Claims are an inevitable process on most construction projects – there will be changes and delays. Yet some projects seem to have multiple claims and delays. A recent study by KPMG found more than 70% of the respondents reported that their projects increased by more than 10%, and 75% experienced delays of more than 10% on their timeline.

But it isn’t just clients who receive delay and cost claims from their contractors, but also contractors who receive claims from their subcontractors.

Unfortunately many projects end in lengthy, acrimonious, legal disputes between owners and managing contractors, and between contractors and their subcontractors. Frequently there are no winners in these situations – except of course the lawyers.

The outcome of these variation claims is the inevitable increase in costs and delays in the project completion. But there are other impacts which include:

• The management time taken to put together and argue the variation claims. Time which could be better spent elsewhere on the project.
• Sometimes legal costs to fight the claims.
• Frequently the breakdown of the relationship between the contractor and their client, or between the contractor and subcontractor.
• The adverse impact on reputation.
• The negative impact on cash flows.
• The possibility that there won’t be money to pay the claims.

The obvious solution is to avoid the reasons for variation claims in the first place. When variation claims do arise these should be dealt with speedily and in a spirit of goodwill between the parties.
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How to avoid variation claims on construction projects

1. Have a sound contract document which doesn’t contain ambiguities, contradictions or loopholes. This document must clearly detail the duties, responsibilities, and obligations of the contracting parties.
2. Adjudicate the prices/quotations received to ensure that the contractor has priced all the work and hasn’t included any clauses which aren’t acceptable. Check that the contractor is capable of completing the work, that they understand the project and have the necessary resources. The wrong contractor or one that has submitted a price that’s too low will submit variation claims in an attempt to recoup their losses.
3. Ensure that the contractor or subcontractor pricing the work is provided pricing documentation that has a clear scope of work and that includes all the contract terms and conditions which will be included in the final contract documents.
4. Provide as much information as possible to the contractor before they submit their price. Remember any new information or changes after the contract is agreed may provide a reason for a variation claim.
5. Ensure that there is an agreed construction schedule with clear milestone dates.
6. Know when the contractor, or subcontractor, requires access and information, and ensure these are provided before the required date.
7. Monitor progress against the construction schedule and ensure that follow-on contractors won’t be delayed by the previous contractor.
8. Make sure that changes are limited.
9. Ensure all instructions of a contractual nature are in writing. Verbal instructions inevitably lead to misunderstandings and claims.
10. Understand the contract document, knowing what your obligations are in terms of the contract. Make sure that you and your team fulfil these obligations.
11. Foster a culture of open and honest communication. The parties should highlight problems, or potential problems, as soon as they are noticed. Solutions should be sought to mitigate the problem. Early intervention can often mitigate the variation claim.
12. Clients need to be aware of the consequences of their actions, or lack of action, on the project. Even small decisions can have ripple effects across the project causing a bigger problem elsewhere.

​This article was first published on the ClockShark website. To visit this website and continue reading the article click on the link above.
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Most construction projects hire some, or all, of their construction equipment. These items could be portable electric tools, through to monster bulldozers and excavators. Sometimes the item is only required for a couple of days (even a few hours), while other equipment is required for the duration of the project. On large earthmoving projects hired equipment could make up some 40% of the project costs, so even small savings can make a difference to the project’s profits.

What to check for when hired equipment arrives on your project
The task of receiving equipment deliveries is often left to a person who has not been told what to look for. Things to check when hired equipment arrives on the project include:

• That the item is actually for the project (sounds very basic, but it wouldn’t be the first time something is delivered to the incorrect project).
• That the item is what was ordered – sometimes suppliers deliver smaller, or bigger, machines, and on occasion even the wrong item. (Bigger items usually use more fuel and they might not be suited for the task. Obviously, small items may be ineffective, and you’ll probably be paying the price of the original item that was ordered.)
• Damage to the item, such as; bumps, scratches, cracked windows and damaged lights. These damages should be noted on the delivery note, put in writing to the supplier, and if possible photographs should be submitted to the supplier, as well as a set kept on the project. Suppliers will charge for damages they find on the machine when it’s returned, so it’s important to record existing damages so the project isn’t charged for pre-existing damage when the item is returned.
• The condition of wearing parts and cutting edges, since the project is normally charged for their replacement or additional wear.
• The condition of the tires, because those that are damaged or in a poor condition often result in deflated tires, which not only cost time to repair but the project could be liable for new tires when the item is returned to the supplier.
• Ensuring the item is in a roadworthy and in an operational condition, that there aren’t oil leaks. It has to be able to do what it’s supposed to do.
• That all the parts and fittings are included with the delivery, and that wheeled machines come with at least one spare tire.
• The fuel level of the machine which should be recorded, since suppliers normally expect their machines to be returned full of fuel, and will charge for additional fuel they have to put in (but of course the converse doesn’t happen, and often machines arrive with minimal fuel. When large items take several hundred litres of fuel, this could result in a significant additional cost).
• When the item is being charged at a mileage rate, the odometer reading should be recorded and compared to what’s on the delivery document.
• When the item is being charged for the hours or days it’s on the project, then it could be important to record the time the machine arrived on the project. For example, if the item arrived in the late afternoon, the project shouldn’t be charged for that day.

