Construction disputes – and resolution – are a two-way street
Driving an amicable reconciliation is not a staring contest, but a shared responsibility of clients and contractors around the world
The ‘adversarial’ nature of the client-contractor relationship has been a recurring theme in Construction Week’s industry interactions over the past year, but while contracting leaders have led the conversation about dispute resolution and avoidance measures, contractual disagreements are not an unfamiliar challenge for the building sector.
Indeed, those aware with the global construction industry’s workings are likely to be unsurprised by contractors calling for greater dispute prevention and resolution mechanisms. The inaugural edition of Construction Week’s Business Confidence Survey, published in October 2018, found that 60% of regional businesses faced payment delays in Q3 2018.
The Middle East’s construction community is far from being an antagonistic one, but conflict is bound to fester if builders are not paid their dues.
Third-quarter performance followed a steady trend of late settlements during the previous year. PWC Middle East’s Capital Projects and Infrastructure Survey, released in May 2018, stated that a spending slowdown in 2017 led to funding constraints that were felt across the construction food chain. Contractors, according to PWC Middle East, said in the report that the biggest challenge they expected to face in 2018 was “payment delays by clients, with availability of funding coming second”.
The Middle East’s construction community is far from being an antagonistic one, but conflict is bound to fester if builders are not paid their dues. Arcadis’s Global Construction Disputes Report 2018 found that the average value of disputes in the Middle East had reached $91m in 2017, a significant hike over the previous year’s $56m.
Large-scale programmes – which “typically [carry] a higher dispute value” – were cited as a factor behind the growing value of construction disputes in 2017. However, clients’ failure to make interim awards on extensions of time and compensation, and owner-driven changes, were listed by Arcadis as the key causes of industry disputes in the Middle East.
Nevertheless, mitigating disputes is the shared responsibility of clients and contractors – and the latter must only commit to work that they are certain they can deliver. As Rajesh Kumar Krishna, chairman and CEO of Beaver Gulf Group, explained in conversation with Construction Week earlier this month, pragmatism goes a long way in helping his company avoid disputes and win repeat work.
Later this month, the UAE’s top industry experts will convene at Construction Week’s Dispute Resolution Question Time: Dubai event to further explore how contracts can be more efficiently – and equitably – delivered. The second edition of the event, to be held at Le Royal Meridien Beach Resort & Spa on 20 March, will shed light on the legislative mechanisms that can help avoid, as well as conclude, contractual disagreements.
Construction disputes are expensive and a drain on critical resources that impact productivity. Regional contractors should review their ability to deliver prior to signing on to more work – and clients must protect their contractors to achieve the timely completion of their developments.