ARCADIS Global Construction Disputes Report for 2014

If you are active in the Forum at all, you are probably aware that ARCADIS is one of the Forum's most active sponsors.  Indeed, both in Dana Point in 2013 and in Las Vegas in 2012, ARCADIS sponsored the Service Project with the Young Lawyers Section.  

ARCADIS is also a globally recognized construction management and claims assistance firm. In those capacities and for the past four years, ARCADIS has published its Global Construction Disputes report.  Its most recent iteration summarizing the 2013 year in construction disputes is available at this link.

In the report, some intriguing information is provided.  First, Mike Allen, who compiled the report and is the Global Head of Contract Solutions for ARCADIS, noted that he believes that there has been an increase in the number of "Mega Disputes" in which the disputed sums are in excess of $1 billion in American dollars.  These mega-disputes, of course, arise out of mega-projects -- after all, for a claim of $1 billion to exist, the project had better be at least that large itself.  Overall, the average dispute rose by approximately $400,000 over 2012.

A second interesting point can be seen in the causes for disputes.  The most common reason for a dispute arising was identified as being a "failure to properly administer the contract." That replaced "poorly drafted or incomplete and unsubstantiated claims" at the top of the chart, and it underlines an issue that all of us can take to our clients: dispute avoidance starts at the beginning of the contracting process with a full understanding of what requirements for contract administration exist in the contract and how the contract identifies how administration should be undertaken.

The final takeaway from this report in many respects is that performing work in joint ventures is more frequently leading to disputes.  Fully 1 of every 3 disputes that ARCADIS encountered in 2013 involved differences between joint venture parties.  In some areas of the world, that number was even higher -- in the Middle East, 46% of joint ventures ended up in a dispute. As projects get larger, fewer companies can take on the risk of contracting to provide all of the services required to build a project. As a result, more joint ventures are formed.  If these numbers hold true going forward, more disputes may result.