Value of contracts in dispute falls

PUBLISHED : Wednesday, 30 May, 2012, 12:00am
UPDATED : Wednesday, 30 May, 2012, 12:00am
 

The average value of contracts in dispute in Asia's construction industry fell by 17.7 per cent to US$53.1 million last year, from US$64.5 million in 2010, consultancy EC Harris says.

Worldwide, the average value of construction contracts in dispute fell to US$32.2 million, from US$35.1 million in 2010, the company said in a report.

The United States saw the most dramatic decline, with the average value of disputed contracts falling from US$64.5 million in 2010 to US$10.5 million in 2011. This was mainly because of a depressed market and an increasing emphasis by owners in both the public and private sectors on avoiding and mitigating disputes through risk management and early resolution.

While this was in line with a wider global trend for the value of disputed contracts to fall, they rose in Britain, Europe and the Middle East, the report said. The average value of contracts in dispute in the Middle East more than doubled to an average of US$112 million last year, compared with US$56.25 million in 2010.

Mike Allen, group head of contract solutions at EC Harris, said there was no single reason for the decrease in the value of disputed contracts in Asia. 'However, there are some strong indications that parties are beginning to take a more proactive approach to resolving their differences or disputes through structured negotiation and mediation,' he said.

Despite the global downward trend, contract disputes were still costing the industry significant time and money, Allen said.

The company found that construction disputes in Asia lasted, on average, 12.4 months in 2011 - one month more than the 11.4 months in 2010. This was longer than most other regions took to resolve their disputes, with only those in the United States taking longer - 14.4 months.

Disputes in Britain were resolved the quickest - in 8.7 months - with the global average 10.6 months.

The company found that failure to make interim awards on time extensions and associated compensation was the most common cause of disputes in Asia. Conflicting interests and unrealistic deadlines set at the tender stage were also key contributors to disputes.

$10.5m

The average value of disputes, in US dollars, in the United States last year

- In 2010 it was US$64.5 million

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