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£12M increase in the value of construction disputes

The value of the average construction dispute worldwide rose by £12M last year to £32M, according to a report by Arcadis.

It predicts an increase in construction disputes this year, citing low margins agreed during the economic downturn and labour shortages in some markets as catalysts.

The report found that the time to reach a resolution in 2014 was 13.2 months, although the UK market had the shortest time of 10 months. The value of UK construction disputes has dipped by £600,000 from £17.8M in 2013 to £17.2M in 2014.

The report, Global Construction Disputes: The Higher the Stakes, the Bigger the Risk, cites poor paperwork as the main cause of disputes. This includes failure to properly administer the contract, poorly drafted or incomplete and unsubstantiated claims and errors and omissions in the contract documents.

It also found that construction dispute values were the highest in Asia at £54.5milllion, followed by the Middle East at £48.8million.

Arcadis head of UK contract solutions Gary Kitt said: “It’s encouraging to see a slight dip in the value of UK construction disputes, which is largely due to a greater willingness by parties to compromise before the onset of formal proceedings and UK courts that are actively seeking to control costs.

“However, the figure is exceptionally high when compared to the beginning of the decade when construction disputes in the UK were valued at £4.5m. In particular, for those operating in fixed-price contracts that were secured during the recession, caution is still needed. The recovery of costs and rise in margins will undoubtedly increase the possibility for disputes, especially where clients continue to operate on highly constrained budgets.”

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