CMS report reveals project risks and disputes trends across global construction industry

CMS has released its International Construction Study 2024, highlighting evolving risk management and disputes strategies across the international construction sector. The Study, conducted in partnership with YouGov, surveyed 125 senior in-house counsel in the international construction, infrastructure and engineering industries across Africa, the Americas, Asia-Pacific, Europe and the Middle East about the biggest challenges of managing disputes in this environment – and how those challenges can be met.

Among the key highlights, the Study found:

Dispute Drivers: Across the globe, the biggest sources of disputes relating to construction projects remain project delays, payment issues, and scope of work. These issues, while subject to regional nuances, remain steadfast as primary sources of contention and are expected to continue to be the top sources of disputes. Environmental issues are expected to contribute a higher proportion of disputes in future, doubling from 6 per cent of recent disputes to an anticipated 12 per cent of disputes in the future.

Evolving risk landscape: Escalating ESG concerns will impact the source of disputes in future. Over half (54 per cent) of respondents anticipate more risks associated with sustainability reporting requirements in the next year.

Embracing artificial intelligence: While artificial intelligence (AI) represents opportunities for all industries, its adoption among in-house lawyers remains relatively modest, with only 17 per cent currently using AI tools in their disputes and contract management. Additionally, only 57 per cent of in-house lawyers expect their external legal counsel to use AI tools in their delivery of work, compared with 30 per cent who do not expect it. The Study also suggests that even sceptical lawyers will find themselves using AI sooner than they might expect.

Identifying and managing risks: Fewer than half of surveyed businesses engage their in-house legal or contract management teams at project inception for risk assessment. Moreover, two-thirds of businesses seek outside advice ‘sometimes’ and one in six never seek outside legal advice on managing risks in projects.

Timeline of disputes resolution: Construction project stakeholders mostly prefer to resolve disputes separately during the course of a project, rather than at the end. 80 per cent of respondents said that issues solved separately during the course of a project result in greater success, compared with 18 per cent who felt it was better to resolve issues all together at the end of a project.

 Adrian Bell, partner and co-head of Infrastructure, construction and energy Disputes at CMS, commented, “Our Study underscores the significant potential of AI in risk management and dispute resolution within the sector. Despite modest current adoption rates, the potential efficiencies it can bring to projects are significant – although it’s safe to say that AI will not change construction disputes overnight. But it’s already clear that there’s a much stronger use case for it than many lawyers believe, both in preventing and resolving disputes.

“The escalating concerns surrounding ESG means this is an issue to watch closely within the industry. With over half of respondents anticipating more frequent disputes associated with sustainability reporting requirements in the next year, and a 100 per cent increase in respondents ranking ESG as one of their top three sources of disputes in future (from 6 per cent to 12 per cent), it’s imperative for stakeholders to adapt their contractual frameworks and negotiation strategies to address these evolving challenges.”

The full report can be found here.