Causes of Contractual Claims in Construction: Types, Tracking Methods, and Resolution Under FIDIC

1. Introduction

Contractual claims in construction are an inevitable aspect of project execution due to the complexity, variability, and risks associated with construction contracts. They arise when one party seeks compensation or time extension for circumstances affecting contract performance. Effective claim management is essential to prevent disputes and ensure fair contractual adjustments.

This article examines the causes of contractual claims **s in construction, their types, effective tracking methods for contractors, resolution mechanisms, notice periods under FIDIC, and the concept of concurrent delay.

2. Causes of Contractual Claims in Construction

Contractual claims in construction originate from various factors, often linked to contractual ambiguities, project delays, or unforeseen conditions. The most common causes include:

2.1. Design Errors and Late Approvals

• Errors, omissions, or inconsistencies in drawings and specifications.
• Delays in issuing approvals, leading to work stoppages.
• Revisions and redesigns impacting construction schedules.

2.2. Changes in Scope and Variations

• Employer-driven modifications to the contract scope.
• Late issuance of variation orders.
• Disagreements over additional work entitlement.

2.3. Site Conditions and Unforeseen Risks

• Differing site conditions not disclosed in the contract.
• Unexpected soil, groundwater, or geotechnical issues.
• Presence of archaeological finds or hazardous materials.

2.4. Delayed Payments and Financial Issues

• Employer’s failure to make interim or final payments on time.
• Insufficient cash flow affecting contractor’s ability to perform.
• Withholding of payments due to disputes.

2.5. Disruptions and Interferences

• Access restrictions or unavailability of work fronts.
• Third-party interference (e.g., utility companies, public authorities).
• Concurrent works affecting the contractor’s progress.

2.6. Force Majeure and Exceptional Events

• Natural disasters, wars, pandemics, or political unrest.
• Government-imposed restrictions impacting project execution.
• Material shortages due to global supply chain disruptions.

2.7. Employer or Engineer Delays

• Failure to provide necessary decisions, drawings, or instructions.
• Slow responses to Requests for Information (RFIs).
• Unjustified rejection of contractor’s submittals.

3. Types of Contractual Claims in Construction

Contractual claims in construction are generally classified into the following categories:

3.1. Time-Related Claims (Extension of Time - EOT)

• Claims for additional time due to delays beyond the contractor’s control.
• Entitlement assessed based on contract provisions and delay analysis.

3.2. Cost-Related Claims

• Claims for additional payment due to changes, delays, or unforeseen events.
• Common examples include variation claims, acceleration costs, and disruption claims.

3.3. Disruption and Productivity Loss Claims

• Claims arising from inefficiencies caused by interferences or obstructions.
• Requires detailed substantiation through production records and schedules.

3.4. Acceleration Claims

• Claims due to employer-imposed acceleration without proper compensation.
• Can be voluntary (contractor attempts to mitigate delays) or directed (by employer).

3.5. Force Majeure Claims

• Claims based on unforeseeable events that prevent contract performance.
• Requires notification and proof of impact under contract terms.

4. Effective Tracking Methods for Contractors

To minimize disputes and strengthen claim submissions, contractors must adopt systematic tracking approaches:

4.1. Robust Documentation and Record-Keeping

• Maintain detailed site diaries, progress reports, and correspondence.
• Record daily labor, materials, equipment usage, and disruptions.

4.2. Baseline and Updated Schedules

• Use project scheduling tools (e.g., Primavera P6, Microsoft Project) to track delays.
• Regularly update schedules to reflect project progress and disruptions.

4.3. Early Identification and Notification

• Identify potential claims at an early stage to mitigate impacts.
• Notify the employer and engineer as per contract requirements.

4.4. Cost Tracking and Accounting

• Maintain cost records linked to claim events.
• Segregate additional costs arising from variations and delays.

4.5. Photographic and Video Evidence

• Use visual documentation to support claims related to site conditions and delays.
• Timestamped records strengthen claims in disputes.

5. Resolution and Management of Contractual Claims in Construction

Effective claim management involves structured procedures to ensure timely assessment and resolution:

5.1. Proactive Claim Prevention

• Clear contract drafting to minimize ambiguities.
• Risk allocation and contingency planning before execution.
• Regular coordination meetings with stakeholders.

5.2. Negotiation and Settlement

• Early discussions between contractor and employer to resolve claims amicably.
• Use of mediation or dispute avoidance mechanisms.

5.3. Dispute Resolution Under FIDIC

• Engineer’s Determination (initial assessment of claims).
• Dispute Adjudication Board (DAB) (binding recommendations in FIDIC 1999).
• Arbitration or Litigation (final stage if amicable settlement fails).

6. Notice Periods Under FIDIC

FIDIC contracts impose strict notice periods for claims, ensuring timely submission and assessment.

6.1. Time Limits for Notification

• Sub-Clause 20.1 (FIDIC 1999) / 20.2 (FIDIC 2017): Contractor must submit a notice within 28 days of becoming aware of the event.
• Failure to submit within the stipulated time may result in forfeiture of the claim.

6.2. Detailed Claim Submission

• The full claim, including supporting documentation, must be submitted within 42 days (FIDIC 1999) or as per the agreed timeline in FIDIC 2017.

6.3. Engineer’s Response and Decision

• The Engineer must respond within 42 days of receiving the full claim.
• If rejected, the contractor may refer the dispute to the DAB.

7. Concurrent Delay in Contractual Claims in Construction

Concurrent delay occurs when both the contractor and employer contribute to project delays. Its impact on claims depends on contract terms and legal principles.

7.1. Approaches to Concurrent Delay

• Contractor-At-Fault: No entitlement to an extension of time or cost.
• Employer-At-Fault: Full entitlement if employer’s actions are the dominant cause.
• Shared Responsibility: The contractor may receive an extension of time but not cost compensation.

7.2. Delay Analysis Methods

• Time Impact Analysis (TIA): Prospective method analyzing future impacts.
• As-Planned vs. As-Built Analysis: Compares actual progress to the planned schedule.
• Windows Analysis: Evaluates delays in defined project phases.

8. Conclusion

Proper claim management, proactive risk mitigation, and clear contractual documentation are key to reducing disputes and ensuring successful project execution.