The Middle East has become the world’s costliest market for construction disputes, with fallouts between contractors and clients involving bigger cases than anywhere else in the world, according to construction consultancy Arcadis.
The firm said that the average value of disputes in the Middle East increased by 7 per cent over the past 12 months to US$82 million (Dh301.2m), putting it ahead of Asia, where the average dispute cost $67m. By comparison, the average cost of disputes in the UK, Europe and North America was just $25m.
Craig Beeson, the head of contract solutions at Arcadis Middle East, said: “In an economic environment impacted by the oil price, the market continued to see a restriction in decision-making within the industry.
“This drove a lack of appropriate delegation to project management consultants and client representatives, thereby prolonging critical commercial decisions and generating cash flow issues related to instructed variations."
The report added that some clients are looking to spread their own cash obligations by prolonging payments owed to contractors. Also, Arcadis argued that the size and complexity of many of the large-scale projects carried out in the region is not suited to the traditional contracting procurement strategy used.
The top three causes of contract disputes are a failure to properly administer a contract, poorly-drafted or incomplete contracts or unsubstantiated claims, or incomplete design information or requirements from clients. The average dispute in the Middle East took 15.2 months to resolve, which is close to the global average of 15.5 months. Disputes in Asia take the longest time to resolve (19.5 months), while those in the UK are resolved most quickly (10.5 months).
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