The ongoing liquidity issues within the Middle East construction market has seen a spurt in the number of claims submitted; however, the industry is resolving them more swiftly, according to the latest research from Arcadis.
Arcadis said compared to last year, the average time needed to resolve a dispute in the Middle East fell to just 13.7 months.
This is 10% quicker than the duration taken during the two previous years, and is less than the global average, stated the company in its ‘The 2017 Middle East Construction Disputes Report’.
Similarly, the average value of a construction dispute also decreased, dropping from $82m in 2015 to $56m last year, it added.
The ‘2017 Middle East 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 resolution most commonly deployed.
The findings are based on an assessment of the construction disputes handled by the Arcadis Contract Solutions team in the Middle East over the previous twelve months.
On a less positive note, basic contract issues remain the root cause of many of the disputes that materialise across the region, said Arcadis.
Rob Nelson-Williams, the regional head of contract solutions at Arcadis Middle East said: “This trend towards swifter resolution is particularly welcome as it helps to improve liquidity across the wider supply chain. In a tight market, we are seeing an increase in the number of claims submitted as contractors take a tougher approach to entitlements to help protect their cash flow position.”
According to him, the failure to properly administer the terms of the contract remained the most common cause of disputes on construction projects in 2016, closely followed by poorly drafted, incomplete, and unsubstantiated claims.
This once again underlines the need to get the basics right, and the importance of seasoned technical and commercial advice when it comes to contract and claims strategy, he stated.
“Every year, we see the same basic issues repeatedly cropping up when we analyse the causes of disputes on construction projects. Within the industry, there’s a pressing need for better education on how to avoid these pitfalls,” remarked Nelson-Williams.
“A sharper focus on removing ambiguity from within a contract at the very outset, and better training on how to prepare a robust and credible claim are two relatively simple steps that would make a significant difference,” he observed.
In this year’s report, proper contract administration was pinpointed as the single biggest factor that would help to reduce the number of future disputes.
The other two factors that the Arcadis team called out also related to contract issues, namely the production of accurate contract documents and a more balanced approach to risk allocation, according to Tradearabia news report.
“Over the next 12 to 18 months, clients need to be careful that, in the haste to get spades in the ground to meet ﬁxed deadlines, they do not make rushed decisions around contract and procurement strategies,” stated Nelson-Williams.
“With disputes typically lagging a year or two behind project commencement, there’s a risk that poor decisions taken now may only become evident much closer to the delivery date when the margin for error is a lot slimmer,” he added.