Various factors may push capital and infrastructure projects over budget and programme, and they multiply with scale, complexity, and heightened unpredictability. But we know from investigating and resolving claims and disputes around the world that certain problems persist, causing disproportionate loss of time and money.
HKA’s integrated research programme, CRUX, analyses and quantifies these causes and effects. More than 1600 projects across 100 countries were examined for the Fifth Annual CRUX Insight Report. The combined capital expenditure on these projects was $2.1 trillion, and the toll colossal. On average, sums in dispute exceeded 35 per cent and schedules faced being prolonged by more than 68 per cent.
CRUX reveals regional variations in impacts as well as patterns of causation. In Europe the costs of conflict rose to a staggering 38.3 per cent of the typical project’s committed CAPEX at the time of our investigation. And design error trumps the otherwise universally dominant driver of claims and disputes – change of scope.
The UK market also suffers from this design-centric malaise. Drilling down into the CRUX dataset reveals its prevalence in different segments. Our ongoing analysis covering 234 UK projects for construction of buildings shows that a third (33.9 per cent) had claims or disputes around incorrect design – more than any other cause. By category, the proportions are 30 per cent for residential projects, 35 per cent for commercial, rising to 40 per cent in healthcare.
Design errors dominated in other sectors too, including industrial and manufacturing, and in highways, where 31 per cent of conflicts sprang from this cause. For rail and transit, the share was 13 per cent, but other design-centric failures were more evident here. Incompleteness and lateness of the design each affected a third of distressed projects (33 per cent); both causes were dwarfed only by change in scope, involving 60 per cent of projects.
Making more time for design
Rising complexity (and its design ramifications) should be cause for caution, not conflict, with more time invested up-front. Design defects often reflect designs’ immaturity. Amid pressure to get projects underway and squeeze schedules, there is insufficient time to produce designs that have been adequately coordinated, appropriately reviewed and are free from error. In our experiences, this problem is prevalent across all disciplines, from architecture to civil and structural engineering design, and MEP to fire engineering. Often a shortcoming in one area of design manifests as shortcomings in others, construction projects being the complex entities that they are. Value engineering and design development can be key reasons for design being considered ‘defective’: these ultimately result in delays and cost to the project if handled poorly.
The UK’s building industry also has an evident (and growing) problem with execution. Workmanship deficiencies ranked second as a cause of claims and disputes for building projects overall. In the residential market this was the top factor (impacting 37 per cent of projects) and, in healthcare, on a par with defective design (40 per cent).
Projects launched since 2020 are more likely to be impacted by poor-quality workmanship. Rather than the many disruptive effects of the pandemic, acute and worsening skills shortages are the main underlying cause according to our latest CRUX report.
For a list of the sources use in this article, please contact the editor.
Helen Collie, Partner at HKA is a structural engineer with over fifteen years of industry experience. Nasir Khan, Principal, is an engineer, chartered quantity surveyor, chartered procurement specialist, legally qualified and an expert in claims advisory and dispute resolution. HKA is a leading global consultancy in risk mitigation and dispute resolution, using its multi-disciplinary expertise to provide a comprehensive set of specialist services. Headquartered in the UK, HKA brings a proud record of excellent service and high achievement to bear on today’s challenges.
As well as more than 500 expert witnesses, HKA now has in excess of 500 advisors and consultants – across more than 45 offices in 17 countries.