Middle East records rise in construction disputes

06 July 2015

Report findings say resolution process is taking longer

  • Value of construction disputes in the region increases to $76.6m
  • This marks a significant increase from 2013, when the value of disputes totalled $40.9m

The value of construction disputes in the Middle East increased by 87 per cent year-on-year to reach $76.7m in 2014, according to a report published by Dutch firm Arcadis.

While the value of construction disputes rose significantly from the $40.9m recorded in 2013, it is still far short of the $112.5m of disputes recorded in 2011, as the shock of the global financial crisis continued to affect the region’s real estate markets.

According to the report, the average time taken to resolve disputes in the region rose to 15.1 months, up by 8 per cent from just under 12 months in 2013. The increasing length of disputes was not confined to the Middle East, with other regions also recording an increase in the length of time of the resolution process. The exception was Asia, where the average dispute length decreased by two months.

Arcadis’ report claims the root cause for most disputes is contract-related issues. Failure to properly administer contracts and claims, as well as issues surrounding project managers and engineering firms were the most frequent causes behind construction disputes in the region.

Another interesting finding from the report is that almost half of all joint ventures ended up in contractual dispute.

The transportation sector saw the most disputes in 2014, followed by social infrastructure and real estate, according to the report.

Shifting risk will drive innovation in construction

MEED recently asked the heads of major regional construction firms about risk allocation in contracts. They agreed that at present, contractors are forced to take on too much responsibility.

The construction leaders were divided over whether this would best be remedied by adopting international standards such as those espoused by the International Federation of Consulting Engineers or by adopting a standardised GCC contract model. But they all agreed that by concentrating liability further down the supply chain, the construction projects market suffers. Read more.

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