Overruns in costs and delivery costing construction US$91 billion

Disputed costs averaged $100 million – more than a third (33.6%) of capital expenditure

Major construction projects globally are facing significant overruns in costs and delivery, with claims exceeding US$91 billion in total value and the cumulative overruns amounting to 876 years, according to the Sixth Annual CRUX Insight Report published by HKA.

The report of 1,800 projects in 106 countries with a combined capital expenditure value (CAPEX) of US$2.247 trillion analyses claims and disputes in major construction projects, revealing the true financial cost and lost time caused by disputed costs and overruns.

The data reveals that disputed costs amount to more than a third of project CAPEX (33.6%), on average and claims for extensions of time (EOT) also reflect extreme project distress, typically prolonging planned schedules by 67.1%.

Disputed costs averaged US$100 million, more than a third of capital expenditure, and time extensions add almost 16 months, or two-thirds to a typical schedule.

Three design-related causes – inaccurate, incomplete and late designs – afflicted 44.8% of projects overall, more than scope change at 38.8%. Clashes over contract interpretation – which impacted 19.8% of projects – was the other ‘top five’ factor.

Just under 20% of projects suffered from poor management or administration of contracts (19.5%), or of subcontractors and supplier interfaces (19.4%).

“Modern megaprojects are increasingly complex, but the cruel conundrum for the global construction and engineering industry is that these most common causes of claims and disputes are highly predictable and largely within the control of the contracting parties,” said Renny Borhan, Partner and CEO, HKA.

There were regional differences, with deficiencies in design and workmanship a bigger factor in Europe and the Americas. Incorrect design topped the European ranking, disrupting close to one in three projects (32.3%), and ranked second in the Americas, where more than one in five projects were affected (20.4%).

Defective work was most common on Europe’s buildings, especially residential schemes (38.3%). Within North America, design failures overall were more prevalent in Canada (41.8%); yet cost and schedule overruns tended to be higher south of the border.

The Middle East and Africa faced the worst prolongation of schedules (82% and above). Scope change and design failures stymied more than half of Middle Eastern projects. Africa’s most persistent problems involved restrictions on access and cashflow.