Do You Still Believe That Construction Claims Can be Won on Merits Alone?

If you still believe that construction claims can be won on merits alone, then you are mistaken.

No one can deny that construction claims in the GCC in particular and globally in general are on the rise. The decline of new project awards, delivering projects at very low profit margins, liquidated damages claims for late completion are rising in frequency and amount, and tough pressure on margins among other issues are compelling owners and contractors to become more contentious and adversarial thus resulting in growing volume of claims and disputes.

Those involved in analyzing, preparing, submitting, presenting, negotiating and defending construction claims understand that winning those claims need to provide timely notices as set in the contract agreement along with the complete documentation to support the claim merit as well as the justified and fully supported quantification of financial damages and time extensions to the project’s completion date.

Technology available today like PMWeb Project Management Information System (PMIS) can provide the organization with a single integrated platform to increase their chances of winning construction claims as well as maintain the relation with project owners by providing them with the needed documentation to review, analyze and recommend an amicable settlement for the submitted construction claims. PMWeb will enable your organization to analyze and assess project’s risks including those covered in the contract agreement, prepare the needed response should a risk occur, issue formal notices for the right to claim as set in the contract agreement, quantify the damages along with the supportive documents, and submit the formal claim submission.

Assessing Contract Risks

Contract agreements include clauses that will identify which party of the contract will own, or share, the different project risks. Those include the risks associated with Acts of God, Acts of Government, Actual and Constructive Acceleration, Adverse Weather, Cardinal Change, Commercial Impracticability/ Performance, Commercial Impracticability/ Supply, Constructive Change, Defective Specifications, Delay of Approvals, Delayed Issuance of Change Orders, Delayed Notice to Proceed, Destruction of Work, Destruction of Materials, Differing Site Conditions, Early Completion Prevented, Impossibility of Performance, Improper Inspection, Inadequate Supervision, Inadequate Utilities, Interference, Labor Shortage, Lack of Access, Lack of Information or Decision, Lack of Permits, Lack of Right of Way, Late Drawings, Late, Defective Material, Payments Not Made, Scheduling Difficulties, Stacking of Trades, Strikes, Nominated Subcontractor Delay, Superior Knowledge/ Misrepresentation, Supplier Delay, Suspension of Work/Delay among others.

PMWeb is used to capture those risks, assess their occurrence likelihood and impact on the project cost and schedule to quantify the risk exposure, decide on response actions to be taken to reduce the risk exposure as well as decide on what should be the actions to be taken should this risk actually occur and who will be responsible for those actions. Those actions along with the assigned responsibilities for taking those actions will be documented in what is known as the “Occurrence Report” which will be triggered when a risk event occurs.

The Occurrence Report: Capturing the Facts

There will be different occurrence reports for each specific project risk identified in the project risk register. Each occurrence report will have two sections, the first is to identify the information that needs to be captured by the field supervisor or site engineer whenever one the possible risks occur while the second is to capture the Project Management Analysis and Action List.

The list of data and actions to be captured in the first section of the Occurrence Report could differ from one risk to another. For example, the Occurrence Report for Differing Site Conditions, the first section will include the following details:

1.     A warning for the Site Supervisor for not disturbing the site condition until he/she have notified the project stakeholders of the condition.

2.     The location of the differing site condition.

3.     Description of the condition along with photographs of the condition

4.     When the condition was first observed

5.     Who observed the condition

6.     Describe how the condition affected the current work

7.     Describe how the condition could affect future work

8.     Whether the project owner or authorized representative are aware of how the condition would impact the work

9.     If the condition delayed or disrupted the workforce or resulted the work to be done inefficiently

10. If the condition would require the use of additional labor, equipment, material or supervisory efforts

11. Where any materials lost or damaged due to this condition

PMWeb Custom Form Builder is used to create the occurrence report for each type of risk. Many of the form fields that includes locations, resources, dates among other standard contents will be picked up from predefined list to reduce the chances of data entry error as well as expedite the process of data capturing.

The project team responsible for completing the occurrence report will be required to attach all supportive documents such as pictures, videos, drawings, specifications and other project documents to the form. Those documents need to be uploaded and stored in PMWeb document management repository under a new folder that is this specific to this risk occurrence. This will ensure that all those supportive documents are reviewed by the authorized project team members.

For each occurrence report, a workflow will be assigned to capture the sequence of actions to be taken by the project team members when such a risk actually occurs. Those predetermined actions will ensure not only the event details and supportive are captured by the right project team member but also ensures that the form get reviewed by the contract management team and others responsible for managing the project’s contractual obligations.

Formal Notification

Based on the occurrence report review, the contract team will advise the project manager with the required formal notification to be sent to the project owner and his/her authorized representative. Using a PMIS like PMWeb will enable the organization to have all notification letters for each type of risk occurrence ready as templates to be used by the project team when needed. Those letter templates will make reference to right contract clauses using the proper contractual language to protect the interest of the organization. The project manager just needs to complete the basic sections of the letter before formally issuing it.

Damages Quantification

The project’s cost engineer or quantity surveyor and the planning engineer will start in quantifying the damages associated with this risk occurrence as soon as they are notified by the occurrence report workflow. Usually, they will start with daily reports which provide an excellent source of information to determine and quantify direct and indirect cost as well as delays associated with the risk occurrence. The daily report is a formal project communication that is used to detail and quantify the work executed as well as the actual resources, labor and non-labor, that were deployed on the project site on that particular day. Those resources are usually linked to the project schedule activity for which the work performed relates to.

In addition, the project team responsible for quantifying the damages, need to search and locate all project communications that could be used to provide proof for the calculated damages and in particular to the schedule delay time impact analysis. PMWeb search command will be used to search for those communications and save them as an issue folder that will be reviewed by the project team to determine their relevance to damages quantification for the occurred risk.

It is recommended that the quantification for the schedule to be captured in a document template called Delay Event form. This form which is created using PMWeb form builder will be used to capture the particulars of the delay events and their impact on the project’s completion date. The form will identify if the quantified delay is compensable or not, if it is concurrent with other delays, among others.

The delay event form will have a number of attached documents including the schedule time impact analysis report and the schedule report that shows the project’s completion date before the risk event occurrence and after the risk occurrence. In addition, all other related project communication including the occurrence report, notification letter, daily reports and others will be linked to the delay event form to ensure that event form has all the backup project documents and records to justify the damages quantification.

Claim Submission

Now the organization is ready to formally submit the change order request associated with the risk event occurrence. PMWeb Potential Change Order will be used to formally submit this change request along with the supportive documents that had been captured when the risk event has first occurred. The submission will include the additional cost and time extension claimed by the organization for this risk event occurrence.

The organization will maintain a log of all submitted claims or potential change order requests to keep track of all those changes and their status in terms of what has been approved, under review and rejected.

Conclusion

Construction claims, which are on the rise, are never won on merits alone. Winning construction claims require providing timely notices as set in the contract agreement along with the complete documentation to support the claim merit as well as the justified and fully supported quantification of financial damages and time extensions to the project’s completion date. PMWeb Project Management Information System enables you to analyze and assess project’s risks, prepare the needed response should a risk occur, issue formal notices for the right to claim, quantify the damages along with the supportive documents, and finally make the formal claim submission.