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New research addresses construction company best practices in managing legal costs—including finance

January 25, 2024
Liz Bigham
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Disputes are a fact of life in the construction industry, as are their hefty associated costs. In 2022, 58% of in-house lawyers at construction businesses reported spending more than $5 million on litigation and arbitration

With the great majority also expecting an increase in disputes over the next two years, construction company lawyers are also understandably focused on cost-saving solutions, including financing. 

Below we explore key data points from a recent survey that sheds light on how GCs and heads of litigation in the construction industry manage the cost and risk of disputes, their views on the importance of legal finance solutions and the potential benefits financing offers. 

Economic considerations for construction disputes 

  • 70% of construction company lawyers expect an increase in the volume of their organization’s disputes over the next two years  

  • When deciding whether to pursue a meritorious legal claim, estimated legal costs are a crucial factor for 77% of construction company lawyers   

  • Uncertain and challenging economic conditions can influence consideration of legal finance solutions, with 68% of construction company lawyers stating that it is likely to impact their decision-making 

Construction businesses recognize the value in commercial legal finance  

  • 91% of construction company lawyers have previously reviewed legal finance solutions when considering pursuing meritorious claims  

  • 85% of construction company lawyers have considered funding for legal fees and expenses  

  • Notably, 79% of construction company lawyers believe that portfolio finance—structures that finance multiple claims and defenses matters in a single funding transaction—would be valuable for their organizations, reflecting the high volume of matters that construction businesses have in their dockets at any one time  

Construction companies see the benefits of funded asset recovery 

  • Only 2% of respondents state that judgments and awards are paid out voluntarily by the opposing party more than 75% of the time  

  • 32% of construction company lawyers report recovering less than 50% on average of the value of their judgments and awards over the last 5 years  

  • The high costs associated with enforcement and recovery deter many construction businesses from pursuing judgments and awards, as reported by 75% of respondents  

  • 74% of construction company lawyers say they are likely to use financed asset recovery services for pending judgments or awards, and 83% say the ability to reduce costs would be a key benefit of funded judgment enforcement for their business 

The research highlights the significant challenges faced by construction businesses in terms of legal disputes and associated costs. With an expected increase in the volume of disputes, construction companies are exploring cost-saving solutions such as legal finance.