Forewarned is Forearmed: How to change the behaviour driving claims and disputes in engineering and construction

For all their complexity, multiple stakeholders, and vast material and technological resources, the success or distress of major infrastructure and capital projects often comes down to human behaviour.

The drivers and implications were explored in a webinar hosted by HKA, and in partnership with Lexology, on November 28th that attracted over 700 registrations. Discussion ranged across the most prevalent and persistent triggers for claims and disputes on engineering and construction projects, as revealed in Forewarned is Forearmed – the Sixth Annual CRUX Insight Report by HKA.

From change in scope to design failures, and contract mismanagement to fundamental questions around contracting models and construction industry conservatism, the debate ranged widely, but coalesced around the need for behavioural change.

Heavy toll in time and money

Moderator Michael McIlwrath, who chairs the ICC Governing Body for Dispute Resolution Services, stressed the value of the report’s real-world data drawn from first-hand analysis of distressed projects. Summarising the findings, HKA Partner Dafydd Wyn Owen outlined the heavy toll of US$91 billion in claimed costs and time extensions stretching cumulatively beyond 875 years on the 1801 major projects analysed across 106 countries.

Scope change remained the top-ranking single causation factor globally, and in most regions.  These contracts had a total CAPEX value of some $2.247 trillion. But it was “increasingly evident that design factors are driving failure separately and in conjunction with scope change”. The triple whammy of CRUX’s three design-centric failures – incorrect, incomplete and late design information – affected more projects overall (44.8%) than scope change alone (38.8%).

Previous CRUX reports highlighted the pressing need for closer management of scope on complex projects and for greater upfront investment of time and resources pre-construction – “planning to succeed rather than rushing to fail”, as Wyn Owen put it. His dismay at the consistent pattern of the same mistakes repeated across projects, sectors and regions was shared, and addressed, by the panel’s experts.

“[It’s] increasingly evident that design factors are driving failure separately and in conjunction with scope change.”

Michael McIlwrath, Chair, ICC Governing Body for Dispute Resolution Services

Commercial, planning and project controls specialist John Nitties, who provided the panel’s employer perspective, stressed the need for a much greater focus on collaborative behaviours. Early contractor involvement (ECI), co-location of teams, and open-book accounting with financial incentives were alternative approaches that could engender solution-focussed teamworking and collective success. Spending more time upfront to mature designs to ensure everyone was clear on scope would also serve the employer’s objective of certainty of delivery.

As projects increase in scale and complexity, they risk being disrupted by a cycle of changing scope. Caroline Pope, Partner at Addleshaw Goddard, bemoaned employers’ failure to take full responsibility for such changes. Many infrastructure project teams were set up to fail, Wyn Owen added, due to their pre-ordained commitment, usually political, to a schedule. Promoters needed to learn “how you go slow, to go fast”.

Design was another controllable factor, Pope added. Shortcomings in the design process had ramifications through the supply chain as tier 2 and 3 contractors assume enormous design responsibility. The result in her experience was serious interface problems – a factor reflected in the 19.4% of projects affected by mismanagement of contractors, suppliers and their interfaces, according to CRUX.

Again, ECI should be part of the remedy. Nitties pointed out how designs influenced by the supply chain can enhance constructability and prompt alternative methods and materials that save time and/or money.

By no means a new solution, ECI still requires a philosophical leap to overcome industry obstacles. The “inherent distrust between employers and contractors” was cited by Wyn Owen, while Pope pointed to “the complete disconnect between tendering and delivery teams”. Both helped drive questionable tendering practices and an adversarial claims culture on site.

Resistance to change

Reflecting on these long-entrenched attitudes, HKA Partner Michelle Metz – a scheduling and delay expert – related how behaviours had changed little in 30 years. She cited a suite of pre-construction advisory services developed 20 years ago by HKA based on lessons learnt. Contractors and clients failed to recognise the need, but continued to seek assistance after claims and disputes arose.

