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Size of construction disputes drops by half

July 10th, 2019

The average value of construction disputes in the UK fell by 47% last year as the industry started to make headway with early resolution of problems on contracts.

According to analysis of global disputes, the UK leads the way in dispute resolution, typically with low dispute values and quick resolution times, compared with global averages.

The UK takes the shortest average length of time to solve a dispute – 12.8 months. Although, this is 28% longer than last year and consistent with the global trend, whereby disputes are taking longer on average to resolve.

The analysis by consultant Arcadis shows contractors are now seeking to resolve contractual disputes as they arise rather than letting them build up into large final account rows.

The report uncovered a reduction in the use of adjudications and an increase in negotiation as the preferred method of dispute resolution.

This could be after a Court of Appeal ruling reducing the use of ‘smash ‘n’ grab’ adjudications, said Arcadis, or concerns about the growing cost of the adjudication process and a tendency for significant extensions to the prescribed 28-day statutory period for a decision.

Adrain Bell, partner at legal firm CMS Cameron McKenna Nabarro Olswang, said: “Parties are now generally preferring to try to resolve disputes as they arise contemporaneously during a project and/or to split disputes into more manageable bite-sized chunks.

“It is not a sign, unfortunately, that the UK construction industry is becoming any less contentious.”

He said that the drive to resolve rows earlier was being supported by the drafters of standard form contracts.

“Many of these contracts now contain elaborate provisions to ensure the early notification of claims and regimes that facilitate early discussion of them between the contracting parties,” said Bell.

“They also support rapid recourse to a third party neutral if their intervention is required.”

But with standard contract forms becoming longer and more complex, failure to properly administer the contract is the primary cause of disputes.

Gary Kitt, Head of UK Contract Solutions at Arcadis, said:  “In some cases, it could be argued construction contracts are simply too complex for administrators to understand, and better training for everyone involved would go some way towards avoiding disputes as they arise.

“However, our results show the UK to be a world leader in effective avoidance and mitigation strategies.

“As we continue to transition towards greater use of digital technologies like BIM and 4-, 5- or 6D modelling, we are likely to see an improvement in risk allocation much earlier on in the process. This could help all parties to collaboratively resolve any difficulties before cost and time pressures start to escalate.”

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