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Construction Industry Disputes Rising

Construction industry disputes…. “those were the days”… or were they?

The Kenzie Group offer some analysis on how the construction sector is dealing with the pivotal issue of construction industry disputes following the recent publication of the 2015 National Construction Contracts and Law Survey…

Let’s not fall out…..

First run in 2012 the National Construction Contracts and Law Survey, conducted by RIBA Enterprises’ National Building Specification (NBS) study set the standards as the most wide ranging independent review of contractual and legal issues throughout the construction industry based on responses from contractors, clients, consultants and advisors.

Following the success of the 2012 study, the survey was again carried out in 2015 with the help of the membership of more than 20 industry bodies, and more than 1,000 clients, contractors and consultants all taking part, making the 2015 survey the largest independent survey of its type.

Recent figures released the 2015 survey show an increasing trend in terms of the number of construction industry disputes occurring haven risen over the past two years.

Almost 44% of the respondents said they had been involved in a contract that went into dispute during the past 12 months, a significant increase from 2012 – when the last survey was carried out – when only 30% of respondents had experienced a contract dispute.

The survey found that 24% of respondents had experienced one construction industry dispute in the past 12 months, 10% two disputes, 4% three disputes, 1% four disputes, and 5% had experienced five or more disputes.

Although these incremental figures must be tempered by the increase in the construction industry’s output in 2012-15 which would naturally account for some of the increase, this pick-up is unlikely to fully account for the rise in disputes.

Graph 1

Joseph Bond Managing Director of the Kenzie Group believes that the reported trend reflects the reality of the sector at present “From my perspective, and from other industry professionals that I spoke with, everyone’s very busy”.

Looking more closely at the surveys statistics it appears that time and money remain the primary cause of construction industry disputes, as they were in 2012, with extension of time being the most common issue among those who had been in disputes, followed by valuations of the final account, and valuation of variations.

 graph 2

 What were the main issues in dispute in the past 12 months?

The report also revealed the damaging effects that disputes can have on projects. Where a construction industry dispute was in progress, almost one in five (19%) were either stopped or suspended due to the dispute.

It’s also clear from the survey that many disputes involve large sums of money and have a significant effect on the construction process. Half of the disputes reported had a value greater than £250,000, while 13% had a value in excess of £5m.

While disputes look to be on the rise, collaboration it would seem is not. Nearly half of all respondents did not adopt any collaborative techniques in 2012, and only 10% did so for all projects. That said, the survey finds the profession embracing collaboration in principle, with respondents agreeing that the core purpose (the delivery of clients’ objectives) is better achieved through collaborative working methods.

It would seem that the industries preferred use of contract type has seen some significant changes since 2012, with a rise in Bespoke contract use despite the inherent risks commonly associated with them.

Overall the survey provides a fascinating insight into the current issues and topics in construction at present, and can be found via the following link https://www.thenbs.com/pdfs/nbs-contracts-and-law-report-2015.pdf

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