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NEWS: Study highlights ‘astounding’ cost of construction disputes

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The findings by a recent study are suggesting that conflict still acts as a costly drag on the performance of the global construction industry.


Analysing data from 1,400 projects in 94 countries, the CRUX Insight 2021, carried out by consultant HKA, also finds that the average time extension claimed was 17 months; that the average disputed costs per project was $100m; that the value of claims ballooned to 46% of projects’ capital value; and that disputes typically prolonged scheduled construction programmes by 71%.

Highlighting the “astounding scale of cash and time lost” on projects, HKA noted that, added up, the cumulative overruns faced by all projects reached 750 years in the period.


“Capital projects are haemorrhaging billions of dollars each year to recurrent, predictable and often avoidable claims and disputes,” said HKA chief executive Renny Borhan.

The company found that the main causes of disputes were changes in scope, conflicting interpretation of contracts, design failures, and mismanagement of subcontractors.

Covid-19 caused additional disruption, restricting access to sites and labour, constricting cashflow, and exposing the limitations of contract provisions on force majeure and changes in law.

Beyond Covid, HKA found that skills shortages, supply chain disruption, cost inflation, increased market volatility, and the climate crisis are increasing the potential for conflict on projects.

It said around 36% of projects were hindered by skills gaps and associated workmanship deficiencies.


HAVE YOUR SAY: What can Construction Professionals do to avoid capital projects haemorrhaging money to predictable and often avoidable claims and disputes?

Comments

  1. Steve Keightley-SmithDecember 6, 2021 at 5:06 PM

    These are absolutely frightening statistics. All the more reason to move away from the traditional tendering systems and move towards an alliance type tender, where the client, engineer & contractor work together as a team and make decisions based on the best solutions from a budget, time and quality point of view. Every job that I worked on where the 3 entities worked together for the benefit of the job were the most successful with the least amount of unnecessary stress.

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