Negotiating a construction variation claim – read this first to improve your success
Most of us have at some time submitted variation claims to our customers for changes encountered during the course of the project. Some are for extra costs only, while others are the extension of time claims which usually also result in additional costs. On some projects, these claims are worth millions of dollars.
It’s essential that you submit a well thought through and substantiated variation claim. However, even if your claim is well presented and includes all the facts, clients usually require a meeting to discuss your claim. They often have questions, dispute your facts and calculations, or just believe that contractors automatically inflate their claims and it’s, therefore, their right to negotiate the claim down to a smaller value. Sometimes they don’t understand the claim. In fact meeting with the client soon after the claim is submitted enables you to answer questions and explain the basis of the claim before the client’s team has made a firm decision regarding your variation claim. Once a claim is formally rejected it can be difficult to reverse the decision. Often egos come into play and people don’t want to be seen to lose face by backing down.
These claim meetings are important because they can secure extension of time and variation claims which can be worth millions of dollars. Failure to resolve these claims can see them drag out for months and even years – often costing huge amounts of time and money. They can become bitter disputes, souring the relationship with your client and even damaging the project. As long as these variations aren’t settled your company is probably not being paid the claim, which can be detrimental to your company’s cash flow and possibly put your company’s future in jeopardy. You need to settle variation claims as amicably and as quickly as possible, ensuring you win what’s due to your company.
Face to face meetings with your client and their team is often useful to shortcut the claims process, giving you an opportunity to answer their questions and understand their concerns. Unfortunately, many contractors go into these meetings ill-prepared, or with an attitude spoiling for a fight.
Here are a few tips to help you win your variation claims.
Before the meeting:
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The opinions expressed in the attached articles are those of the writer. It should be noted that projects are varied and different laws and restrictions apply which depend on the location of the contractor and the project. It's important that the reader uses the supplied information taking cognisance of their particular circumstances. The writer assumes no responsibility or liability for any loss of any kind arising from the reader using the information or advice contained herein.
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