Dive Brief:
- The leading cause of construction disputes in the Americas continues to be disagreements over changes in scope, but the region also stands out for staying closer to budget and schedule compared to the rest of the world, according to HKA's 8th Annual CRUX Insight report, which examines causes of construction disputes.
- However, the London-based construction risk mitigation consultancy also found that claims for poor workmanship in the region outpaced global counterparts, with the issue impacting more than 20% of builds across the region, compared to just 16% globally.
- Still, according to Kimberly Reome, a quantum and forensic accounting expert at HKA, the most compelling story isn’t just in the data, it’s in what is actually changing on the ground. “We’re seeing a clear shift,” Reome said. “Disputes of certain types have been trending down since 2020. Traditional triggers like scope and design issues are less frequent, but financial pressures are gaining ground.”
Dive Insight:
HKA found projects in the Americas have a lower percentage of disputes based on change in scope and incorrect designs than the rest of the world. Conflicts from change in scope impacted 25.7% of disputed projects in the region, versus 38.8% globally. Likewise, design mistakes were the culprit in 18.3% of project disputes across the Americas, compared to 21.7% globally.
That said, disagreements over changes in scope remain the leading cause of construction disputes in the Americas, affecting more than one in four distressed projects completed since 2020.
That cause was followed closely by workmanship deficiencies, an area where the Americas underperformed other regions with 20.5% of disputes arising from the issue, against 16.1% for the rest of the world. Numbers were slightly higher in the U.S. (20.6%) and Canada (21.4%).
The top five causes of disputes in the Americas and the percentage of distressed projects impacted ranked as follows:
- Change in scope: 25.7% vs. 38.8% globally.
- Workmanship deficiencies: 20.5% vs. 16.1% globally
- Design was incorrect: 18.3% vs. 21.7% globally
- Unforeseen physical conditions: 17.4% vs. 14.7% globally.
- Design was incomplete: 16.8% vs. 19.1% globally.
The Americas outperformed global averages on both cost and schedule outcomes, suggesting improved project controls even as financial and workmanship-related disputes gained ground.
In the Americas, the average extension of time claim ran at 57.5% of schedule, versus 69.6% globally. Likewise, cost overruns came in at 31.1% of budget, compared to 34.7% for the rest of the world.
The report analyzed claims and disputes across 2,204 projects in 114 countries, drawing on the HKA’s direct involvement in distressed projects. In the Americas, the dataset included 703 projects across 20 countries, with an average capital expenditure of $639 million, offering a detailed view of how disputes are evolving across the region.
The report points to improved outcomes across the Americas, particularly on projects scheduled to finish in 2020 or later. Claimed extensions of time fell from 60.2% on pre-2020 projects to 44.2%, while claimed cost overruns remained comparatively modest at 26.8%.
Globally, similar trends are visible, but the Americas continue to perform slightly better than the worldwide averages. HKA cautions, however, that some newer projects remain ongoing, and disputes can surface later in the project lifecycle.
For example, payment and cash-flow disputes are rising rapidly across all project sizes, particularly in a softer economic environment marked by inflation and lingering supply chain constraints.
“We’re seeing payment disputes rise fast,” Reome said. “Those financial pressures can trigger delays and cost overruns that ultimately lead to disputes.”
The report attributes a reduction in other classic problem areas to a combination of better project discipline and tougher lessons learned during the past several turbulent years.
For instance, while the CRUX data predates the most recent tariff developments in the U.S., Reome said the report’s findings from the post-COVID period offer a preview of how trade policy shifts could impact projects.
“External shocks are dispute accelerators,” she said. “COVID, geopolitical conflict and commodity price spikes all hit projects hard. Tariffs and trade policies can have similar effects if contracts aren’t structured to deal with volatility.”
Looking ahead, Reome sees several developing pressure points for what’s to come.
“AI is a game changer, but it has risks,” she said. “Collaborative contracting models require real cultural change. Skill shortages may become more acute. And emerging regulations, whether environmental standards or payment laws, are going to put pressure on projects.”
Ultimately, she believes the industry must stay proactive by spotting the risks early, keeping up with learning and evolving contract approaches.
“That’s the best path to reducing disputes going forward,” she said.
