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Arcadis: Middle East construction disputes valued at $57m in 2018

The consultancy's annual report finds nine-year high in resolution period despite $34-million decline in value of disputes

Construction disputes in the Middle East fell from $91m to $57m in 2018.
Construction disputes in the Middle East fell from $91m to $57m in 2018.

Construction consultancy Arcadis revealed that the average value of disputes in the Middle East dropped to $57m in 2018 from $91m in 2017, potentially due to recent cases involving suppliers and subcontractors with lower dispute values, with Arcadis stating that the trend also reflected "the overall size of projects awarded in recent years", even as the average time to resolve a dispute grew to a nine-year high of 20 months. 

The ninth Arcadis 2019 Global Construction Disputes report showing that a balance between “logic and emotion” was key to resolving construction disputes in the Middle East, with alternative dispute resolution mechanisms gaining traction in the region. 

While the volume of claims submitted in 2017 and 2018 remained almost similar, the average value of disputes went down, but average resolution periods got longer year-over-year.

The report explained: "After two years of seeing faster resolution, the average time spent in resolving construction disputes reached a nine-year high of 20 months from 13.5 months previously.

"This, according to the report, is due to the ongoing low liquidity in the market that results in delays in paying out the disputed amounts."

The report added that “poorly drafted or incomplete and unsubstantiated” claims emerged as the new top dispute cause.

Another new entrant in the top three causes for disputes was stakeholders such as the owner, contractor, or subcontractor failing to understand or complying with contractual obligations.

The lack of understanding and compliance came in third, after failure to properly administer the contract, a cause that has been in the top three of Arcadis's dispute causes since 2016.

Commenting on the findings, Arcadis Middle East's head of quantum contract solutions, Shawkat Abbas, said: “With party-to-party negotiation still the most preferred resolution method, we see how important open and consistent communication among different parties is in resolving disputes. 

“Seeing the importance of logic and facts in the causes of disputes and the emphasis on the human aspect in reaching a resolution are not contradictory at all.

"Instead, this is telling us that we must have substantial understanding of the problems, but we should always keep in mind that we are dealing with creatures of emotion and not just with numbers in our spreadsheets.”

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Construction Week - Issue 753
Nov 09, 2019