A 2015 study found that cost adjustment denial was the most common cause of construction disputes with federal agencies.
According to CFMA and the Sage Policy Group’s, Analysis of Construction Projects with Federal Agencies and the Cause of Disputes, unforeseen problems or issues that arose over the course of the project that resulted in cost changes was the major cause of disputes.
The study further said that disputes often arise when both parties fail to communicate. Design-build involves significant upfront communication to plan projects and reach consensus. But in most cases, disputes arose in the course of the project and were typically unforeseen. Thus, upfront engagement represents an imperfect defence against disputes.
Also, disputes commonly resulted from the denial of cost adjustments due to unexpected problems or issues that arose over the course of the project. These disputes also centred on misunderstandings regarding specifications. To the extent that government agencies were deemed to be at fault, the study found that changes in specifications were not properly communicated or needed financial considerations.
The study further suggested the need for extensive documentation when working with government agencies because contractors’ claims are likely to be denied in disputes due to lack of evidence.
