While common perception often points to budget overruns and schedule delays as the primary villains in construction projects, a landmark analysis of industry conflicts across the Americas has revealed a different culprit holding the top spot. An extensive review of distressed projects indicates that disagreements over the fundamental scope of work are the most frequent source of disputes in the region. This insight stems from the 8th Annual CRUX Insight report, a comprehensive study conducted by the global risk mitigation consultancy HKA. The report’s conclusions are drawn from a massive dataset, analyzing HKA’s direct involvement in 2,204 projects across 114 countries, with a focused examination of 703 projects in the Americas. These regional projects, with an average capital expenditure of $639 million, provide a detailed and authoritative snapshot of the challenges currently facing the industry, challenging long-held assumptions about what truly drives projects into conflict.
Unpacking the Causes of Conflict
Scope Changes Lead the Way but with a Twist
The report unequivocally identifies changes in project scope as the leading cause of construction disputes throughout the Americas, impacting a significant 25.7% of all distressed projects completed since 2020. This finding underscores the critical importance of clearly defined project boundaries and robust change management processes from the outset. However, the data also presents a fascinating paradox: while scope is the number one issue regionally, the Americas actually handle this challenge far more effectively than the rest of the world. Globally, a staggering 38.8% of projects are derailed by scope-related conflicts. This suggests that the contractual frameworks, project management disciplines, and communication protocols employed in the Americas, while not perfect, are comparatively successful at containing the often-chaotic nature of scope creep. The lower incidence rate points to a regional maturity in anticipating and documenting changes, though it remains the most common friction point.
The persistence of scope as the primary dispute driver, despite better-than-average performance, highlights the inherent complexity of translating a design vision into a physical structure. Disputes often arise not from a lack of process, but from ambiguity within it. Misinterpretations of initial design documents, disagreements over whether a task is included in the original contract or constitutes a new change order, and conflicting stakeholder expectations can all fuel conflict. Even with sophisticated change management systems in place, the financial and schedule implications of a scope modification can create an adversarial environment. This dynamic reveals that the challenge is not just procedural but also relational; fostering a collaborative approach to managing change is as crucial as the contractual mechanics that govern it. Therefore, even in a region that manages scope relatively well, it remains a fertile ground for disputes that can stall progress and sour partnerships.
Workmanship and Unforeseen Conditions Emerge as Regional Weaknesses
In contrast to its relative success in managing scope, the Americas exhibit notable vulnerabilities in other critical areas of project execution. The report reveals that claims related to workmanship deficiencies are a more frequent cause of disputes in the region than elsewhere in the world. Poor workmanship was a factor in 20.5% of distressed projects in the Americas, a figure substantially higher than the global average of 16.1%. This problem is even more acute in the United States and Canada, where the rates climb to 20.6% and 21.4%, respectively. These statistics point toward a systemic challenge in quality control and assurance standards across North America. The issue may be compounded by persistent skilled labor shortages, which can force contractors to rely on a less experienced workforce, or by intense schedule pressures that incentivize speed over precision, ultimately leading to costly rework and formal disputes over quality.
Another area where the region underperforms is in dealing with the unexpected. Conflicts arising from unforeseen physical conditions—such as unusual soil compositions, underground obstacles, or hazardous materials not identified in initial surveys—are significantly more common in the Americas. This issue was the root cause of disputes in 17.4% of regional projects, compared to a lower global average of 14.7%. This disparity may be attributed to the vast and diverse geography of the Americas, which presents a wider range of potential geological and environmental surprises. However, it also raises questions about the thoroughness of pre-construction site investigations and risk assessments. An industry tendency to fast-track projects might lead to insufficient investment in preliminary geotechnical surveys and site analysis, pushing the discovery of these costly problems into the construction phase, where they inevitably trigger claims for additional time and compensation.
