Risk And Opportunity For New Zealand's Construction Sector As Disputes Climb

Construction disputes are tipped to rise over the next two years according to findings from Russell McVeagh's 'Building Up New Zealand's Construction Industry' report released today. Out of those surveyed, 61% of construction industry respondents believe construction disputes will continue to increase, which follows two years of increases.

Construction disputes specialist Michael Taylor says there are also new opportunities for the sector, including planned substantial investment in public infrastructure, with construction industry participants generally believing the industry had risen to the challenges faced in 2020.

"Despite dramatic shifts in the industry's operating environment, including the launch of the Construction Sector Accord and the impact of COVID-19, little appears to have changed in terms of the drivers of project delays and construction disputes over the last two years. Employer variations remain the most common cause of delay to construction projects and poor-quality documentation is still considered a key driver," he says.

Litigator, arbitrator and adjudicator Polly Pope says, "With the high costs of construction projects, which are also expected to continue increasing, coupled with more disputes, we encourage all industry participants to pay close attention to areas such as risk allocation and contractual terms to ensure there is clarity from all parties at the outset of a project."

Property & Construction partner Ed Crook says that with infrastructure and construction central to stimulating New Zealand's economic recovery from COVID-19, contracts for major projects are a particularly high stakes environment.

"They are frequently for works of a high value, undertaken over a long term and in a dynamic environment where many unknown events may be encountered. It is essential that everyone involved in the contract understands it," he says.

Issues with the standard form contracts in use in the industry, and the complications caused by the use of multiple tailored or "bespoke" contractual clauses were seen as creating unwarranted complexity and increasing the risk of parties not understanding what they were agreeing to.

Mr Taylor says, "If issues do arise, there are multiple options available to consider for resolution, and our findings show that mediation remains popular, as one of the fastest, cheapest and most flexible means of resolving disputes within the construction industry. Our insights report includes a close up on construction mediations and how to get the most from them, based on data from New Zealand's leading commercial mediators."

"The more construction sector participants arm themselves with knowledge of risk points and how to resolve issues when they do happen, the better prepared the sector will be for facing the challenges that lie ahead," concludes Ms Pope.

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