Designed to Fail? The Not-So-Hidden Problems Behind Construction Disputes

In its latest CRUX report, global risk consultancy HKA confirms a known and troubling pattern: the same issues keep fueling disputes in construction projects — across regions, project types, and time.

But if the problems are well documented and recurring, why does the industry keep repeating the same costly mistakes again and again?

Billions Lost, Years Delayed: The True Cost of Construction Disputes

HKA's research shows both strengths and limitations due to its direct involvement in every project analyzed. From 2016 to 2024, HKA experts dedicated at least 30 hours to 2,000 projects across 107 countries, covering a total CapEx of $2.25 trillion. This approach allows for deeper insights but also excludes projects without claims or disputes, as well as those handled by peers. Additionally, it may introduce bias, as HKA would typically be contracted by one party rather than serving as a neutral joint expert.

Still, the report’s strengths far outweigh its limitations. HKA pinpoints five interlinked problem areas driving project distress: contractual conflicts, accelerated timelines, stakeholder behaviors, skill deficits, and escalating environmental risks.

The damage is massive, and the numbers are staggering: On average, additional cost claims amounted to 33% of budgeted CapEx, while planned schedules saw 67% overruns — adding roughly 16 months of delay per project.

A Broken System: The Key Factors Driving Disputes

HKA highlights five key factors driving claims and disputes:

Change of scope: As in earlier reports, scope changes remain the dominant cause of claims and disputes.

Design issues: Incorrect, late, and incomplete designs are the top technical causes of project distress. These failures are often worsened by the industry’s push to "speed the build" and minimize upfront costs — at the expense of long-term feasibility.

Contract mismanagement: The rigid and often unrealistic allocation of risk has turned contracts into battlegrounds rather than safeguards.

Behavioral failures: Counterproductive stakeholder behaviors range from blind commitment to fast-tracking to aggressive bidding strategies that rely on post-award claims to recoup losses.

Skills shortages: A talent deficit continues to undermine execution. Poor workmanship —directly linked to gaps in training and career experience — has been especially prevalent in Europe and the U.S. Aging workforces, low-margin business models, and declining investment in human capital have all contributed to this crisis.

A Call for Change: Beyond Risk-Shifting and Claims Culture

The report delivers a stark warning to stakeholders, particularly those involved in mega-projects: Without a fundamental shift in approach, these complex undertakings will continue to underperform. Current strategies — such as excessive risk transfer to contractors — are not only ineffective but counterproductive. Misallocation of risk breeds opportunistic contract interpretation, fosters disputes, and ultimately increases project costs. Instead of fixating on rigid fixed-price models, the team advises the industry to embrace collaborative contracting, early contractor involvement, and more nuanced risk-sharing mechanisms.

HKA's 7th CRUX report challenges project owners, investors, and stakeholders to reconsider their assumptions:

• Fast-tracking does not necessarily lead to faster delivery — it often results in costlier, delay-ridden projects.
• Delegating design responsibility is not a solution — it is a gamble with quality, cost, and time.
• Lowest-price tendering does not produce the best value — it fosters a claims culture that erodes trust and efficiency.

The Elephant in the Room: Scope Change

HKA’s insightful report presents numerous valuable takeaways, provides free access to an interactive dashboard, and highlights compelling service options such as tailored benchmarking and stress-testing. However, considering the omnipresence and widespread impact of scope change — often directly linked to other major issues like incorrect design, late design information, and incomplete designs — this topic may warrant deeper exploration.

HKA has provided further insights into managing scope change in a recent article (see link in comments), acknowledging that uncertainty is part of the game and that scope changes often have valid, multifaceted causes. The article also highlights agile project management strategies that enhance delivery flexibility and strengthen project resilience against uncertainty.

Will the next CRUX report delve even deeper?