A recent report by EC Harris identified that during 2011 there was a significant increase in the value of disputes in the British construction industry. The report, entitled ‘Global construction disputes 2012: Moving in the right direction’, showed that the average value of such claims had risen by approximately 41%. The actual figures showed an increase from 4.6 million in 2010 to 6.5 million in 2011.
In addition, the study uncovered that the average length of construction disputes was also increasing, moving from an average of 6.75 months in 2010 to 8.7 months in 2011. Gary Kitt, head of Contract Solutions at EC Harris stated;
“The length of time for resolution of disputes in the UK has increased due to parties’ reluctance to refer disputes to adjudication quite as readily as in past years. This would appear to be to as a result of the inconsistent results obtained in adjudication proceedings. In addition, once matters are referred to adjudication these proceedings regularly exceed the statutory period of 28 days for a decision.’
Failure to administer the contract correctly was found to be the most frequent cause of British construction disputes. This is thought to stem from the clients’ disinclination to spend money during the procurement phase to the extent that the final choice of contract is often somewhat alien to those who are selected to administer it. The top five causes of disputes of this nature in the UK during 2011 as researched by EC Harris were as follows;
1. A failure to properly administer the contract
2. Conflicting party interests
3. Unrealistic risk transfer from employers to contractors
4. Employer exposed change
5. Ambiguities in the contract document
The performance of a project manager or engineer was also taken into account, as often it is their conduct which is at the centre of the dispute’s cause. Generally problems seem to arise as a result of a lack of understanding of the procedural aspects of the contract, which are often tipped towards their employer’s interests and lean away from the interests of the other party.
When considering the most commonly used method of dispute resolution, party to party negotiation proved to be the most popular, closely followed by adjudication and then mediation. The results of the survey show increasing frustration caused the adjudication process which has lead to an increase in attempts to negotiate prior to seeking resolution from a 3rd party.
For information or legal advice on a construction dispute, or if you are pursuing or defending a claim in relation to a construction project, please don’t hesitate to contact one of our construction dispute lawyers.
By Daniel Draper, Commercial Litigation Solicitor