Most Common Causes of Construction Disputes in the Middle Eastcontracts
ARCADIS have published their annual Global Construction Disputes Reports for 2019, in which they share their findings about construction disputes around the world.
Globally, it is seen that the average dispute value is declining, while the average dispute length is increasing. Unsurpisingly, British and North American disputes have the lowest average value, standing around 18 Million USD, while the Middle East's disputes averages more than 3 times that value at around 57 Million USD.
For clarification, ARCADIS define the disputes and its value as follows:
We define a dispute as a situation where two parties typically differ in the assertion of a contractual right, resulting in a decision being given under the contract, which in turn becomes a formal dispute. The value of a dispute is the additional entitlement to that included in the contract, for the additional work or event which is being claimed. The length of a dispute is the period between when it becomes formalized under the contract and the time of settlement or the conclusion of the hearing.
The top three reasons leading to disputes in the Middle East according to ARCADIS are:
- Poorly drafted or incomplete and unsubstantiated claims,
- lack or proper contract administration, and
- parties' failure to understand and/or comply with their contractual obligations.
These findings are not surprising as owners in the area tend to focus on the financial issues with an initial disregard to the proper contract administration practices. The attention given to the contract, and their administrators, is usually too late after several defaults, contract breaches, missed notices and claims have arisen.
I believe the report underlines a major issue with most contractors; poor contract administration and incomplete claims which costs on average $60,000,000. A properly drafted and well substantiated claim is the way to resolve and issue before it grows into a multi-million dispute, and it is not difficult to produce.
It just requires a professional with sound knowledge of the contract to produce a solid claim submittal with the essential bits to effectively build a case, and prove the contractor's entitlement.
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