For the fifth year running, the most common cause for disputes in North America was errors and/or omissions in the contract documents. For North America, more projects are using design-build and alternative project delivery methods. For these projects, the design process requires a more collaborative and interactive effort, which creates the need for all project participants to be diligent and responsive so that errors and/or omissions, along with delays, do not occur. Better communication and controls during the design process between all parties can be a powerful tool for minimizing the cost of errors and omissions.
Owner/contractor/subcontractor failing to understand and/or comply with its contractual obligation - the top cause globally - moved up from third to second position for North America. Failure to properly administer the contract had been one of the top three causes for the last few years for North America but did not appear in the top three this year.
The three most common methods of Alternative Dispute Resolution that were used during 2018 (the same as it has been the last two years) in North America were:
1. Party-to-party negotiation
2. Mediation
3. Arbitration
These results show that there continues to be a preference towards negotiated outcomes controlled by the parties involved in the dispute resolution process to avoid formal litigation proceedings. They are realizing that the further along a dispute progresses, the higher the value and cost of resolution will become. Expenses, like interest on the claim and the cost of litigation, can exceed the cost of the original claim itself. This demonstrates the value added when proactive dispute avoidance techniques are employed early in the construction process, which can aid in keeping participants away from formal claim proceedings altogether.
With so many large ongoing construction programs across all the sectors in North America, we expect to continue to see mega disputes. However, if sophisticated project participants continue to invest in early resolution techniques, we believe that the overall value of disputes will continue to decline.