Construction projects involve clients, labourers, subcontractors, equipment,
and material. With multiple parties, diversified goals, and expectations
involved, it may lead to conflicts. Hence it becomes imperative to have a claim
management process for construction projects.
“A Construction Claim is a request by either party to the contract, usually the
contractor, for compensation for damages caused by the failure of the other
party to fulfil his part of obligations as specified in the contract. The
compensation is usually an additional payment or an extension of time
(EOT).”
Causes of Construction Claims:
Conflicts in the construction industry occur mainly due to disagreements
between various parties involved, leading to construction claims. Some of the
causes may be due to changes in scope, changes in plans or specifications,
quoting low rates, design errors, idle machines, idle labour, poor quality of the
materials, delay in supply of materials, delay in payments, delay in
commencement, natural calamities, or unforeseen circumstances.
The most common types of Construction claims are:
1. Change Claims: A modification of the scope of work may directly
impact the construction cost – if the scope of work has increased, the
contractor may claim additional expenses incurred.
2. Delay Claims: When a project's completion date is delayed beyond the
actual completion date, it leads to delay claims. It occurs due to
unforeseen circumstances such as bad weather, natural calamities,
flawed design, or a pandemic.
3. Extra work Claims: In a construction project, requests for additional
work after the job has begun lead to extra work claims.
4. Contractual Claims: Unclear contracts without explicit details of the
parties' roles, responsibilities, or liability lead to contractual claims.
5. The difference in pricing and measuring Claims: It occurs when there
is a conflict between the contractor and the owner about the quantity
and pricing of the materials.
6. Different site condition Claims: It occurs when the actual physical site
conditions and the ones laid down in the original contract differ.
7. Acceleration Claims: When the owner wants to expedite the
completion of the project to an earlier date, it leads to acceleration
claims.
8. Damage Claims: During the construction process, the contractor may
damage the property; in this case, the owner can claim to retrieve the
loss.
9. Payment-related Claims: Payment-related claims include unpaid bills,
deduction in wages without apparent explanation, and delay in
payment.
10. Injuries: In case of accidents in construction sites, a claim is made if
the safety protocols are not in place.
There are usually two parties in a construction claim process. One is claiming it,
and the other is preventing it. The claim management process has four phases.
1. Prevention: The best way to avoid claims is by creating a sound
contract that covers all contingencies and mentions all parties' roles,
responsibilities, and liabilities. The owner should avoid any ambiguities
in the agreement.
2. Mitigation: It is difficult to avoid all claims. However, it is possible to
mitigate them through effective risk management, clear contract
terms and conditions, promptly addressing any concerns, maintaining
accurate project records, and sound management practices.
3. Claim Identification and Quantification: Claim identification analyses
the scope of work and the terms and conditions. A claim, once
identified, is quantified as an additional payment or an extension of
the timeline. If applicable, perform a critical path analysis to calculate
the project's delay. Additionally, calculate any other costs incurred
from the claim.
4. Resolution: Claim resolution is a process of resolving the claim issues.
Negotiation, mediation, arbitration, and litigation processes will be
conducted depending on the resolution.
Construction disputes are complex and have unique characteristics. The parties
involved may have the same goals but may have disagreements and conflicts.
A good claims management process ensures a systematic approach to
identifying claims, evaluating the same, and providing the necessary resolution
on time.
Are you looking for claims management services?
Contract Square Pvt.Ltd is a reputed claim management company. As of now,
we are managing contracts worth around Rs 24 billion. We have ensured
successful arbitrations to the tune of over Rs 12 billion. We follow a systematic
process to document, evaluate, analyse and eventually settle construction
claims. For more information, contact us enquiries@contractsquare.co or call
+91 9903023893.
