputes from arising.
“The downward trend in terms of both value and length of disputes has been encouraging, but the more important concern is how we maintain this in a post-pandemic environment. One solution would be to make the administration of contracts easier for everyone involved. This calls for industry-wide collaboration not only in terms of who is represented on drafting bodies to make sure that everyone on the project understands the consequences of their actions, but also by using more collaborative forms of contract that will help to inspire longer term confidence in delivery.”
Sally Davies, managing partner at law firm Mayer Brown International, added: “Time, cost, quality, health and safety are all key ingredients of any construction project, but tension between them so often results in disputes. It is therefore no surprise to see the classic battlegrounds of time and money top of the survey list.
“If parties want to continue working together and resume performance as soon as possible, where neither is at fault and both have suffered, understanding on both sides will be required. Is collaboration, rather than confrontational legal battles, a better way forward?”