- For the second year in a row, scope of work changes were the major cause of project disagreements, costing $48.6 billion and 593 years of additional time requests, according to international consultancy firm HKA's CRUX Insight 2020 report, which looked at 1,185 projects with spending of $1.8 trillion. Claimed extensions added an average of 323 days to a project's schedule, or more than 70%, the report found.
- While scope changes topped the list of primary dispute causes, they were followed by incorrect design; incomplete design; poor management of subcontractors and suppliers; unforeseen physical conditions; the late issuance of design information; deficient workmanship; differences in contract interpretation; and late approvals. In a breakdown by U.S. states, HKA found that the major cause of construction disputes in California was workmanship deficiencies; unforeseen physical conditions in New York and the late issuance of design information in Texas.
- The most popular method of dispute resolution in the Americas, a region that covers 17 countries including the U.S., is litigation, followed by mediation, arbitration, negotiation and adjudication. But mediation had the biggest increase among dispute resolution methods, rising from a 15% to 25% share.
The fact that scope of work changes were also the leading cause of disputes in 2019 shows the importance of preconstruction planning, and accurately capturing a project's comprehensive footprint, as well as all parties' roles, reponsibilities and risks on the job, right out of the gate.
For some contractors, the root causes of disputes can be elusive, so reports such as HKA's can provide a handy blueprint and guide from the planning stages through punchout.
HKA said data that would indicate how impactful the COVID-19 pandemic has been on the cause and resolution of construction disputes was not yet available, but the firm offered insights as to how the industry can "reset" in order to mitigate the potential effects.
Already, the report said, the relatively thin supply of skilled labor has been further reduced by "COVID-related cutbacks," challenging contractors to find replacements.
Some strategies HKA offers to potentially reduce the number of disputes, therefore delivering a project with less overall cost and fewer delays, are:
- Give appropriate weight to the different elements in Requests for Proposals (RFPs) — price, expertise, experience and quality — so as to reveal the true value in bids;
- Allow for adequate design resources and set realistic deadlines for the delivery of design;
- Make sure all relevant stakeholders are involved in the design review process, which should have a focus on quality assurance;
- Formulate a project execution plan that the client and supply chain can agree with;
- Allocate risks among project participants appropriately;
- Maintain transparency when it comes to project issues and address potential problems as they arise;
- Pay more attention to and improve the management of companies at the subcontractor and supplier level in order to help those lower-tier companies meet their contractual obligations;
- Synchronize the design process, which could involve multiple firms, with a realistic schedule and conduct regular reviews to make sure the two remain in alignment;
- Use mentoring to develop a skilled labor workforce and pay market-rate wages to attract and retain talent when the budget does not allow for formal training programs;
- Allow for the possibility of unforeseen site conditions, especially on linear infrastructure projects, and make sure contracts anticipate them as well.
As the report notes, however, some of the most important lessons that contractors can learn about construction conflicts come from past projects, both contentious and dispute-free. Such insights will greatly aid in overcoming the challenges put forth by the COVID-19 pandemic or any other issues that present themselves.