Construction disputes in the Middle East surged by 38 per cent in 2020 due to several factors, of which the biggest one was Covid-19, which created significant impacts including restricted movement of labour, supply chain delays and even suspension of projects in major GCC economies, said a report.
 
Covid-19 created significant impacts including restricted movement of labour, additional health and safety measures, supply chain delays and challenges across the region, and suspension of projects in areas such as Saudi Arabia and Kuwait, according to Arcadis, a leading global design and consultancy firm for natural and built assets. 
 
This year’s Arcadis report focuses on the best way to combat construction project issues: preparation. With the right tools in place, organisations can prevent issues from becoming full-blown construction disputes. 
 
Secondly, Arabtec’s insolvency affected many contracted subcontractors and suppliers. Thirdly, the progression of Saudi Arabia's giga projects, representing a significant proportion of construction in the Middle East, could have contributed to a higher average value, stated Arcadis in its report. 
 
Another key attribute was a greater interest in litigation and arbitration funding. It was noted in recent years that low liquidity in the market made clients reluctant to pursue disputes, even when they had strong entitlement in their case. Now, clients are availing themselves to new funding and pursuing disputes, the report added.
 
According to Arcadis Global Construction Disputes Report, most of the 2020 disputes came from building projects (including education, healthcare, retail, commercial and real estate developments), replacing infrastructure atop the list. 
 
The change could be because many building projects, such as those related to Expo 2020 or Saudi Arabia's giga projects, reached their final target dates in 2020. 
 
The report pointed out that the average value of the disputes in the region was $86 million in 2020. 
 
Despite the increase in the average value of the disputes, survey respondents reported the average time taken for resolution decreased from 17 months in 2019 to 15.5 months in 2020. 
 
It could be that project participants are embracing collaboration to enable successful dispute resolution, a key topic of our previous report. 
 
Another trend from last year that could also have played a role, was that past respondents noted they were less likely to take a wait-and-see approach to resolution, especially when they believe they have a strong case, or because they would prefer to resolve disputes to maintain cashflow. 
 
On the future outlook, Arcadis said the uncertainty surrounding Covid-19 will likely affect projects throughout 2021.
 
Risks across the supply chain need to be monitored and managed by all stakeholders, and collaboration between key participants will factor in early resolution efforts and reducing disputes that stem from the continued uncertainty. 
 
The leading global design and consultancy group said the recent removal of the blockade on Qatar paves the way for dormant supply chains to reawaken, possibly reducing project costs and creating healthy competition within the market. 
 
It could also reduce the number of disputes arising from supply chain restrictions, it added.
 
On the UAE scenario, Arcadis said the fallout from the Arabtec insolvency could determine how the industry moves forward in the UAE. There are already signs of a move away from traditional methods. 
Banks are more reluctant to issue unconditional bonds, and contractors are unwilling to accept poor payment structures or late payments. 
 
Diverting from heavily amended forms of contract to reduce the imbalance of risk, as well as a change in mindset from traditional aspects of contracting, may well improve cashflow throughout all levels of the supply chain.
 
Reverting to a standard template like those from FIDIC or NEC may make it easier for all parties to understand and comply with contractual obligations and help deal with the region’s top dispute cause, stated Arcadis in its report.
 
When using these standard forms, participants must ensure that any subsequent amendments do not
inadvertently create an imbalance of the shared risks. Otherwise, the common understanding of obligations may be jeopardized, it added.
 
The top consultancy firm also cautioned against the stockpiling of claims for the end of the process. 
Implementing a roadmap for early resolution of issues as they occur can prevent prolonged disputes. For the region to move away from the top dispute causes, project participants need appropriately experienced staff to administer their contracts and protect their interests, it stated. 
 
Early warnings and timely notifications, followed by timely interim and final submissions of complete, substantiated claims, will be essential to mapping early resolutions. Additionally, engineers must remain
impartial and fulfill their roles as quasiarbitrators to enable fair and reasonable outcomes, said Arcadis in its report.
 
Early identification of issues via the contractual mechanisms should not be viewed as a means to damage commercial relationships or hinder project delivery. On the contrary, such an approach supports early resolution and helps to prevent the escalation of matters into formal – and often expensive – disputes, it added.
 
On the global scenario, Arcadis said the average value of disputes from 2019 to 2020 increased significantly across the globe, while the average length of disputes continued to drop. 
 
The consensus was that the overall number of disputes remained relatively the same, it added.-TradeArabia News Service