2 June 2014 | Will Green
The news that the average cost of a dispute in the construction industry has risen to $32.1 million is sobering enough, but procurement professionals will have their heads in their hands when they learn the top cause is failure to administer contracts properly.
Contract managers may feel a sense of shame that mistakes in their field have resulted in repercussions costing millions of pounds, and will quite naturally be searching for reasons why.
Report authors ARCADIS may be able to help in this regard. “The most common cause of dispute is now directly focusing on the contract administrator,” said the report. “In practice, however, it can be seen that it is not only employers but also contractors who fail to carry out their roles under the contract.”
The report said “there has not been any fundamental shift in contract forms or procurement strategies in the year to change the way contracts should be administered”.
Rather, ARCADIS suggests it is the fast pace of construction projects, multiple levels of contractors and subcontractors, poorly drafted documents, a shortage of professional expertise, and cultural differences that are behind the problem.
But this doesn’t get buyers completely off the hook. For surely it is part of the job to take into account changing circumstances and all the factors mentioned above when drafting and managing contracts? Perhaps a “fundamental shift” in procurement strategies is exactly what should’ve taken place to take account of the changing landscape. Contractors eager for cash flow may well have been too hasty in signing deals without properly understanding their commitments, but buyers don’t have the same excuse.