The average length of time needed to resolve a dispute in the Middle East fell to just 13.5 months in 2017, the lowest since 2011 (which stood at just nine months), according to new research conducted by Arcadis.
Despite the speeding up of resolving disputes, their average value stands at $91 million, a rise of 38% from $56 million in 2016 and the highest since 2011’s $112 million.
As part of its 2018 Global Construction Disputes Report, studies by the design and consultancy firm also found that ongoing liquidity issues within the Middle East construction market has resulted in a steady flow of “claims being submitted as contractors take a tougher approach to entitlements, however the industry continues to make progress in resolving them more swiftly.”
“Over the last year, the average length of time needed to resolve a dispute in the Middle East fell to just 13.5 months. This trend towards swifter resolution was also observed last year, and reflects the industrys focus on trying to improve liquidity across the wider supply chain,” said Arcadis. “On a less positive note, the average value of disputes increased over the last year, rising to $91 million. This was due to a small number of high-value disputes and a flow of mid value final account claims.”
According to Arcadis, the most common cause of disputes on construction projects handled by the firm is a failure to make interim awards on extensions of time and compensation. A failure to properly administer the contract was the second most common cause with owner directed changes being found to be the third highest reason.
In analysing the causes of disputes on construction projects in the Middle East, we continue to see a lot of the same issues crop up,” said Rob Nelson-Williams, regional head of contract solutions, Arcadis Middle East. “This underlines the need to get the basics right, and the importance of seasoned technical and commercial advice when it comes to contract or claims strategy.
Party to party negotiation and arbitration remain the two most common methods of dispute resolution in the Middle East with the use of a dispute adjudication board trailing in third.
Nelson-Williams concluded that the construction industry needs to continue to learn from its past mistakes to reduce the number of disputes in the region.
Over the next 12 to 18 months, major regional construction related events loom ever closer. As pressure increases to meet fixed deadlines, the need to make smart decisions around contract and procurement strategies will be even more important,” hje said. “Embracing lessons from the past is key to reducing the risk of disputes, but also in helping the industry move towards a more harmonious and less confrontational contracting environment for all parties.
