HKA: Volume of construction disputes to stay consistent in 2019
EXCLUSIVE: Consultancy’s Michael McSorley talks about methods to avoid and ‘speedily resolve’ construction disputes
The Middle East's construction sector is welcoming the adoption of newer dispute resolution methods, but the volume of disputes in the regional industry appears to be steady despite a reduction in the average value of disputes since 2017, HKA partner, Michael McSorley, told Construction Week ahead of the Dispute Resolution Question Time: Abu Dhabi 2019 conference that will be held on 22 October at the Sofitel Abu Dhabi Corniche hotel.
Commenting on the state of dispute resolution in the regional construction sector, McSorley – one of the panellists at this year's conference – said: “I notice a trend towards the use of third-party joint-appointed expert determinations and mediation rather than the traditional methods [litigation and arbitration].
“I understand, based on studies, that the average value of disputes dropped last year when measured against 2017, this being reflective, most likely, to the extent of smaller-sized projects being awarded. The volume of disputes has remained consistent over the last two years and 2019 looks to follow that continuing trend.”
According to HKA, projects in the Middle East are typically driven by ambitious design, include new technologies, and are required to be constructed within tight timeframes, making them some of the world's most complex schemes to deliver.
McSorley said that the while there was a likelihood of disputes arising on a construction project in the Middle East, the manner in which the disputes escalate depends on the nature of the dispute, on the financial scale of the issues, and on “the will of the parties” to resolve the dispute amicably or compromise.
Suggesting ways to avoid and minimise dispute resolution cases, McSorley said: “Contractors must ensure they fully appreciate the contractual obligations and risks involved at the bid stage; they must challenge terms and conditions that are unacceptable and ensure there is – as far as reasonably possible – a fair allocation of risk.
“Contractors should ensure that appropriate records are maintained, notices are provided as contractually prescribed, and claims are clearly articulated, particularised, fully supported and robustly presented.”
However, the onus does not lie on contractors alone. Developers need to ensure that construction contracts are unambiguous, that there is a fair balance of risk, and that the risk is borne by the party best suited to carry such risk.
Ensuring timely payments should be made a priority, McSorley explained: “Developers must ensure that timely payments are made and that they, or their designated representatives, administer the contract as prescribed, in a fair, balanced, and reasonable manner.
“Claims must be dealt with as they arise and the commonly adopted approach of deferring decisions – ‘wait and see’ – until project completion should be avoided.”
Alternative dispute resolution (ADR) methods, including dispute adjudication boards, mediation, party-to-party negotiations, and expert assessments are gaining a foothold in the Middle East, the HKA expert explained.
McSorley said: “Having worked in the UK during the formative years of statutory adjudication and having witnessed the spectacular successes, I would like to see the introduction of a similar model whereby disputes can be speedily resolved on a temporarily binding basis – if and until the adjudicator’s decision is over-turned in ligation or arbitration. This, of course, should be supported by the judiciary and adjudicator’s decisions and be fully enforceable.”
He explained that the introduction of such measures could improve cash flows for contractors and subcontractors, in turn contributing to the timely completion of projects even if disputes occur.