Middle East construction disputes rise in value by 88%

Increase in value to $76.7 million in 2014 marks the highest rise since 2011, according to consultancy firm Arcadis

PHOTO: Construction disputes in the Middle East rose in value to $76.7 million in 2014, according to Arcadis. Credit: Shutterstock

Construction disputes in the Middle East skyrocketed in value by 88% in 2014, according to consultancy firm Arcadis.

The increase to $76.7 million marked the highest rise since 2011, when the value of disputes touched $112.5 million, according to the firm’s fifth Global Construction Disputes report.

Most high-value dispute claims have arisen from projects dating to 2008 and 2009, due to money recently made available to pursue such claims, the report said.

The average time taken to resolve disputes in the Middle East has also risen by 8% to 15.1 months, from just under a year in 2013.

“The Middle East construction market is back in full swing and contractors and employers are seeing more liquidity in the market. With this though those parties that parked their losses now have the funds to pursue those claims that were parked,” said Edward McCluskey, head of alternative dispute resolution for the Middle East at Arcadis.

“We forecast that this trend shall continue into 2015 as more parties have the required liquidity to pursue those claims that were put on ice.”

The global report, which studies the duration, value, common causes of disputes and methods of resolution, found that the Middle East ranked second globally by the value of claims. Asia ranked top with $85.6 million in construction disputes, followed by North America and the UK which dipped to $29.6 million and $27 million respectively.

The most common causes of dispute were a failure to properly administer the contract, poorly drafted or incomplete and unsubstantiated claims, or a biased project manager or engineer, the report found.

Joint ventures were also likely to end in disputes, the report found.

“Joint ventures are becoming more commonplace as developers opt to divest risk across major programs and blend specialist skills in the supply chain into one contract,” McCluskey said. “However, this approach comes with many potential risks attached. Joint ventures can be typically described as a compromise agreement and our research shows that almost a third enters dispute proceedings.”

Arbitration, party to party negotiation and mediation are the three most common methods of alternative dispute-resolution used in 2014, the report said.

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