Construction disputes in the Middle East being resolved quicker than before: Arcadis report

Failure to make interim awards on extensions of time and compensation and properly administer the contract, the most common causes of construction disputes in the Middle East

Party to party negotiation still the preferred method for resolving disputes across the region

Ongoing liquidity issues within the Middle East construction market has resulted in a steady flow of claims being submitted as contractors take a tougher approach to entitlements, however the industry continues to make progress in resolving them more swiftly, according to the latest research from Arcadis.

The 2018 Global Construction Disputes Report is an annual study from Arcadis that examines the most common causes of dispute on construction projects, as well as the average duration and value of disputes, and the method of dispute resolution most commonly deployed. The findings are based on an assessment of the construction disputes handled by the Arcadis Contract Solutions team in various regions over the previous twelve months.

Length of time needed to resolve disputes continues to fall, however average value rises:

Over the last year, the average length of time needed to resolve a dispute in the Middle East fell to just 13.5 months. This trend towards swifter resolution was also observed last year, and reflects the industry’s focus on trying to improve liquidity across the wider supply chain.

• 	Average length of dispute (months)
  	2011	2012	2013	2014	2015	2016	2017
  Middle East	9	14.6	13.9	15.1	15.2	13.7	13.5
  Global average	10.6	12.8	11.8	13.2	15.5	14.3	14.8

  Fig 1 – Average length of construction disputes handled by Arcadis (2011-2017)

On a less positive note, the average value of disputes increased over the last year, rising to $91m. This was due to a small number of high-value disputes and a flow of ‘mid value’ final account claims.

• 	Average value of dispute (US$ millions)
  	2011	2012	2013	2014	2015	2016	2017
  Middle East	112.5	65	40.9	76.7	82	56	91
  Global average	32.2	31.7	32.1	51	46	46	43.4

  Fig 2 – Average value of construction disputes handled by Arcadis (2011-2017) 

Basic contract understanding still a cause for concern: 

A failure to make interim awards on extensions of time and compensation emerged as the most common cause of disputes on construction projects in the Middle East. This was a new trend however it was very closely followed by a failure to properly administer the terms of the contract which has been a recurring issue in previous years. 

• Rank	Most common causes of dispute in 2017
  1	A failure to make interim awards on extensions of time and compensation
  2	A failure to properly administer the contract
  3	Owner directed changes

  Fig 3 – Most common causes of disputes on construction projects handled by Arcadis in 2017  

Rob Nelson-Williams, Regional Head of Contract Solutions, Arcadis Middle East said: “In analysing the causes of disputes on construction projects in the Middle East, we continue to see a lot of the same issues crop up. This underlines the need to get the basics right, and the importance of seasoned technical and commercial advice when it comes to contract or claims strategy.”

Party-to-party negotiation still the preferred method for resolving disputes: 

Consistent with previous years, party to party negotiation and arbitration remained the two most common methods of dispute resolution in the Middle East.

• Rank	Most common methods of alternative dispute resolution
  1	Party to party negotiation
  2	Arbitration
  3	Dispute adjudication board

  Fig 4 – Most common causes of disputes on construction projects handled by Arcadis in 2017

“Over the next 12 to 18 months, major regional construction related events loom ever closer. As pressure increases to meet fixed deadlines, the need to make smart decisions around contract and procurement strategies will be even more important. Embracing lessons from the past is key to reducing the risk of disputes, but also in helping the industry move towards a more harmonious and less confrontational contracting environment for all parties,” concluded Nelson-Williams.

-Ends-

For further information, please contact:

Arcadis Middle East

Nisha Celina

Marketing & Communications Manager

M: +971 50 872 9518

E: nisha.celina@arcadis.com

About Arcadis:

Arcadis is the leading global Design & Consultancy firm for natural and built assets. Applying our deep market sector insights and collective design, consultancy, engineering, program and cost management services, we work in partnership with our clients to deliver exceptional and sustainable outcomes throughout the lifecycle of their natural and built assets. We are 27,000 people active in over 70 countries that generate €3.3 billion in revenues. www.arcadis.com

About Contract Solutions:

The Arcadis Contract Solutions team helps clients avoid, mitigate, and resolve disputes. The team encompasses a large pool of procurement, contract and risk management professionals. It also includes quantum, delay, project management and engineering defects experts. The team provides procurement, contract and dispute avoidance and management strategies, as well as dispute resolution and expert witness services. This is delivered through a blend of technical expertise, commercial advice, sector insight and the use of live project data, combined with a multi-disciplined and professional focus.

© Press Release 2018