The Global Construction Disputes Report 2019 (by Arcadis) confirms that failure to understand or comply with the contract is the number one cause of disputes globally.
Professor Renato Nazzini, in his guest foreword says:
It would be tempting to look for solutions in ever more complex, more detailed contractual documents purporting to foresee every risk and address all possible issues. Experience shows, however, that such an approach is both unrealistic and in itself a source of disputes. Complexity and excessive detail all too often camouflage gaps and omissions and prove impossible for employers, engineers, project managers, contractors and sub-contractors to apply and administer. A contract should be, first and foremost, a document that speaks, clearly and fairly, to those actually involved in the project on a day-to-day basis.
The solutions proposed to avoid disputes (whose global average value was US$33m*) include:
- clear and fair contracts
- contractual processes to manage risks
- training on contracts
- contractual dispute avoidance processes
What should you do?
You should ask for and expect clear and fair contracts. You should get a second pair of eyes to check your contracts are free of errors and omissions (the second global cause of disputes).
As construction projects to be inherently risky, you should agree contract mechanisms which clearly manage risk and change during the project.
Once signed you need to comply with the contract to the letter so you should ensure your staff are trained to understand your contract, use those change and risk mechanisms and apply the procedures to help avoid or resolve disputes.
If you need help with complex, detailed or impenetrable contracts, I can review them or provide training so you can comply.
Note: the data is based on cases referred to Arcadis so is not representative of all disputes.