Dive Brief:
- In its second annual report on the cause of construction disputes, international consultancy HKA found that changes to a project's scope of work was the most frequent contributor to disagreements across the sectors it studied: buildings; defense, aerospace and military; industrial; infrastructure; oil and gas; and power and utilities.
- In "CRUX Insight: A Global Sector Market Analysis," the construction claims and dispute resolution firm analyzed 700 projects with a combined value of $1 trillion. HKA found that as contractors take on more design functions or subcontract that job out to others, disputes related to design have almost overtaken those related to contracts, which featured prominently in the company's 2018 analysis.
- HKA also found that construction companies are not learning enough from previous dispute situations to keep them from making many of the same mistakes. It suggests a move toward digitalization would help many companies to improve the quality of communication, which, in turn, would lead to better project outcomes and fewer disputes. However, HKA said technology is not a sure solution when dealing with human error, and firms must train employees to better manage the increasing complexity of projects.
Dive Insight:
The categories of technology that are most helpful in avoiding disputes, according to Resolution Management Consultants of Marlton, New Jersey, are scheduling software, 3D modeling tools like BIM and data collection devices. All these tools can help contractors better plan projects and execute them with potentially fewer disputes.
And if contractors do end up in court, said Jim Gallagher, principal at Resolution Management, these digital tools produce accurate records that can help construction companies win the cases.
But even the best software and devices won't be much help if contractors don't know what to do with the resulting data. “There has to be a plan to use the data and to make it available," he told Construction Dive.
In the study, HKA also drilled down into each construction sector, which in addition to scope changes, had their own dispute causes.
For buildings, the additional major contributors to disputes include poorly drafted contract requirements, late design information, a failure of either the contract management process or administration, poor subcontractor or supplier management, a low level of skill or experience, incomplete or incorrect designs, cash flow issues and false or unsubstantiated claims.
Defense, aerospace and military projects had poorly drafted contract requirements, incomplete and incorrect designs, failure of the contract administration and management processes and lack of skill and experience in common with the building sector's major causes of disputes, but they also experienced operational performance issues, personality and cultural differences and late delivery of materials.
The industrial sector suffered from many of the same contributors but also had to deal with labor shortages. Unique contributors to disputes on infrastructure projects were restricted access to jobsites, unforeseen physical conditions and late approvals. Oil and gas, as well as power and utility projects, also were affected by many of the same dispute causes.
More HKA suggestions about how to reduce the number of project disagreements include:
- A more balanced allocation of risk.
- Collaborative delivery methods.
- Extensive planning for how project delivery will be managed.
- A plan for the continuity of skills and knowledge throughout all stages of the project.
- Earlier and better engagement during bidding, contract negotiation and through the project lifecycle.
- Effective communication and transparency between all parties, including those in the supply chain.
