What are some features of a good claim management process?
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Given the complex nature and massive scope of construction projects together with interdependencies among stake holders, claims are often unavoidable. A claim is basically a request by one of the parties for compensation for damages caused by failure of the other party to fulfil their part of obligations as specified in the contract. There could be a number of reasons for a disagreement between both the parties. Some of them could be:
Unclear scope definition
Poorly defined requirements
Change in scope
Non payment / Delay in Payment
Unforeseen site conditions
Neglect or willful breach of contract by one party or the other
Delay in site handover
Phases of a construction process where claims can arise
To understand what a good claim management process looks like, we must know at what stages the claims arise.
1. Pre Tender: During this phase the preparation of concept design and contract documentation takes place.
2. Contract Formulation: Under this preparation and submission of tenders is done. Contract signing is also an important part of this phase.
3. Construction: Here construction of the building & execution of the project takes place.
4. Completion and Handing over: Completion of the project and transfer/Handing over of the project from contractor to owner.
It is essential to note that most of the disputes arise during the third phase i.e. construction phase. There could be many reasons for disputes, one of the major reasons among them are the poorly managed Pre-tender works and the contract packaging phase. So, a contractor must review the contract document before submission of its bid and record the ambiguities before the tende floating authority. The services of An experienced Contracts and claims management company during bidding phase can assist contractors in analysing risks and ambiguities in the tender document.
Here are some of the good practices in claim management process:
1. Prevention: This phase of claim prevention starts when the Tender is submitted by a contractor and again when construction work in project is commenced. Initial documentation plays vital role in laying solid foundation of organised contract management and claim management process.
2. Mitigation: As already mentioned, most of the claims occur during the construction phase. Sometimes it is not possible to avoid these claims but they can definitely be mitigated. To mitigate these claims some of the things that can be done are :
- Well defined responsibilities and clear scope of work.
- Effective risk management
- Strong and holistic maintainance of records and documentation thereof.
- Timely notification of claims and adoption of right dispute resolution mechanism
3. Pursuing claims: This phase include the two important things:
Claim identification: Claim identification is the process of identification of additional cost and time which is an ongoing process. A contractor has to be vigilant through out the construction period in order for timely identification of claims.
Claim quantification: In claim quantification, the cost and time impact is calculated by thoroughly analysing the events and documents. Once this is done and the claim is presented to the party under default, it is the resolution stage that comes into action.
4. Resolution: One of the best ways to resolve the claim is through amicable settlement. If this does not work out, conciliation mediation, arbitration, and litigation comes into picture for effective resolution. Some of the contract also has provision of dispute resolution through a Board formed by the owner which includes Industry experts and retired technical experts.
Note: One of the best ways to avoid a claim is to remove the root cause during the initial period because with the passage of time, money and many other resources get involved. This will reduce reduces the chance of disagreement during the execution phase.
Looking for claim management services?
We, at Contract Square Pvt Ltd, are the experts at claim management in construction and handling construction disputes and settlements. We take over all the documentation, drafting of contractual correspondence, review, analysis, and evaluation of claims so that the same may be settled amicably. To know how we can help your construction company in managing claims , call us at 9051739355.
