What has Gone Wrong with Construction Disputes: an Engineer's View

Abstract

The likelihood of disputes arising in the course of international construction contracts has increased in recent years. Indeed, the engineering industry has fallen into disrepute with many employers and international financing institutions (‘IFIs’) and it has, in some quarters, laid itself open to the accusation of being incapable of managing its affairs. The problem is not peculiar to engineering or to one country. Taking the figures of the American Arbitration Association as an example, the cases filed in 1988 of which those related to construction formed only a part, showed an all-time high of over 54,000 disputes, continuing a five-year growth pattern. In Australia, it was decided that the situation there warranted special study and an eight-man team, drawn from government and industry, visited sixteen countries and held meetings with some ninety organisations and firms in an effort to learn from the experience of others. The outcome was a hundred page report entitled ‘Strategies for the Reduction of Claims and Disputes in the Construction Industry’ issued in 1988. Not so many years ago, it was relatively rare for discussion of a claim to reach such an impasse that one of the parties to the Contract asked for an Engineer's decision under Clause 67.2 Difficult claims tended to be put on one side by tacit agreement for further discussion at the end of the Contract when they could be considered in conjunction with any other claims still outstanding and included in an overall settlement. In the few cases where an Engineer's decision was asked for, the decision was almost invariably accepted by both parties. Even where it was not and the requirement to proceed to arbitration was stated, the dissenting party generally made no immediate move to commence arbitration. The usual practice was to rely, perhaps unwisely in the light …