Construction dispute resolution

Construction Dispute Resolution – Let’s get to the bottom of them

  • Education

Intro

Construction disputes can be costly, so costly that they eat away the profit margins of a company for a year. Arcadis reported that in 2017 the average construction dispute in the UK was £26 million. However, disputes are something that you cannot avoid, it is inevitable in any industry. Construction dispute resolution is at the forefront of construction companies as they seek ways how to win them more easily and resolve them quickly. Better yet, how to dismiss them before they even get to court.

Construction projects are complex and so are the contract documents, which is why construction disputes result in being complex too. The reason behind disputes is that the extent of work is high and it involves various prime contracting parties followed by unprepared contract documents, insufficient planning and financial issues or communication problems. All these factors can contribute to problematic litigation with high costs and ultimately, they divide the parties and affects their communication and relationship (CESW, 2018).

Construction dispute resolution cost table

image taken from Arcadis report 2018

Causes of disputes

There are several causes of disputes in construction projects. Here are just the main ones but there are others.

  1. One of the most common causes of construction disputes was wrong administration of contracts, which started to boom across the industry very often during the previous three years.
  2. The second common cause of the dispute is stakeholders on a construction project, not understanding or comply with obligations in the contract
  3. The third cause of disputes claims is poorly drafted or incomplete.

While the UK is getting disputes resolved, some of the disputes and the causes of the disputes remain widespread from past years.

Such issues can be acknowledged and once we are aware of what is needed to tackle them, it’s only a matter of how we use this knowledge in order to become more proactive in avoiding any future disputes. This way, the effort, stress, time and costs invested in disputes in the construction industry can be reduced.

Construction dispute cost and time spent

(Arcadis Report, 2018)

The picture in the above is part of the Arcadis Report (2018) which shows the figures of disputes across 7 years on the UK and Global levels. It suggests that in 2017, the top dispute cause for the dispute was contractual or the failure to properly administer the contract.

Why companies lose disputes?

There could be many reasons why a company may lose a dispute.  However, the one reason that we would like to touch on is the factor of not keeping records of daily activities on site. Your daily report/site diary can be your lifesaver when a dispute arises. In your daily report you should record and challenges and issues you face o site, any sub-contractor labour who doesn’t show up for work etc. The issue is today on construction projects, people are reluctant to fill their site diaries because they just feel it is a waste of time.

Site Diary New PDF Report screenshot

Construction dispute resolution – How to prevent/minimise them?

The most efficient three approaches used in the UK to prevent disputes are adjudication (contract), party to party negotiation and mediation, however, depending on the case of each dispute, these approaches might not be the solution.

There are challenges, and certainly, Brexit has generated much uncertainty amongst all industries, including construction. The UK construction industry can lose the significand number of workforces, which is worrying in regards to the delivery of existing and future projects. Projects such as London Crossrail, Euston Station Redevelopment and Battersea Power Station regeneration are some of the ones affected by Brexit, to name a few.

The most preferred solution to avoiding disputes in the UK so far has been the one which involved obtaining a payment arising from the failure to proper administration of contract payment mechanisms. As a result, anticipated the impact of such decision to move forward and this way the UK construction industry will see an increase in the avoidance of disputes if the right methods to avoid disputes are used appropriately together with party negotiations and mediation.

Conclusion

Consequently, it is remarked that every complex construction contract will see disputes coming. The key is for contractual parties to recognise that differences can occur and when they do, it’s best to address them straight away and not keep them away from their employees. Preventing disputes can only be done through transparent communication and if they occur, mediation is the only solution left to avoid long lasting processes as such, in order to avoid time-consuming and costly measures like litigation or arbitration (CESW, 2018).

Another way to avoid disputes is by using tools on site that will contribute to better collaboration between the contracting parties and the contracted ones. Digital tools have proved to minimise issues and to save time on site for both sides of the parties. The Site Diary app is certainly one of the must-have tools that help many contractors report activities and events on site, it improves team collaboration effectively and finally, it’s easy and fun to use.