Nitties agreed the cultural and behavioural shift need to be combined with the right contracting model and technical skills. “Not an easy task,” this demanded hard, sustained work from bidding and selection of delivery partners through ECI to project completion.

Employers’ engagement with the industry should happen before the tender stage, Metz emphasised. Less experienced developers had most to gain from tapping into contractors’ know-how. “Once you’ve set a timeline and budget, it’s too late and a project is set up to fail.”

On most successful infrastructure projects around the world market soundings had been made over 18-24 months before, during the business case phase, Wyn Owen added. At this point, clients had maximum leverage, and could absorb information to inform scheduling and budgeting. The dialogue was also in contractors’ interest, as it enhanced their chances of participating in a successful project.

Employers need to select a contracting model with the incentives, and metrics, to drive the right behaviours and outcomes, Nitties stressed – from performance against programme and health and safety to community engagement and the bottom line.

“Once you’ve set a timeline and budget, it’s too late and a project is set up to fail.”

Michelle Metz, Partner, Delay Expert, HKA

Alliancing frameworks promoted partnering and continuity of work for contractors. However, the seemingly ideal model had been subverted in Australia and was now discredited. Wyn Owen also warned of lazily adopting models favoured by other employers, when a more conventional lump-sum or design-and-build arrangement might be most appropriate to the project in question.

People and skills

Even where contractual guiderails incentivise the right behaviours, performance will falter if teams lack the necessary people, be it skills or numbers. CRUX found that 13.7% of claims and disputes globally stemmed from a low level of skill or experience, while worker shortages disrupted 9%.

In addition, workmanship deficiencies were a factor on 17.5% of projects (rising to 20-25% in the Americas and Europe). Competency gaps also contribute to other causes of claims and disputes. Pope cited the 19.5% of projects where failures in contract management or administration triggered conflict.

Human resources are another systemic challenge for an industry so far better able to describe solutions than enact them.

Women’s participation in the construction workforce may be the most glaring example. Metz observed that, over her 32-year career, the female proportion in the UK had risen from 13% to just 15% today.

While the main contractors are now selling construction careers in schools, it is a struggle to dispel the industry’s negative image, compared with more alluring sectors. As well as greater investment in apprenticeships and internal training programmes, companies should also seek other talent, and especially women, from different, non-technical educational backgrounds who offered other valuable, communication and tech skills, said Metz. “The industry is missing a trick.”

Young talented people are unlikely to find the prospect of six-day weeks and outdoor work in cold or hot conditions attractive. The construction industry needed to look to other sectors to find solutions, said Wyn Owen. More conventional business hours would make the industry more amenable to women. He cited the Project 5 trial of a five-day week on a Sydney hospital redevelopment. It was completed on time and on budget in 2022, and saw improved job satisfaction, cohesion and productivity. A study concluded that the culture change would strengthen the Australian construction industry’s sustainability and support female participation.[1]

Challenged to predict what CRUX will report in a year’s time, panellists hoped to see evidence of increased collaboration, improved contract administration and faster technology adoption. However, many claims over COVID and price escalation were coming to a head, and an uptick in technology-centred disputes was also predicted.

Doubts remain over the industry’s acceptance of lessons learnt, especially on upfront investment. There has been a greater, if limited, take-up of HKA’s revised offering to set up project process and procedures, and its advisory services have been retained on giga-projects in the hot Middle East market. However, tough economic conditions generally risk reinforcing, rather than changing, short-term thinking and adversarial behaviour in the industry.


Download the CRUX Insight Report, and explore the unmatched dataset through the free-to-use CRUX Interactive Dashboard.

This publication presents the views, thoughts or opinions of the author and not necessarily those of HKA. Whilst we take every care to ensure the accuracy of this information at the time of publication, the content is not intended to deal with all aspects of the subject referred to, should not be relied upon and does not constitute advice of any kind. This publication is protected by copyright © 2024 HKA Global Ltd.


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