Edward Poon | HKA
Construction has long been known as a litigious industry. The fundamental challenges of multifaceted projects regularly lead to claims and disputes among owners, developers, general contractors, subcontractors, and other stakeholders. As the industry evolves with the growing complexities of modern construction, increased specialization, and varied project delivery methods, the threat of claims and disputes only intensifies.
Understanding how key driving forces spur disputes in the current construction landscape is crucial for prioritizing effective strategies to mitigate risks and resolve issues that may arise.
Primary drivers of construction disputes
High-level factors fueling construction claims and disputes include:
More sophisticated projects
Modern construction projects are no longer just about bricks and mortar. They are intricate puzzles that integrate advanced systems and incorporate cutting-edge technology. Think of construction like assembling a Swiss watch. Every tiny gear must work perfectly with the others, or the whole thing falls apart.
Today, projects large and small involve a web of interconnected systems spanning structural, mechanical, electrical, plumbing, and smart technologies. These sophisticated systems must not only function flawlessly on their own but also integrate seamlessly with one another. At the same time, the industry’s growing emphasis on sustainability, safety, and compliance adds additional layers necessary to meet regulatory requirements.
Operating in this type of framework means even the slightest ambiguity or omission related to project or integration requirements, responsibilities, or the cascading impacts of change orders can easily lead to disputes, delays, and cost overruns.
Specialized and siloed work
As projects become increasingly complex, they require input from highly specialized experts, such as building information modeling (BIM) specialists, sustainability consultants, software engineers, and others. The downside? These experts typically work in silos, focusing exclusively on their part of the puzzle without always fully understanding how it fits into the project’s overall scheme.
Design consultants and subcontractors often become so specialized that they lose sight of the project as a whole. This narrow focus can lead to poor coordination when all the pieces come together. For example, a single change in the electrical design might inadvertently clash with the HVAC system, resulting in delays, rework, and disputes.
Even with state-of-the-art technology, information silos persist. If one party fails to share critical information, it can lead to costly mistakes. The same goes for miscommunication or unclear roles. Contributing to potential conflict is the fact that different disciplines may have conflicting priorities or interpretations of project requirements, leading to coordination issues and errors. For stakeholders, these coordination challenges are a breeding ground for disputes.
Evolution of delivery methods and associated risks
Against this backdrop, construction project delivery is evolving to enhance collaboration, mitigate risks, control costs, and expedite project completion. While there are many benefits, each approach simultaneously carries its own set of risks.
The traditional design-bid-build model keeps the design, bidding, and building stages of a project completely separate, creating pitfalls that are increasingly evident. One of the most significant challenges of this approach is that errors in design are typically not caught until construction begins, sparking disputes over responsibility and budget overages. Progressive improvements to project delivery methods and tools are ongoing to address respective shortfalls.
As project delivery evolves, new approaches aim to streamline construction and reduce conflict. Yet, each carries distinct vulnerabilities that can lead to disputes:
- Design-build and construction manager at risk (CMAR): Design-build projects consolidate work under one dual entity. Similarly, the CMAR method relies on a single partner to oversee and coordinate all work from start to finish. These approaches improve collaboration; however, they blur the lines of responsibility. Who is liable for design errors or cost overruns? The answer is not always clear.
- Lean construction and integrated project delivery (IPD): Lean construction and IPD methodologies are designed to increase efficiency, bringing owners, designers, and builders together as a true integrated team and taking collaboration to the next level. These methods necessitate a cultural shift that diverges from traditional working practices. If trust breaks down or communication falters, disputes can still arise.
- BIM: Technology-driven methods face novel risks. BIM, which uses virtual building models to align project stakeholders, can, by nature, enhance coordination, but only if everyone knows how to use the system effectively. Otherwise, risks that appear to be managed will still lurk under the radar.
- Modular construction: Modular construction, where building modules are fabricated off-site and assembled on-site, introduces additional risks associated with quality control, coordination errors, and global supply chain complexities.
Delivery method risk trends: Insights from CRUX
The real-world data from HKA’s 2025 CRUX Insight[1] report shows how risks are trending across different project types at a more granular level. The following chart highlights the primary and secondary causes of claims or disputes around the world across four widely used delivery methods: design-build; construction management; engineering, procurement, and construction (EPC), whereby one contractor is responsible for all of these functions; and lump sum, which provides a contractor with a fixed fee for the entire project.
While each of these project delivery methods shares “Change in scope” as the top cause of claims or disputes, this is not the case for all delivery methods in the construction ecosystem. In these and other models, additional leading causes vary significantly, underscoring how different issues drive risk in different project structures.
Although the path to project delivery may vary, disputes over costs, schedules, and responsibilities remain a reality. This highlights the importance of selecting the right method for the project and proactively managing the associated risks.
The complexity of modern construction claims
Due to the advanced nature of modern building techniques, construction disputes are often extremely technical, involving multiple parties and legal interpretations. Getting to the root cause of issues can be challenging, especially in collaborative delivery methods where responsibilities are shared.
One example is a high-stakes design-build project that became an arbitration nightmare when a critical building system’s performance criteria became a legal battleground. With a narrow focus, the builder’s specialized consultant interpreted the project-specific output specifications (PSOS) in a way that violated the building code’s explicit requirements. This situation devolved into a tug-of-war over approved designs and liability allocation that went on for years before the proper experts were brought in to resolve the case.
Another example is the case of a rehabilitation project for a major municipal utility’s infrastructure building, where the misinterpretation or omission of contract requirements for temporary works culminated in a disastrous failure that caused millions of dollars in damages to the surrounding neighborhood. The engineering consultant, contractor, subcontractor, and owner each assumed that the other party had taken the necessary criteria or conditions into consideration; however, ultimately, everyone overlooked them because no one was focused on the project from a holistic systems perspective.
Unraveling these claims in litigation or arbitration can be time-consuming and expensive, exacerbating delays and affecting everyone’s bottom line.
The role of forensic engineering in dispute resolution
The volume, high-dollar value, and complexity of construction claims have led to greater industry-wide recognition of the critical role forensic engineers can play in resolving disputes related to structural, material, or system failures. Experienced forensic engineers combine specialized expertise, system-level understanding of the building process, evidence-based investigative methods, and comprehensive testing and analysis to separate speculation from fact. Their diverse skill set enables them to provide objective evidence and conclusively identify the root cause of disputes with a uniquely thorough perspective.
In a similar vein, forensic engineering expert witnesses are being called on more frequently to conduct dispute investigations and present impartial, defensible findings in court. By making the scientific facts indisputable, they are one of the most productive resources used today to catalyze fair dispute resolution.
Prevention and preparation: Managing risk proactively
The best way to handle disputes is to prevent them from arising in the first place. Mistakes happen, but disputes can be prevented. Tuning into the overarching trends that impact disputes sets the stage for a closer examination of risks and mitigation measures, such as clear collaboration methods, well-defined contracts, mechanisms for identifying trouble early, and robust change management protocols.
Still, risk management strategies may not avert every claim. When they do arise, knowing how to fast-track dispute resolution with the right resources is equally valuable. In today’s high-stakes construction environment, understanding the systemic drivers of disputes is crucial for managing risk and achieving successful outcomes. The key is to plan ahead and always consider the big picture.
When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.