Construction Industry Disputes: How To Avoid Them

When the global consulting firm HKA released a report analyzing construction claims and disputes, many knowledgeable construction industry leaders were stunned. CRUX Insight is an annual publication and was released 3Q 2020. It reports “colossal costs lost to construction claims and disputes.”

Causes of Construction Industry Claims, Disputes

The analysis revealed “eye-watering sums of money and time being lost, as well as the patterns of root causes.” Information was obtained from the Americas, Africa, Asia-Pacific, Europe, and the Middle East. The leading cause of construction industry claims and disputes is design issues.

The report said “fast-track construction” is putting pressure on the design phase. The fast pace often compromises project control. “More investment in up-front planning, design and coordination is imperative, along with smarter procurement and more balanced risk allocation.”

Inadequate contract management might be contributing to design problems, according to Construction Dive. The top causes of claims and disputes in 410 North, Central, and South America projects were:

• Access to project site restricted
• Adverse weather conditions
• Changes in scope
• Claims – “Spurious, over-inflated, opportunistic and/or unsubstantiated.”
• Contract mismanagement
• Designs
  • Incomplete
  • Incorrect
  • Late
• Failure to anticipate physical conditions
• Installation failures
• Subcontractor mismanagement
• Supplier/third-party interfaces mismanagement
• Workmanship deficiencies

The pandemic and shaky markets, trade tensions, supply chain issues, and the shortage of skilled administrative talent all currently challenge the construction industry. Internationally, change in scope, design, and poor subcontractor management were leading causes of construction industry claims and disputes.

5 Ways To Reduce Claims and Disputes

Construction industry writer/editor Julie Strupp offers five recommendations to reduce project claims and disputes:

1. Allocate adequate design resources/set realistic timelines. 
   • Ensure stakeholders are involved in a design review process. 
2. Assign risk management to appropriate personnel. 
3. Develop/implement a project execution plan with buy-in from the client and supply chain. 
4. Don’t rush Requests for Proposals (RFPs).
   • Wait until the design is reasonably advanced, so timeframe/costs are more reliable. 
   • Weigh factors such as experience/expertise, quality/price to gauge bidders’ true value. 
5. Promote transparency among all parties.
   • Promptly communicate/resolve issues.

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