Disputes in the global construction industry are costing a staggering amount of time and money

According to a new analysis, the worldwide construction sector has been wasting an alarming amount of time and money recently.

For its CRUX Insight 2021 report, global management consulting firm HKA evaluated data from 1,400 projects in 94 countries to shed light on claims and disputes in the construction industry around the world.

According to the findings, $73 billion was spent on claims and disputes in significant building projects around the world in the year leading up to August 2021.

According to the research, the average project extension time was 17 months, and the average disputed costs per project were a whopping $100 million. The survey also shows that claims escalated to an average of 46 percent of a project’s capital value, and that costly delays often increased the duration of projected construction projects by 71 percent.

According to HKA, cumulative overruns on all global building projects totaled 750 years throughout this time period.

These data, according to HKA, show that conflict is to blame for the world’s construction industry’s bad performance. Changes in scope, design problems, contradictory contract interpretations, and mismanagement of subcontractors were among the main reasons of these costly and time-consuming claims and disputes, according to HKA.

According to HKA, the ongoing epidemic has wreaked havoc on the construction industry around the world, resulting in shortages of materials and labour, restricted access to job sites, constrained cashflow, and exposure of contract terms on force majeure and changes in law.

COVID-related claims and disputes are expected to last a long time, according to the business. “By August 21 – the CRUX data cut-off – only one out of every six projects (16%) started since the pandemic had generated COVID-related claims, but many more are in the queue,” the report states.

“Ominously, however, COVID has compounded underlying industry weaknesses, intensifying the risk of claims and disputes as the industry is rebounding and governments across the world press ahead with ambitious infrastructure and development plans,” reads the report.

The analysis also reveals some beneficial outcomes. “In certain regions, increased reporting has helped to reduce bogus claims and poor workmanship. Drones and digital modelling, for example, have garnered new supporters. Other changes in working methods — frequently including tighter collaboration — could help the construction and engineering business become more nimble and productive in the future,” it adds.

Quality construction labourers are hard to come by in many parts of the world, as it turns out. According to HKA, skills gaps coupled with labour shortages had a negative impact on around 36% of projects.

Skills shortages, supply chain disruptions, cost inflation, heightened market volatility, and the climate catastrophe are all having an impact on projects and raising the risk of conflict in the claims and disputes environment, according to HKA. Whatever the reason, the global construction industry is experiencing an unstable and uncertain atmosphere.

“Capital projects are hemorrhaging billions of dollars each year to recurrent, predictable, and often avoidable claims and disputes. CRUX Insight 2021 not only diagnoses these failings and quantifies the impacts, but also identifies corrective actions to stem these losses,” says Renny Borhan, HKA Chief Executive Officer.

“The stakes are rising for all involved in delivering capital projects as global pressures increase in parallel with construction activity. Individually and collectively, project stakeholders and the industry can learn lessons from CRUX Insight to operate more effectively amid this heightened uncertainty and deliver better project outcomes. I encourage them to make good use of our analysis and insight along with the CRUX Interactive Dashboard.”

How does Canada stack up against the rest of the globe? The constant pressure to design in Canada and the rest of the Americas, according to HKA, is having unforeseen repercussions. “A more proactive approach to risk assessment and allocation, with checks on design progress and constructability, as well as designer pricing changes, can prevent scope creep and design disputes,” HKA said of the country’s struggles.

Despite the fact that the pandemic has disrupted building projects and employment to varied degrees across North America, HKA recognises that both Canada and the United States are on the mend.

According to the survey, access to sites and unforeseen physical conditions are causing a big number of claims or disputes in Canada and Latin America, but not so much in the United States.

“Yet, COVID-19 — echoing its societal and public health impacts — has exposed and amplified many of the underlying weaknesses of the construction and engineering industry, while also accelerating change, some of it positive,” reads the report.

“The risk of unforeseen ground conditions is invariably borne by contractors under the types of contracts used in Canada,” reads the report. “However, they do not carry out geotechnical investigations and soil testing before submitting bids, and when appointed, therefore, have not accounted for any issues with ground conditions. Contractors do not want to spend the money upfront unless they are certain they will be awarded the work.”

The design flaws are a major source of claims and disputes in both the United States and Canada. “Construction management — namely, cost, schedule and efficiency tracking — has improved greatly in the last few decades. However, managing and tracking design has not,” reads the report. “This failure has become increasingly apparent during the pandemic, exacerbated by designers working from home.”

A succession of cases handled by HKA Canada since March 2020 has hinged on alleged or actual design deficiencies, says HKA. “Defending or challenging these claims is difficult as the information is not being captured,” reads the report. “We expect to see an overhaul of design management (akin to the progress in construction management) in the coming years.”

The difficulties, Canada’s pandemic-inspired construction boom continues, as the country’s need for home repairs and gleaming new condos is hampered by supply chain constraints and variable market costs.

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