No doubt technology enables building projects to achieve increasingly complicated designs and shapes. But as construction schedules start accelerating and continue to do so, the pricing and delivery of materials become quite volatile. Labor also becomes expensive. When deadlines aren’t met, construction claims start knocking on the doors.
There are various facets and perspectives related to a complete and clear understanding of what a construction claim is. How does a person or an entity determine the proper amount of money in a systematic manner to be paid, detect an accurate change in the contract’s time, or any other relief when analyzing a claim?
The answers and their significance (plus the significance of questions) should never ever be underestimated. It directly impacts the settlement. Moreover, the evidence presented to the court should be true, not outdated, and not labeled as false else time-wasting tactics cost a lot in these matters.
Underscoring the need for clarity serves as an alternative when it comes to settling claims i.e. dispute arbitration, litigation, or dispute avoidance. The key paths to resolving disputes are quite expensive (i.e. require a lot of time and money). Such a reality can be appreciated by both project owners and contractors.
The average time frame for filing a case with the American Arbitration Association to award a claim was around 232 days. Also, the median time of a jury or bench trial was almost more than 2.25 years.
The bottom line – analyzing factors leading to construction claims
The bottom in this regard pertains to the fact that the hourly or per diem charges taken by both arbitrators and lawyers are indeed considerable (and also differ by quite some margins). In litigation notably, there isn’t any time limit on the discovery process, whereas in arbitration proceedings discovery is limited to the exchange of documents and any depositions in small numbers.
Here are five key elements that can help put a construction claim into sharp focus, expedite proper analysis and lead to a resolution:
Determining entitlements under the contract(s)
Professionals are surprised how usually a claim’s narrative often fails to address the contract provision defining it. It is important because provisions of a change order clause, or that of delay or work suspension, unusual weather, no damages for delay or changed condition of the site have different requirements for the following:
- Notice.
- What the contractor might be entitled to/for (quantum analysis Dubai)
- Any allowances for the delay.
Verification of a notice provided on time
A claim analysis should be able to verify that a notice was given on time regarding the incident of the claim. Allotment of time for this matter depends solely on the nature of the construction claim.
An instance of how a timely notice can differ can be observed during a comparison of a Notice of Claims clause with a changed site condition clause. The former requires notice within 21 days while the latter calls for it within 14 days.
The inability to observe this critical detail in the schedule (which the contract stipulated) can seriously put the right to file a claim in jeopardy. This also raises the possibility that the claim could be waived too.
However, claimants are often well advised to use available authorized means, by way of contract, delivery channels (like an overnight delivery service) and if possible, have proof of receipt when submitting notice for claims.
Calculation of the quantum as mentioned in the contract with supporting documentation
Close observation and careful reading of the contract is key to the calculation of the quantum. The contract can allow or restrict expenses during a claim’s submission.
The AIA Document A102 – 2017 is used. It pertains to the Standard Form of Agreement between an Owner and a Contractor. Here the payment’s basis is the work’s expense plus a fee with a guaranteed maximum price and article 7 identifies expenses that can be included and article 8 defines expenses that cannot be reimbursed.
In the case of a contract that has a provision for no damages for delay, no quantum is allowed for any delay event.
Under a suspension of work clause, usually, allowances are made for only increasing field expenses but not for additional profit on the increased costs. Hence correctly understanding entitlement’s basis under the terms of the contract is key to the way the request for additional compensation is calculated.
Analysis of delays through project schedules and key records
A critical path is basically the longest sequence of construction activities that are needed for completing a project. Unless remedial steps (like resequencing work) can be taken, delays to any critical path can accelerate a project’s deadline and push it beyond the date of completion.
Non-critical activities can be absorbed by the schedule, without affecting the on-time completion of the project.
Requests for time extension make a schedule review necessary. It helps ensure that it can be achieved within a project’s constraints and limits. Claims focusing on delays should be analyzed to see the event’s specific category.
Also, determining the kind of activities that comprise the critical path, it is required to determine the amount of float associated with non-critical activities. Determining the nature of the delay (excusable, non-excusable, compensable or not, a critical path impact, concurrent or consumption of float is also compulsory.
For those who are not aware, here are some more things to know:
- Excusable delays are those where the contractor is entitled to a contract’s time extension for completing work. In other words, a contractor completing work late is excused.
- Compensable delays are those where contractors are entitled to time extensions and compensation. Compensation is in the form of an adjustment to the contract price for additional expenses that came directly from the delay.
- Unexcused delays are those for which the contractor has responsibility and they do not entitle contractors to any time extension or additional compensation. If the contractor hasn’t completed the work when required and the delay is unexcused. Owner will be entitled to damages for contractors failing to complete work on time.
Industry experts recommend that any critical path schedule must be tested with other contemporary project records (like daily reports). This will help determine whether the schedule and claimed delay can be verified. Daily reports can often be a weak link despite the key level they hold.
Apart from documenting weather conditions, description of work carried out, and calculating the amount of labor and equipment on the job site, daily reports must also track time spent by equipment and personnel either by categories of work, or expense codes.
Project advisory professionals also recommend that reports should be able to present consistent information and details on typical workdays, holidays, and those days where the delays/interruptions took place.
It should be emphasized to all partners at work sites that keeping themselves abreast with daily reports is needed. Backdated and outdated documents are not accepted as evidence by courts and arbitrators.
Ensuring no waiver issues exist
It is wise to ensure that claims are scrutinized to make sure if there were any waiver issues that could cause more issues. Conditional and unconditional lien waivers are examples. The unconditional surrender of all rights to file a lien whether or not one was paid. Whereas the conditional one surrenders the right to file a lien upon payment.
