Controllable causes of claims and disputes key to relieving pressures on construction: report

Recent data has unveiled the scale of costs and delays in prominent engineering and construction projects both in Canada and worldwide, primarily stemming from recurrent and often foreseeable causes.

The sixth Annual CRUX Insight Report, Forewarned is Forearmed, examines claims and disputes within major construction projects around the world and reveals a remarkable prevalence of disputed costs and overruns. The study, released by HKA, a risk mitigation and dispute resolution consultancy, delves into more than 1,800 projects in 106 countries, which includes 99 projects in Canada. These projects collectively represent a capital expenditure value (CAPEX) of $2.247 trillion.

According to the report, in the global context, Canada seems to be performing relatively well, particularly when compared to the US.

The report noted that at 22 per cent of CAPEX, contentious costs in Canada are significantly lower than the global average (33.6 per cent). The average extension of time (EOT) claimed in Canada was 53.4 per cent of the planned project duration and the change in scope was the biggest cause for claims in Canada, affecting 32.7 per cent of projects.

Incorrect design, unforeseen physical conditions and workmanship deficiencies are also top causes for disputes in the country. Despite being the biggest cause for claims in the country, change in scope was still less of a source for disputes in Canada.

According to the report, design failures overall were more prevalent in Canada, yet cost and schedule overruns tended to be higher south of the border.

“Modern megaprojects are increasingly complex, but the cruel conundrum for the global construction and engineering industry is that these most common causes of claims and disputes are highly predictable and largely within the control of the contracting parties,” said Renny Borhan, partner and CEO of HKA. “The purpose of CRUX is to better inform all stakeholders so they can apply these lessons, raise the standard of risk management, and achieve better outcomes.”