Construction disputes rise in value to $32.1million in 2013
Disputes relating to major global construction projects increased in value to, on average, $32.1million in 2013 according to global natural and built asset design and consultancy firm ARCADIS.
This was $400,000 more than in 2012 when disputes were valued at $31.7million. ARCADIS also saw the emergence of the 'mega-dispute' in 2013, with its teams working on three separate disputes worth over $1billion including the Panama Canal Expansion project.
This year's report 'Global Construction Disputes: Getting the Basics Right' is ARCADIS' fourth annual study into the duration, value, common causes and resolutions of construction disputes across the globe.
The report found that construction dispute values were the highest in Asia at $41.9milllion, closely followed by the Middle-East at $40.9million. In the US, disputes values tripled in value to $34.3million and also rose in the UK to their highest value since the report started at $27.9million.
The findings showed that disputes took, on average, less time to resolve in 2013 at 11.8 months, down from 12.8 months in 2012. They took longest to resolve in the Middle East and US with 13.9 months and 13.7 months respectively. Disputes in Continental Europe tended to be resolved the quickest at 6.5 months.
Mike Allen, Global Head of Contract Solutions at ARCADIS said: "Today's major construction programmes are fast paced, complex and involve a multitude of supplier parties, so there are numerous points at which a dispute can occur. Many of these disputes are resolved out of the public eye but do often result in heavy costs and time overruns.
“Our research indicates the scale of this problem and highlights the need for better contract administration, more robust documentation and a proactive approach to risk management to help mitigate against the most common causes of dispute."
The Panama Canal Expansion was one of the highest profile disputes in 2013, with the Panama Canal Authority in dispute with the GUCP contractor consortium about cost overruns said to be worth $1.6bn. It was reported that a deal over a protracted financing dispute was secured in order to free up funds earlier this year and this has allowed work to continue.
The research found that the most common causes of construction disputes related to the administration of contracts. The top five causes in 2013 were: failure to properly administer the contract; failure to understand and/ or comply with its contractual obligations; incomplete design information or employer requirements; failure to make interim awards on extensions of time and compensation; and poorly drafted or incomplete and unsubstantiated claims.
Party-to-party negotiation was deemed the most popular method of alternative dispute resolution in 2013, followed up arbitration and adjudication.
The likelihood of a joint venture (JV) ending in dispute was also reviewed in the report. ARCADIS found that, where a JV was in place, it had a one in three (35 percent) chance of causing a dispute. This is an increase from 2012 where instances of JV dispute were less commonplace at 19 percent.
Allen continued: "As a result of an increasing active construction market, we are seeing the number of joint ventures increase as employers seek to divest risk across major programmes and blend specialist skills in the supply chain into one contract.
“This is clearly not an easy undertaking and our research shows it is leading to an increase in the number of disputes highlighting a need for some very careful focus around the selection, set up and management of the JV relationship."
The full report can be downloaded here
Webuild and Lane to build railway in Texas
Webuild, formerly known as Salini Impregilo, has announced a US$16bn agreement to build a high-speed railway between Dallas and Houston in Texas. The project has been described as the “final step” before financial closure for the company, which Webuild said was“foreseen in the coming months”.
Passengers using the 236-mile long railway, which was developed by Texas LLC, will travel in Japanese Tokaido Shinkansen bullet trains at 200mph, making one scheduled stop at Brazos Valley near Texas A&M University. This aims to shorten the total journey time between the two terminals from almost four hours to around 90 minutes, Texas LLC claims. The company hopes commercial operations will begin in 2026.
According to Webuild, the new line will aim to target an estimated 100,000 “super commuters” who travel between the two cities by car and plane every week. Webuild said it would cut greenhouse gas emissions by up to 101,000 tonnes per year.
This contract is an update on a preliminary design-build agreement signed with Texas Central LLC in 2019, valued at $14bn. The deal confirms the US as Webuild's single biggest market, comprising some 35% of the group’s total order backlog.
Around 17,000 new direct jobs will be created as a result of the project, as well as 20,000 indirect ones. U.S. suppliers from states aim to provide an estimated US$7.3bn of materials to construct the railway in conjunction with services provided by Italian suppliers.
Webuild and Lane will oversee the civil engineering works of the project. This includes the tracks themselves, the viaducts, and depot buildings.
Three facts about bullet trains
- The fastest commercially operated bullet train is not in Japan, but China. It is capable of reaching speeds of up to 268mph… with passengers onboard.
- Bullet trains are one of the safest ways to travel. Over 10bn passengers have been on board a bullet train and no-one has ever been killed on one.
- The “tunnel boom effect” is powerful enough to blow a freight train over. When a bullet train exits a tunnel at over 200mph, the resulting sonic boom effect is so strong, it could blow a normal freight train off its tracks.
Image: Texas Central LLC.