Wednesday 22 January 2020

Mideast construction disputes' value plunges 60pc in 2018

DUBAI, July 8, 2019

The average value of construction disputes in the Middle East region fell by around 60.4 per cent last year compared to 2017 in line with the global construction market trend, according to Arcadis, a leading global design and consultancy for natural and built assets.

After two consecutive years of decline in dispute duration, the average time needed to resolve a dispute increased, recording the longest dispute duration since 2010, stated Arcadis in its Global Construction Disputes Report.

The 2019 Global Construction Disputes Report is an annual study from Arcadis that examines the most common causes of disputes on construction projects, as well as the average duration and value of disputes, and the method of alternative dispute resolution (ADR) most commonly deployed.

According to Arcadis, the figures revealed in the ninth edition of the report showed a reversal of trends in the Middle East compared with the previous report.

Although the construction market saw almost the same volume of claims submitted in 2017 and 2018, the average value of the disputes went down while average resolution time got longer year over year, it added.

Stemming likely from disputes recently involving suppliers and subcontractors with typically lower dispute values, the average dispute value in 2018 decreased to $56.7 million from $91 million in 2017. This trend also reflects the overall size of projects awarded in recent years, said the Arcadis report.

However, after two years of seeing faster resolution, the average time spent in resolving construction disputes reached a 9-year high of 20 months from 13.5 months previously. This, according to the report, is due to the ongoing low liquidity in the market that results in delays in paying out the disputed amounts, it added.

The top global consultancy pointed out that balance between logic and emotion was key in resolving construction disputes in the Middle East region.

Poorly drafted or incomplete and unsubstantiated claims took the top spot as the new most common reason for disputes in the Middle East, it stated.

Another new entrant in the top three causes for disputes was owner/contractor/subcontractor failing to understand and/or comply with its contractual obligations which came in third after failure to properly administer the contract, a cause that’s been in the top three since 2016, it added.

Most common causes of disputes on construction projects handled by Arcadis last year were:

*Poorly drafted or incomplete and unsubstantiated claims
*A failure to properly administer the contract
*Owner/contractor/subcontractor failing to understand and/or comply with its contractual obligations

Arcadis pointed out that party-to-party negotiation and arbitration remained the two most preferred methods of resolving disputes.

The report also showed that mediation is returning as a common method of alternative dispute resolution in the Middle East.

Shawkat Abbas, the head of Quantum Contract Solutions at Arcadis Middle East, said: "Poorly drafted or incomplete and unsubstantiated claims, the top common cause for disputes, is telling us that claimants must stick to an evidence-based approach if they want to reach a satisfactory conclusion."

"Combined with the other two common dispute causes, the industry is confirming the importance of complete understanding of contract administration and claims fundamentals," he noted.

"With party-to-party negotiation still the most preferred resolution method, we see how important open and consistent communication among different parties is in resolving disputes," he added.

Abbas pointed out that seeing the importance of logic and facts in the causes of disputes and the emphasis on the human aspect in reaching a resolution were not contradictory at all.

"Instead, this is telling us that we must have substantial understanding of the problems, but we should always keep in mind that we are dealing with creatures of emotion and not just with numbers in our spreadsheets," he  added.-TradeArabia News Service


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