Design-related issues edged closer to scope changes as the primary driver of worldwide project claims and disputes in the past year, consultant HKA reports.
HKA performed its annual analysis, called the CRUX Report, on 1,801 building and infrastructure projects in 106 nations where the company served as a consultant on a claim or dispute—part of its risk mitigation and dispute resolution services—or was as an expert witness.
While conditions and causes vary depending on where work is performed, there are common patterns, says Renny Borhan, HKA's chief executive. For example, projects planned to last 24 months regularly finish in 40, and claims costs often equal a third of a project's planned budget, HKA reports.
Political issues and wars, notes Toby Hunt, one of the authors, indirectly affect projects by distorting other risks—from "interest rates and public investment to labor laws and immigration controls."
For example, the war in Ukraine and related trade sanctions on Russia increased the premium on energy security. "The tensions are most acute in the sphere of energy and the environment," Hunt adds.
In 2023, HKA also found, there were a growing number of claims around labor and material price inflation traceable to the COVID-19 pandemic, says Hunt. There were also supply chain issues related to the war in Ukraine, he says.
The factors driving claims and disputes differ depending on where the work is performed. HKA breaks down its report into sections for the Americas, Europe, Africa, the Middle East, Asia and Oceana.
U.S. v. Non-U.S. Dispute Causes
While changes in scope were the biggest cause for claims in the U.S., affecting 26.3% of projects, scope changes plagued 42.7% of projects in the rest of the world, reports HKA.
In the U.S., the other leading causes of disputes were workmanship deficiencies (26.3%), incorrect designs (19.1%) and poor management of subcontractors or suppliers (19.8%).
But design issues and scope changes are universal problems.
Though scope changes again topped the global ranking of dispute and claims causes, HKA's authors wrote, their analysis "makes it increasingly evident how design failures drive project distress directly and in conjunction with changing scope."
All three types of design shortcomings: incorrect, late or incomplete, ranked in the top five claims and dispute causes.
HKA calls the problems a "design triple whammy" that together "afflict" a greater proportion (44.8%) of projects than scope changes alone (38.8%).
Last year’s CRUX report called for closer, constant management of scope change and greater investment of time and resources in preconstruction planning. The idea was to develop designs to a more mature level before starting construction.
Underdeveloped design more than negated any apparent gains in the early stages of fast-tracked programs, HKA reports.
"Construction’s cruel conundrum," they report authors wrote, "is that the level of design maturity is more controllable than many other triggers for claims and disputes. While allowing for site-specific quirks and contingencies where necessary, designs can be largely complete and construction-ready."