In the world of high-risk construction, disagreements are occasionally inescapable. When communication deteriorates, schedules slip, or quality is below par, litigation often ensues. Though most stakeholders, owners, and contractors appreciate the obvious dangers of a court fight, the most likely to surprise them are the unseen costs of construction litigation.
These things quietly creep into project budgets, schedules, and reputations. Knowing these less obvious effects can enable you to plan more wisely, settle conflicts sooner, and safeguard the success of your building project.
- Legal Fees Are Just the Beginning
When folks hear the words construction litigation, they tend to think of attorney fees — and yes, those are pricey. But the real cost goes much deeper. In addition to lawyer retainers and hourly billing, you’ll probably have to pay for such things as:
- Expert witness fees
- Court filing fees
- Document preparation and discovery procedures
- Consultant fees for forensic delay analysis or site visits
Each of these services quickly adds up, particularly in complicated cases that last months or years. To small- to medium-sized contractors, these expenses can be ruinous.
- Hampers Business Relationships
Construction is a business of trust, collaboration, and relationships over the long haul. Construction litigation tends to place partners in conflict between clients and contractors, contractors and subcontractors, etc. Even when the case is won, the working relationship could be irreparably damaged or lost forever.
What’s the unseen cost here? Loss of repeat business, referrals, and possible joint ventures. Reputation is important in construction, and construction litigation leaves a lasting footprint, not necessarily a positive one.
- Time Lost is Money Lost
Litigation takes a lot of time. Project managers, engineers, and other critical personnel might have to spend time getting documents, taking depositions, or going to hearings, taking them away from actual project work.
This diversion of attention slows progress, derails workflows, and can lead to a ripple effect that affects other jobs in your pipeline. The opportunity cost of diverting personnel away from ongoing work to refight old battles is seldom factored into the mix, but it can really hurt your company’s productivity overall.
- Project Delays and Financial Penalties
Litigation typically freezes critical parts of a project. Court cases pending may stop progress, postpone payments, and activate penalty clauses in other contracts. Some projects never recover, particularly when stakeholders withdraw or funds run out because of continuing litigation.
This triggers a chain reaction that extends to not only the present job but also future work. Clients might be reluctant to hire a contractor with a pending court case, anticipating instability or risk.
- Insurance Premium Increases
Should you be attracted to a case of construction litigation, your insurer is probably on board. Be it general liability or professional indemnity insurance, lawsuits against your policy can translate into increased premiums in the future.
In some instances, you could even find yourself being cut off by your insurer. This unseen expense doesn’t appear on your bill of costs in your lawsuit, but it impacts your bottom line over the months and years ahead.
How to Minimize or Avoid Construction Litigation
Now that we’ve unwrapped the hidden expenses, let’s discuss what you can do to minimize or avoid them:
- Spend on solid, detailed contracts. Make each party’s responsibilities, roles, and remedies well-defined.
- Record everything. Keep complete records of communication, change orders, and site conditions.
- Communicate openly. Most disagreements stem from a simple misunderstanding. Regular updates and meetings can defuse escalation.
- Use alternative methods of dispute resolution (ADR). Mediation and arbitration are frequently quicker and cheaper than court.
- Join experienced legal advisors early. Legal advice before things go wrong is much less expensive than afterward.
To sum up, construction litigation isn’t just expensive; it’s also costly in ways that may stick with you long after the case is resolved. Though sometimes inevitable, most conflicts can be resolved more effectively with foresight, documentation, and the right attitude, with the right consultation partner like Proclep Consulting.
The next time you feel a conflict in the making on-site, stop and think about the hidden expenses. Fixing a problem upfront may not just save your project — it might save your company.
