Your browser is no longer supported

For the best possible experience using our website we recommend you upgrade to a newer version or another browser.

Your browser appears to have cookies disabled. For the best experience of this website, please enable cookies in your browser

We'll assume we have your consent to use cookies, for example so you won't need to log in each time you visit our site.
Learn more

Rising cost of disputes highlighted

UK construction disputes are increasingly expensive and complicated, mainly due to failures to administer contracts properly, research by EC Harris has found.

A report by the consultancy said tthe average value of UK disputes rose to £6.5 million in 2011, from £4.6m the previous year - a 41 per cent increase.

Disputes had also become more time-consuming, taking an average of 8.7 months to resolve in 2011, against only 6.7 months in 2010.

Despite this, UK dispute resolution remained the world’s quickest, it noted.

EC Harris’ report Global Construction Disputes 2012: Moving in the Right Direction said the global value of disputes had fallen because of reductions in America and Asia. But the UK, Europe and the Middle East had gone in the other direction.

It said a “failure to properly administer the contract” was the most common cause of a construction dispute.

It said this stemmed from clients spending too little while procuring the contract on the technical and legal advice needed to deliver the job, leading to administrators trying to operate contracts inappropriate to the project concerned.

Projects were shaped around contracts, rather than the reverse, it said, and clients’ enthusiasm for contracts such as NEC3 led to these being adopted without adequate budgeting for the level of administration support needed.

Poor performance by project managers was also an important factor, “because they had insufficient understanding of the procedural aspects of the contract or were deemed too partial to the employer’s interests”, the report said.

EC Harris head of contract solutions in UK and Europe Gary Kitt said: “The biggest problem is people who are running jobs not doing so properly.”

Problems in administering contacts arose mainly when architects were involved because “you get designers administering contacts when this is not their expertise and what they want to be doing is designing buildings”.

Mr Kitt said many people wanted to use the NEC contracts “but they do not resource it properly”.

He said: “If you are using [NEC] it needs an admin team on both sides. Contractors cannot afford to do everything required by the NEC, so that becomes a big problem.”

Construction dispute specialist William Gard, a partner with law firm Burges Salmon, said: “There is a lack of appreciation of the level of project management needed to operate an NEC contract.

“It is a good way to pro-actively manage a contract but it only works when both parties do that otherwise it makes things worse.”

Royal Institution of Chartered Surveyors director of built environment David Muse said: “Because of the economic situation and competition in fee tendering, clients do not choose on a like-for-like basis, by which I mean they look just at price not at the service and expertise they are getting.

“The legal tail is wagging the project dog. You need to do risk allocation then choose the contract that suits that.

“Instead people take a contract off the shelf and say ‘oh it says design and build so we’d better do it that way’ rather than look at what meets the client’s objectives.”

The report also found a growing reluctance to refer disputes to adjudications “largely because of inconsistent results that have been obtained from these proceedings over the past twelve months”, and that adjudications regularly took longer than the statutory 28 days for a decision.

Party-to-party negotiation was the most common method of resolution used, followed by adjudication and then mediation.

Mr Kitt said: “We see people less willing to go to adjudication these days because of the variability of quality of adjudication.

“It is very difficult for the largest contractors to achieve the right result because in courts you have fairly rigid guidelines but an adjudication depends entirely on the adjudicator. Adjudications have become more expensive and in court you might at least get your costs back while in an adjudication you can’t.”

RIBA Director of Practice Adrian Dobson said: “The introduction of BIM technologies and processes makes the requirements for clear design team leadership ever more important.

“Many architects’ practices provide project management and contract administration services as a core element of their business, and generally architects are very adept at combining a commitment to design excellence with a rigorous approach to delivering broader project outcomes.”

The top five causes of disputes in UK construction projects found by EC Harris during 2011 were:

* A failure to properly administer the contract

* Conflicting party interests

* Unrealistic risk transfer from employers to contractors

* Employer imposed change

* Ambiguities in the contract document.