Construction Contracts Claims -Part 1

Claims in construction projects can arise from both principal/contractors and contractor/ subcontractors for various reasons. Understanding these potential claims from each perspective helps both parties better prepare and manage their responsibilities and risks throughout the project.

Contract requirements can vary significantly, and the drafting of clauses differs from contract to contract. This overview provides a common understanding of potential claims, their causes, and the supporting documents required for a successful claim.

A clear understanding of the contract’s claim-related clauses is essential for making a successful claim. Failure to do so can result in an unsuccessful claim. Before proceeding with any claim, consider the following steps:

1. Identify Relevant Provisions: Review the contract to understand and list the provisions that support your claim, both directly and indirectly.
2. Check Compliance: Ensure that all requirements outlined in the relevant clauses are met and that you have all necessary supporting documents.
3. Follow Claim Procedures: Adhere to the process specified for submitting a claim, including:

• When the claim can be made
• Required notices to be sent
• Types of events that can be claimed
• Actions needed to establish your entitlement

Impact Assessments

In construction contract claims, impacts on the project can manifest as either increased costs, delays in the project schedule, or both. A clear understanding of these impacts and timely, accurate claims from both parties are crucial for avoiding disputes later in the project. Properly assessing and addressing the impact of changes or delays helps ensure that issues are resolved promptly and fairly, minimizing the potential for conflicts and financial discrepancies.

Best Practices for Both Parties

Contract Management

• Clear Contract Provisions: Ensure that all contract provisions are clear and detailed to minimize ambiguity.
• Detailed Scoping: Ensure the scope of work is detailed and agreed upon before starting the project to avoid scope discrepancies.
• Follow Procedures: Adhere to the contract’s procedures for submitting and managing claims.
• Use of Standard Forms: Utilize standard forms and templates for claims and documentation to maintain consistency.
• Formal Procedures: Follow formal procedures outlined in the contract for claims, changes, and dispute resolution.

Communication and Documentation

• Clear Communication Channels: Establish and maintain clear communication channels to quickly address issues and changes.
• Document Everything: Maintain detailed records of all communications, agreements, and changes. Ensure all communications, changes, and claims are clearly documented and traceable.
• Documentation of All Changes: Document all changes to the scope, schedule, or cost to support any claims or adjustments.
• Frequent Updates: Regularly update schedules and progress reports to keep all parties informed.

Issue Identification and Resolution

• Early Identification: Recognize potential issues early and address them proactively.
• Prompt Issue Resolution: Address issues and disputes as soon as they arise to prevent escalation.
• Timely Reporting: Report any issues or potential claims promptly to avoid complications and delays.
• Seek Resolution: Work towards amicable resolutions through negotiation or mediation before considering formal dispute resolution.

Project Reviews and Audits

• Regular Reviews and Audits: Conduct regular reviews and audits of project performance and documentation to identify and address issues early.

Collaborative Approach

• Collaborative Approach and Problem-Solving: Work towards collaborative solutions rather than adversarial ones to maintain good working relationships. Approach disputes and claims with a collaborative mindset to reach mutually acceptable solutions.
• Regular Coordination Meetings: Hold regular meetings to discuss progress, address issues, and ensure alignment.

Legal and Professional Support

• Legal and Professional Support: Engage legal or professional advisors when dealing with complex or high-stakes claims.

Cost and Claims Management

• Transparent Cost Tracking: Track and document all costs associated with changes or disputes transparently.
• Detailed Claims Preparation: Prepare detailed and well-documented claims to support your position.

By considering these claims and adhering to best practices, both contractors and subcontractors including Principal can better manage their responsibilities and navigate the complexities of construction projects. This approach helps in minimizing disputes and ensuring smoother project execution.

Part 2 of this article contains the list of possible claims by both sides.