Why Are Major Construction Projects Facing Delays and Cost Overruns?
Navigating claims in today’s environment requires expertise, precision, and a thorough understanding of construction contracts.
At Accura Consulting, our forensic quantity surveying and expert delay analysis services provide the technical insights and know how required to navigate these claims with confidence.
What are the main reasons for delays and cost overruns leading to claims?
Industrial Actions and Union Influence
Industrial actions have become a significant disruptor for construction projects, particularly those requiring collaboration with monopolized or heavily unionized industries. The suspension of Queensland's Best Practice Industry Conditions (BPIC) policy, reported to add $17 billion to infrastructure projects due to union stipulations, underscores the scale of the issue. (Courier Mail)
These disruptions often affect critical-path activities such as network upgrades or essential infrastructure connections. Delays here can stall entire projects, forcing rescheduling of resources and escalating costs.
Construction Cost Inflation
The last decade has seen unprecedented construction cost inflation, with nearly 50% of additional expenses in major capital projects attributed to this factor alone. Rising material costs, fluctuating labour expenses, and transportation disruptions have all played a part. (SIBNI Report)
Labour Shortages and Productivity Decline
Labour productivity in Australia’s construction sector declined by 1.8% in 2022/23, a worrying trend given the long-term average growth of 1.3%. This shortfall means that more resources are needed to achieve the same level of progress, increasing costs. Compounded by a national skills shortage, project teams are often left struggling to meet deadlines. (RLB Construction Insight)
Supply Chain Disruptions
Global supply chain issues continue to wreak havoc on project timelines. Delays in obtaining essential materials, price surges, and logistical bottlenecks have made it harder for teams to stick to schedules and budgets. This has been particularly pronounced in the energy and infrastructure sectors, where large-scale projects rely heavily on international supply chains. (Rail Journal)
Allocation of Risk and Scope Changes
Inefficient allocation of risk—where contractors bear undue responsibility for matters, they cannot control causes severe delays and cost overruns. When combined with scope changes and a lack of detailed upfront planning, delays and cost blowouts become almost inevitable. (Centre for Independent Studies)
Design Complexity and Regulatory Hurdles
Projects with intricate designs or stringent regulatory requirements are inherently more prone to delays.
The Rise of Claims for Time and Costs
As these challenges intensify, claims for additional time and costs are becoming more common. Media reports highlight a steady increase in disputes and adjudications, reflecting the strain on contractors and project stakeholders alike. These claims are not frivolous—they are a necessary mechanism for addressing the real impacts of external pressures, delays, and unforeseen expenses.
Claims often stem from factors outside a contractor’s control, such as industrial action, design changes, or supply chain disruptions. They provide a way for projects to remain financially viable while ensuring that unforeseen costs are fairly allocated.
Why Effective Claims Are Critical
An effective claim addresses three key elements:
Entitlement: Demonstrating that the events causing disruption are covered under the contract and entitle the claiming party to recover time and/or costs.
Causation: Proving that the events directly disrupted project activities.
Quantification: Providing clear evidence of the financial impact of these disruptions.
Without these elements, claims can falter—underscoring the need for expert input.
Preparing for the Challenges Ahead
The construction industry’s current landscape may seem daunting, but proactive planning and meticulous record-keeping can make a world of difference. Here are some practical steps project teams can take:
Maintain Detailed Records: Keep thorough documentation of all delays, costs, and communications.
Serve Notices Promptly: Follow contractual timelines and requirements for delay and disruption notices.
Update Programmes Regularly: Reflect delays and disruptions in updated project schedules.
Isolate Costs: Use separate cost codes for delay and disruption expenses to simplify claims.
Engage Early with Experts: Seek professional advice to strengthen your position in disputes and negotiations.
A Partner for Success
At Accura Consulting, our forensic quantity surveying and delay analysis expertise allows us to deliver insights that go beyond surface-level analysis.
We specialise in:
Forensic Quantity Surveying: Offering a detailed, fact-based approach to assess, quantify, and validate the financial impacts of delays and disruptions.
Delay Analysis: Pinpointing the root causes of delays and quantifying their impact on project schedules.
Cost Claims Preparation: Presenting detailed, evidence-based assessments of additional costs incurred.
Strategic Guidance: Helping clients navigate the claims process and ensuring all contractual requirements are met.
We work alongside our clients to build straightforward claims supported by rigorous evidence. Our focus is not just on addressing challenges but on ensuring that the solutions we provide contribute to long-term success.
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