Ongoing liquidity issues within the Middle East construction market have resulted in a steady flow of claims being submitted over the past year as contractors take a tougher approach to entitlements, though the industry continues to make progress in resolving them more swiftly.
Over the last 12 months, the average length of time needed to resolve a dispute in the Middle East fell to just 13.5 months, according to research from Arcadis. 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.
On a less positive note, the average value of disputes increased over the last year, rising to $91m, the report says. This was due to a small number of high-value disputes and a flow of ‘mid value’ final account claims.
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 last year. 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.
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
Like previous years, party-to-party negotiation and arbitration remained the two most common methods of dispute resolution in the Middle East.
“Over the next 12 to 18 months, major regional construction related events loom ever closer,” said Nelson-Williams. “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.”
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.