Construction disputes may be costly. The global consulting firm HKA reported that the value of claims involving 1,100 projects across the world from 2018 through 2020 was $48.6 billion, excluding legal fees. Claimed extensions of time accumulated to 593 years. There are, however, methods to avoid the most common construction disputes and these losses.
The building industry and third parties must face these common problems afflicting construction. Otherwise, they will continue to face financial and other losses and the risk of construction litigation.
Design problems replaced change in project scope design as the major cause of claims and disputes in the American construction industry, according to HKA’s 2020 report. Projects are more likely to have workmanship deficiencies and unforeseen physical conditions according to the report which relies on pre-pandemic data.
Other major causes of disputes include poor management of third parties and inadequate contract management which may contribute to design problems.
Design problems, according to the HKA report, are more prone to occur from increasingly strict timetables imposed upon project designers. Inadequate contract management may also play a role with design problems. Failure to manage third parties across more complex supply chains may have played a contributing role.
The U.S. construction industry is still dealing with impact from the changing economic conditions that began in 2020 and changing market conditions. Future challenges will likely include restricted cash flow, difficulties in design coordination and insufficient administrative skills for managing and executing contracts.
Because of ongoing economic uncertainty, the report recommends investing more time in planning, design, and coordination before construction to assure that all parties understand their roles, responsibilities, and risks.
The HKA report also contained these other recommendations:
- Do not rush request for proposals and wait until the design is advanced so that its schedule and costs are dependable.
- Consider factors such as experience and expertise, quality, and price in a manner that evaluates the actual value provided by bidders.
- Allocate appropriate resources for design and set realistic time for design deliverables.
- Make sure all relevant parties participate in a design review process incorporating the appropriate level of quality assurance.
- Allocate risks and opportunities to the party which is most able to own, manage and address them with an appropriately managed risk manager.
- Encourage transparency among all participants and quickly address and communicate issues.
Attorneys can assist with negotiations to help prevent these problems. They can also protect interests in lawsuits.