To understand claims and dispute causation better in the construction and engineering sector, and the likely impact of digitalisation, our team analysed data and expert opinion on 257 projects, together valued at more than $400bn, where HKA provided claims consulting and dispute resolution services.
We identified numerous causes, and the interrelationships between them, which we believe more truly reflects the constraints on parties and projects.
The top ten causes of disputes will surprise few. They are, in order:
- Slow progress
- Variations
- Extensions of time
- Late availability of information/design
- Change of scope
- Managing – time
- Different interpretations of the contract provisions
- Adversarial culture
- Design errors/buildability
- Lack of communication
More interesting, however, is that our research showed an average of 13 interrelated causation factors per project, which debunks any attempt to reduce dispute causation to a few headline factors. There are primary, secondary, even tertiary causes, and they shift depending on which party in the dispute – owner, contractor, designer – is examined. Put simply, it’s complicated.
Looking at the top ten causes, however, we believe that digitalisation in the industry will have an ameliorative effect on disputes as "information liquidity" extends through supply chains. By information liquidity, we mean the ease with which records, and the data they contain, can be converted into knowledge.
For instance, a major challenge in dispute resolution is trying to establish what the facts were on site.
Retrieving data has traditionally relied on paper-based site diaries, which site agents can neglect to update, or can fill with inappropriate information.
Where there is ambiguity around the facts, parties entrench. The advent of relatively simple smartphone apps, complemented by photography, which can export data in a structured format, allows the facts to be established much faster, and with less expense.
So, rather than fight over the facts, parties can progress more efficiently to negotiating a settlement.
The savings in time and cost can be dramatic. Recently we assisted with a delay claim and used automation techniques to extract progress data and plot S-curves in about four hours, whereas a manual process might have taken three weeks.
Extrapolated, this type of time and cost saving supports the claim that the forecasted value-add of digitalisation is in the trillions of dollars.
The use of 3D models in the industry at large, and within dispute resolution, will only increase over time as BIM continues to gain traction globally and becomes business as usual.
As awareness of the value of information models grows, we expect them to be requested and their potential to connect with non-graphical data to be evaluated as a matter of course. This will be reinforced as the dispute resolution community shifts focus to data rather than documents.
With both industry and advisors digitally maturing, it is not unrealistic to expect 70% to 80% of future contentious commissions to have models available within the next five years, reversing the current position.
Note: We do not hold that the industry in its entirety must digitalise all at once. Pockets of change spark more pockets of change. Information requirements that include machine-readable formats for data interchange will result in a trickle-down effect, improving data flow throughout the supply chain.
This process will accelerate as parties recognise the value of data flow, and such provisions become standard inclusions in contracts.
Image: Photograph shows the entrance to the London Court of International Arbitration, at 70 Fleet Street, London (Public domain)
- Charlie Woodley is director and CRUX programme lead at HKA, a consulting, expert and advisory firm. A longer version of this article, with a link to the HKA report, is published in the current edition of Construction Research & Innovation, and can be accessed free of charge by GCR readers by clicking here, until 24 June 2019.
