HKA publishes construction and engineering industry insight report
Construction and engineering industry consultancy HKA has published the 2019 “Crux Insight” report, which analyzes factors for global claims and dispute causation. The report identified more than 4,000 causes for dispute on 700 projects in 72 countries, with a total value of $1.2 trillion. All projects studied were those on which HKA provided claims consulting.
Per project, the report shows, there was an average of 5.8 underlying causes for dispute. This shows that, to avoid or reduce claims, organizations’ focus should not be on an individual cause, but on a variety of factors, many of which are outlined in the report.
“We know from this year's report that lessons are still not being learned in the industry,” Simon Moon, a partner and COO at HKA, said. “The consequences of delay, disruption, lost productivity, cost overrun and poor quality are not only significant for clients but for industry and economies at large. "All decision-makers on projects can benefit from a clearer understanding of the recurring causes of claims and disputes. We would encourage governments, policy-makers, influencers, and professional bodies to engage with our Crux research findings and its implications for the engineering and construction industry.”
Far and away the number-one overall cause for dispute is a change in project scope. This is followed by poorly drafted contract requirements, contract management failure, and the late issuing of design information. Level of skill and experience (or a lack thereof) rounds out the top five.
The report also examines various industries and their respective values in terms of total project capital expenditure (Capex). Oil and gas industry projects are valued at nearly equal to every other analyzed industry combined – at more than $600 billion, or an average of about $1.8 billion per project. This is followed by infrastructure; defense, aerospace, and military; power and utilities; buildings; industrial; and other projects.
Methods in which claims can be reduced are also outlined within the Crux report. These include earlier and greater engagement with the market; good, transparent communication between all parties involved in a project; and increasing digitalization to allow for a faster flow of data. Impartial engineering audits, the report states, could also ensure the strength of project design, while “prompt intervention” can help to handle change in projects, as well as resolve claims that do arise as cost-efficiently as possible. In all, claims reduction comes down to overall readiness of those involved in projects.
“If the [engineering and construction] industry is to break this cycle of repetitive disruption, delay, and overblown costs, employers and contractors must better understand, prepare for, and manage the complexity of their projects,” the report concludes.
