How construction disputes are a ‘key component’ for KSA’s Vision 2030
HKA senior consultant, Adham Kotb, talks about construction dispute causes and mechanisms for project delivery in KSA
For the delivery of the Saudi Arabia’s Vision 2030, HKA believes the construction industry is a key component of the national enabling machinery.
Certain vital projects must be successfully completed on time and within budget. This is clearly appreciated by the Saudi government which has established a national organisation, Mashroat, whose mandate is to support the management of projects and transform public entities into efficient and effective project delivery organisations.
Noticeably, the private sector is also moving in parallel with the public sector, with several organisations elevating their project management offices (PMOs) to international levels.
Successful project delivery requires the collaboration of many stakeholders, including employers, designers, contractors, and subcontractors.
It is therefore important to implement effective mechanisms for reducing the chance of disputes occurring. The roots of most disputes can be traced to three main causes which, fortunately, can be largely avoided.
Firstly, poor preparation of the contract documents, including the conditions of contract and the design documentation. Ambiguities, inconsistencies, errors and discrepancies in the contract documents are common causes for construction disputes.
The lack of a proper risk allocation is also problematic. One of the best ways to avoid disputes is to identify risks and then to allocate them to the party best able to deal with them.
Secondly, poor choice of the consultants and contractors appointed to deliver the project. A choice that is only based on the lowest bid, with disregard to the quality, technical, financial, and experience aspects, is likely to result in disputes arising during the project’s execution phase.
Thirdly, the choice of an unsuitable procurement route – that is, without due consideration of the specific requirements of the project.
A dispute is a claim that is not admitted. For a dispute to arise, there must be an underlying claim by one of the parties. As highlighted hereafter, claims are commonplace in the construction industry.
It is therefore prudent to ensure adequate means are available for resolving disputes as and when they arise during the project execution phase, so that work can progress on site with minimal disruption.
Construction projects occur over lengthy periods of time – major construction projects can take many years to construct – and the “unknown” is an inevitable factor on any project.
During execution of the works, it is possible to encounter unforeseen sub-soil conditions, shortage in labour or material, changes in law or tax, adverse weather conditions and so on.
Moreover, changes to the scope of works are often required and breaches of contract are not unusual such as delays or defective works on the part of the contractor and late provision of information or approvals on the part of the employer.
All such matters may have a significant impact on the cost and time for completion of the works.
Dispute avoidance and resolution are areas which need more attention in KSA and which, if improved, could lead to the successful delivery of more projects.
The current national move towards establishing and supporting the public and private PMOs, is clearly an important step in the right direction.