Average value of contract disputes jumps over 70%

The Middle East remains the region with the most contract disputes

The average value of construction disputes increased by 76% during 2020, a year that was dominated by Covid-19, according to a report from Arcadis.

The report revealed that the average vale of construction disputes in 2020 was US$54.3 million, up from US$30.7 million in 2019, but that the average length of disputes continued to decline.

Over 60% of survey respondents said their projects were impacted due to Covid-19.

The Middle East was the region of the world with the most disputes, as it was last year. The average value of construction disputes in the Middle East was US$86m in 2020, a 38% increase from the previous year, and the number of reported disputes increased.

The top cause of disputes globally was owners, contractors, or subcontractors failing to understand or comply with their contractual obligations. This was the number three cause in 2019.

Owner-directed changes was cause number two in 2020, and third-party or force majeure events was number three – not surprising due to the pandemic.

The fact that disputes have increased indicates that construction continued in much of the world during the pandemic, something alluded to by Roy Cooper, head of contract solutions, North America, Arcadis. He commented in the report that, “Our research indicates there is a strong emphasis on increasing construction activity across the globe to jumpstart economies in the wake of covid-19.

“Bigger and more complex projects requiring coordination among multiple stakeholders will require sophisticated delivery methods and rapidly changing technology. In addition, the industry will have to overcome shortages of labour and materials that is being experienced globally.”

Download the full report.