What is claims construction management?

Construction claims are getting more complex based on the nature and complexity of construction projects. As everyone within the construction project, including the client, contractors and subcontractors, are trying to reach their goals, expectations may be ruffled.

The direct consequence of these diversified expectations is that conflicts arise. If these contracts are not successfully managed, they can lead to disputes which can negatively impact the successful completion of construction projects. Therefore, claims management is an unavoidable part of construction project management and requires effective management practices. In this article, we will talk about construction claims management.

What is construction claims management?

The objective of the contractor in the construction industry is to perform the work required by the client properly and promptly. On the other hand, the client wishes to pay a reasonable amount for the work performed. However, due to diversified expectations, changes occur, which can lead to disputes.

A construction claim can be described as the assertion of a right from either party, demanding additional time or/and payment due to an action. Claims can originate due to several reasons, including inadequate project planning, change orders, change in scope, errors, contract expediting, omissions or slowdowns. Construction claims management is mitigating all issues surrounding these claims so that both parties are agreeable with the decision.

Common types of construction claims?

Where there are sources of disagreement, it can lead to various construction claims. Listed below are the common types of construction claims:

• Delay claims: This claim arises when a project takes longer than stated in the contract, causing the client to file a claim against the contractor for late completion.
• Acceleration claims: Sometimes, to catch up with the work schedule, the contractor accelerates the work speed by spending more resources or finances. This can lead to disputes because the client has not agreed to the acceleration cost. Additionally, the client may not want to bear the cost of acceleration, causing both parties to accuse each other of the delays.
• Change orders: Sometimes, the client may exert a request for extra work to be done during the project execution without making the written request. Depending upon if the requested change falls under the scope of work or not, disputes can arise.

• Differing site conditions claim: When the site’s actual condition is different from the conditions explained in the contract, the contractor can file a claim.
• Damage claim: During construction activities, the contractor can damage the property, and in such cases, the client can file a claim to retrieve a loss.

Some other construction claims that are not so common include defect claims related to force majeure claims, design and construction, cost overrun claims, non-payment claims or loss of labour productivity claims.

Construction claims management phases

The typical claim management process can be divided into four phases: claim prevention, claim mitigation, claim identification and resolution.

• Claim prevention: This process is activated during contract formulation and at the pre-tender phase of a project and can help the tender management process. To prevent the development of claims and contract documents, a project plan should teach the scope of work and include all detailed requirements related to the project. This is extremely important, as, after the contract award, the opportunity to prevent claims due to misinterpretation of information or lack of clarity comes to an end.
• Claim mitigation: Generally, construction activities are performed in highly sensitive and outdoorsy environments. It is better to minimise the possibility of claims arising instead of dealing with claims as they emerge. Hence, to mitigate claims, the contract must include a well-defined scope, clear responsibilities and well-demarcated risks to help reduce the possibility of claims occurrence. Management plans play a vital role in this phase of claim mitigation.

• Claim identification and qualification: Claim identification can be made by evaluating the scope of work and the provisions within the contract. Inputs such as the scope of work, contract terms, the definition of extra work and the definition of extra time should be requested and evaluated. Once a specific entity is categorised as a claim, it should be identified and fortified. Quantification can include additional payments or time extensions. In this phase, critical path analysis should be done to calculate any potential delays to the project so that additional direct and indirect costs can be identified and calculated.
• Claim resolution: It is a step-by-step process for resolving individual claims. Depending upon the terms of resolution within the contract, possible outcomes can include negotiation, arbitration, mediation and litigation.

We also suggest to read the article “Vibration Hazards In Construction Site” from Edara Apps blog.

Conclusion

Construction claims can have high cost and time impacts on projects; therefore, clients and contractors should establish robust management strategies and systems within their organisations. To be proactive when establishing management strategies, it is vital to be hyper-aware of all causes of conflicts in a construction project. The first thing to avoid claims is to identify, manage and address the root causes of all potential claims. Therefore, the content of tender and contract documents should be analysed carefully to avoid ambiguity.