The Concept of Dispute Avoidance

Disputes are costly. On average 50% of the legal costs borne by the construction industry are related to disputes and roughly 10% of projects 10% of the total costs were legal costs. If a dispute proceeds to international arbitration, under the ICC process a 10m dispute will cost about $300,000 in administrative and arbitrator’s fees alone and that takes no account of the parties’ legal and management costs and of course the hidden costs of lost reputations and goodwill. An ICC arbitration can typically cost as much as 12% of the value of the dispute. Disputes take time and deflect energy and money away from the construction project, resources that could have been spent on the project itself or invested in the industry to provide better margins and performance for its participants.

In medicine it is a well known fact that prevention is better than cure. That is also true of construction and yet every year more is spent on cure rather than prevention and more is spent on legal solutions than is spent on the prevention of disputes in the first place. Then there are the cases where the total legal costs exceed the value of the claim, cases where the cure has cost many times more than prevention would ever have done…