The rising cost of construction litigation and how to avoid it

Construction disputes have become far more expensive: the average dispute in North America was worth $60.1 million in 2024 and took 12.5 months to resolve, according to Arcadis. The most reliable ways to avoid that cost are clear contract documents, written change management, dated records of site conditions and early use of mediation before positions harden.

Those headline figures come from large commercial projects, but the underlying causes look the same on a home addition, a site-built garage or an exterior renovation: unclear scope, changes agreed verbally and no reliable record of what was there before work began. The prevention steps scale down just as well.

How expensive disputes have become

Arcadis’s 2025 construction disputes report for North America found that the average dispute value rose to $60.1 million in 2024, up from $43.0 million in 2023. Dispute values have nearly doubled since 2021 and tripled compared with 2019. Resolution time improved slightly, falling from 14.4 months to 12.5 months, but that still represents more than a year of legal fees, management time and tied-up cash.

The causes are familiar to anyone who has managed a project. Errors and omissions in contract documents topped the list of dispute causes in North America for 2024, and 56 percent of survey respondents identified supply chain disruptions, price escalation, labor shortages and delays as key sources of conflict.

The dispute value is only part of the bill. Legal and expert fees, the time project leaders spend preparing claims instead of running work, delayed payments and strained relationships all add costs that rarely appear in the headline number. For smaller builders, a single prolonged dispute can absorb the profit from several projects.

Scope changes and design errors drive most claims

International data points the same way. HKA’s latest CRUX analysis, summarized in Construction Dive’s report on disputes in the Americas, drew on claims across 2,204 projects in 114 countries. In the Americas, change in scope affected 25.7 percent of disputed projects, and design mistakes were behind 18.3 percent.

Delay is where the stakes climb. The average extension of time claim in the Americas ran at 57.5 percent of the planned schedule. Claims of that size depend almost entirely on proving when work happened, what stopped it and who was responsible, which makes the project record the deciding factor.

Documentation decides most arguments

When a dispute reaches mediation or arbitration, the core question is nearly always what happened on site and when. Records created at the time of an event carry more weight than recollections assembled months later, because they are hard to reshape around an argument.

A practical approach to construction dispute documentation starts with three requirements for every record: it should show the condition, the location on the plan, and the date and time it was captured. Phone photos that lack any one of those rarely settle a disagreement. Capturing the whole site on a fixed schedule, especially before work is covered by drywall, slabs, siding or finishes, gives both parties a shared reference point.

Written records matter too. Daily reports, meeting minutes, change order logs and notice letters should reference the same dates and locations as the visual record, so that each document supports the others instead of competing with them.

Change orders are the most preventable source of conflict

Because scope change is such a frequent trigger, change management deserves its own discipline. The pattern behind many claims is simple: an owner asks for an adjustment on site, the builder agrees and proceeds, and the price and schedule effect are settled later, if at all. By the time the invoice arrives, each side remembers the conversation differently.

A few rules prevent most of that friction. Every change should be documented before work begins, with a description, a price and any schedule impact, and signed by someone with authority to approve it. Photos of the condition that triggered the change, taken at the time, help explain why it was needed. When pricing cannot be agreed immediately, a written directive to proceed with the cost to be settled later still records that the change was requested.

Homeowners and small commercial owners benefit from the same discipline. A signed change order protects the owner from surprise invoices as much as it protects the builder from unpaid work.

Early collaboration prevents conflict

Many disputes are set up long before anyone files a claim. A peer-reviewed study of owner-contractor conflicts on Norwegian state projects found that fewer than 5 percent of respondents believed contractors were sufficiently involved during early project phases, while 90 percent agreed that investing more in early collaboration could significantly lower conflict levels.

About 70 percent of respondents said contract size had little to no direct effect on conflict. The authors concluded that the root causes are operational and contractual. For owners and builders of any size, that is encouraging: better processes reduce risk whether the project is a hospital or a single-family home.

Resolve disagreements before they become lawsuits

When a disagreement does arise, speed matters. The American Arbitration Association’s construction dispute resolution resources describe mediation as a route to faster resolution that can help preserve relationships, and note that parties who do not reach a full settlement often leave with a clearer sense of the next steps. For smaller matters, the AAA offers Fast Track procedures for two-party cases where claims or counterclaims do not exceed $150,000.

The AAA also reports a median time to award three times faster for claims between $100,000 and $999,000 than the median time to trial in U.S. District Court. Contracts that name mediation as a first step, followed by arbitration if needed, give both sides a defined path and a reason to settle early.

Choosing the forum in advance also protects homeowners and small builders. Mediation and arbitration rules differ by provider and by contract type, so reviewing the dispute clause before signing avoids surprises later about cost, location and timing.

A prevention checklist for owners and builders

Most of the protection comes from habits that cost little to maintain:

• Review contract documents and specifications before signing, and resolve conflicts between drawings in writing.
• Put every change in writing, with its price and schedule impact, before the work starts.
• Capture dated, location-tagged photos of existing conditions and of work before it is covered.
• Track the notice deadlines in the contract and meet every one of them.
• Include a mediation step in the dispute resolution clause.
• Agree at the outset on where project records will be stored and how both parties can access them.
• Keep project records for the full period during which a claim could still be brought.

Preparation is the cheapest defense

The rising cost of construction disputes rewards preparation. Clear documents, written changes and dated records will not prevent every disagreement, but they shorten the ones that happen and give both sides facts to settle on. This article provides general information and is not legal advice; owners and builders should confirm contract terms and deadlines with qualified counsel.