A Silver Lining in Project Controls
Amidst the challenges, the report delivers a compelling narrative of strength and discipline in the Americas when it comes to managing the tangible metrics of time and money. Projects across the region demonstrated markedly better project controls, which translated into more favorable outcomes for both schedules and budgets compared to their global counterparts. The average extension of time claimed on distressed projects was 57.5% of the original planned schedule. While this figure may seem high, it is substantially lower than the global average of 69.6%, indicating a greater ability to maintain project momentum and mitigate the impact of delays. This superior performance suggests a more mature application of project management methodologies, more realistic initial scheduling, and more effective strategies for resource allocation and progress tracking, allowing teams to navigate disruptions with greater efficiency.
This proficiency extends to financial management as well, where the region also outperforms the rest of the world. Cost overruns in the Americas averaged 31.1% of the original project budget, a figure that, while significant, is notably better than the worldwide average of 34.7%. This points to more robust systems for cost estimation, budget control, and risk contingency planning. The positive trend is even more pronounced on projects scheduled for completion in 2020 or later, where claimed extensions of time dropped to 44.2% and cost overruns remained comparatively modest at 26.8%. This improvement reflects valuable lessons learned from navigating recent economic turbulence and a doubling down on project discipline. However, the report cautiously notes that since many of these newer projects are still in progress, disputes could still surface later in their lifecycle.
Evolving Risks and Future Outlook
The Rise of Financial Pressures
A critical insight from the analysis, emphasized by HKA quantum and forensic accounting expert Kimberly Reome, is a fundamental shift occurring in the landscape of construction disputes. While traditional triggers like scope changes and design deficiencies have been on a downward trend, a new wave of conflicts rooted in financial pressures is rapidly gaining prominence. This trend is being fueled by a challenging macroeconomic environment characterized by a softer economy, persistent inflation that erodes margins, and lingering supply chain disruptions that drive up material costs. Consequently, disputes centered on payment terms and cash-flow problems are on the rise. This financial strain places immense pressure on contractors and subcontractors, creating a volatile environment where minor disagreements can quickly escalate into formal, costly disputes that threaten project viability.
This growing financial instability creates a dangerous domino effect that can ripple through an entire project. For example, a dispute over a delayed payment to a key subcontractor can halt their work on-site. This stoppage immediately creates a schedule delay for the general contractor, who may then file a claim for an extension of time. The ensuing conflict often centers on the delay itself, masking the original financial issue that served as the catalyst. This dynamic makes resolving the dispute more complex, as the symptoms—delays and cost overruns—are debated while the root cause of financial distress goes unaddressed. As cash flow becomes an increasingly critical battleground, stakeholders must recognize that financial health is no longer just a project metric but a primary driver of project harmony or conflict.
Navigating Future Challenges
The report also highlighted how external shocks acted as powerful “dispute accelerators,” capable of turning minor issues into major conflicts. Events such as the COVID-19 pandemic, geopolitical instability, and sudden commodity price spikes have tested the resilience of construction contracts, often with disruptive results. Looking ahead, new trade policies and tariffs were identified as potential future accelerators that could introduce similar volatility into supply chains and project costs. This underscores a critical need for the industry to move toward more flexible contractual arrangements. Contracts that fail to include mechanisms for fairly allocating risk and adjusting to such external shocks were seen as increasingly vulnerable to disputes, pushing stakeholders into adversarial positions when faced with unforeseen market shifts.
Ultimately, the analysis concluded that navigating these complex and evolving challenges required a proactive and forward-thinking approach from the industry. Beyond external economic and political pressures, a host of other developing risks were identified as potential pressure points. These included the challenges associated with integrating artificial intelligence into project workflows, the cultural shifts necessary to successfully adopt collaborative contracting models, the ever-worsening shortage of skilled labor, and the impact of new regulations related to environmental standards and payment laws. In the face of these multifaceted risks, the most effective path forward involved a deep commitment to early risk identification, a culture of continuous learning from past projects, and the strategic evolution of contractual practices to better anticipate and mitigate conflicts before they could derail a project.