Most importantly the project member who requested the item should be notified the item has arrived on the project. Often machines arrive and then aren’t used for several hours, or days because the person who requested the machine doesn’t know it’s available.
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Where the item is supplied with an operator, it’s important to check that the operator has all the correct licenses to operate the equipment. The operator should attend a project-specific introduction or induction so that they are aware of the rules and the hazards of the project before they start working.

Understanding the conditions in the hire agreement
Often items of equipment are hired, but the project team has not read the terms of the hire agreement, which can be fairly stringent. The terms should include:

• The hire rate for the machine, and whether it’s charged hourly, daily or monthly.
• The minimum hours, or minimum days, the item will be invoiced for.
• Whether a surcharge applies if the machine is worked excessive hours or travels more kilometres.
• What the hire charges will be if the machine can’t work due to rain, force-majeure, or non-work days on the project.
• Which party is responsible for insurance – more importantly is the machine insured?
• Who is responsible for repairs and maintenance (these costs can sometimes be large, adding significantly to the hire costs).
• Who supplies fuel, oil and cutting edges, and for cranes the slings.

It may be possible to negotiate some of these terms when the order is placed, which could result in considerable savings later.

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​I’m sure every one of you are putting off tidying some part of your house. Whether it’s the garage, your clothes closet, your work room, or the garden shed. I’m sure there’s some part of the house where you take one look, then walk away, leaving it for another day. In the meantime the thought of all that mess hangs over you, and you’ve always got it nagging at the back of your mind. Then, when you finally get the courage and jump in to sort the junk, it’s often easier than you thought it would be. Sure, there are always some tough decisions, like throwing out those items you remember fondly wearing, but you haven’t worn in ages because they probably don’t fit anymore. You’ll probably find some junk that you’ve been hoarding for years, convinced that it will be some use one day. Some of you who are savvy may even turn some of that unwanted junk into cash by offering it on eBay or Craigslist. Hauling some of the better clothes to the local charity store can be immensely satisfying – cleaning out a room in your house and donating to a good cause is really good for your soul.

The important thing is that as long as the problem remains unsolved,  it’s like this dark cloud hanging over us every day. Some of you probably have rooms, cupboards or drawers in your house that you are too scared to even open. But, once the mess is tidied and rid of junk, it’s a tremendous relief and suddenly you are free to open that room, cupboard or drawer. The amazing thing is that once you set your mind to the task of clearing, and you are committed to that task, it usually gets done much quicker than you imagined. Of course, there are some who will make half-hearted attempts to clear the clutter, then give up before long – often leaving more of a mess than before. Those half-hearted attempts waste time and energy, but more importantly they make the problem seem even bigger than it actually is.

​Better still, don’t let you project get into a mess in the first place. If it’s planned properly from the start, and if everyone approaches the project logically and orderly, then many problems can be avoided. If hard decisions are made as needed, then problems can be avoided. If problems are dealt with when they arise they won’t snowball. Exactly in your own homes, if you have a plan and a place for everything, and stick to that plan, ensuring that everyone else in your house follows that plan, then everything will have its rightful place and should be returned there. When something is broken it either gets fixed immediately or it gets trashed. It’s pointless keeping that jacket that no longer fits in the forlorn hope that one day you’re going to shrink a few sizes and it will fit you again – it probably won’t happen, and if it ever does happen the jacket will be long out of fashion.

Once a mess has been tidied it’s immensely satisfying, its like a whole weight has been lifted from your shoulders. Suddenly it’s pleasant to enter that room, or visit that project.

​So, if your project is in a mess, make the time to sort it out. Have a strategy and a plan. Break the problems into small parts that can be more easily dealt with. Understand the underlying reasons for the mess. Solve them one by one. Don’t let the whole messy situation overwhelm you. Be bold, make the hard decisions when you have to. Salvage what you can salvage. Trash what must be trashed. Create order from the chaos.
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Go out today with a mission to resolve those problems, to tidy those messy projects.
​#constructionmanagement #constructionprojectmanagement #contractors #constructionindustry