Industry needs to work harder to avoid contractual disputes, says new report

The consequences of delay, disruption, lost productivity, cost overrun and poor quality are amongst the lessons still not being learned by the industry, according to the second annual CRUX Insight report by dispute resolution specialists HKA.

The report provides sector-by-sector insight into dispute causation on major capital projects around the world, with this year’s CRUX Insight focusing on buildings, defence, aerospace & military, industrial, infrastructure, oil & gas, and power & utilities.

The analysis, from what is claimed to be the broadest and most in-depth dataset in the industry, identifies over 4,000 causes across 700 projects in 72 countries, with total project capital expenditure in excess of US$1.2 trillion, where HKA has provided claims consulting and dispute resolution services. 

The report provides detailed insight into the factors, pattern and causes of disputes on major engineering and construction projects across multiple sectors worldwide – claiming that the dominant drivers of disputes are a significant lack of control over scope and design, along with poor drafting and administration of contracts. 

Skills gaps, cultural differences and overinflated claims are also prevalent within the web of interrelated causation factors.  

Simon Moon, HKA partner and COO, said: “We know from this year’s report that lessons are still not being learned in the industry. The consequences of delay, disruption, lost productivity, cost overrun and poor quality are not only significant for clients but for industry and economies at large. 

“All decision makers on projects can benefit from a clearer understanding of the recurring causes of claims and disputes. We would encourage governments, policy-makers, influencers and professional bodies to engage with our CRUX research findings and its implications for the engineering and construction industry.”

The analysis also questions the fitness for purpose of procurement strategies and operational models, suggesting that earlier and greater engagement with the market is required to pre-empt unforeseen problems that emerge later in the project lifecycle. 

The report highlights advancing digitalisation as a way to improve the information flow, with timely access to data expected to raise the performance of project delivery teams and the design process in particular. However, it acknowledges that there is no easy technological fix for disputes that stem from human actions and omissions. 

Toby Hunt, chief business development officer, said: “If the industry is to break the cycle of repetitive disruption, delay and spiraling costs, employers, contractors and the whole supply chain must better understand, prepare for and manage the complexity of their projects.

“All stakeholders should benefit from the use of CRUX data to re-assess the risk profile of their business, including by service, sector and location,” he said.  

Click here to download HKA’s CRUX Insight Report.