Are construction project managers contractually savvy?
Many construction projects involve acrimonious legal fights over the contractor’s variation claims. Some of these battles drag on for months, even years, after the project is finished. They take a huge amount of time, effort and cost. Can these disputes be avoided?
In my career I’ve been involved with over 120 projects in various roles, from site engineer, to project manager, project director, and general manager of the construction division. On almost every project we lodged variation claims for both cost increases and delays. 99% of these claims were settled with the client without resorting to outside intervention or legal help. In most cases we agreed amounts which were more than satisfactory for us. Sure, on some occasions we had to concede when we were wrong, once or twice we were beaten on a technicality, and sometimes we looked at the bigger picture on the project where it was beneficial to allow the client a win in return for the benefits of other claims we settled. Some of our contracts nearly doubled in value because of variation claims, and some had extension of times agreed of several months. Despite these many and sizable claims we remained on good terms with our clients and their team, continuing to be employed on their next projects.
Now winning these claims was often vital for us, and without the wins many of the projects may have ended in a loss, or we would have finished beyond the original agreed project completion date which would have result in penalties or damages.
I was personally involved with many of these claims, some claims were at my instigation, some I put together from scratch, many I provided input and advice to those preparing the claim, and most I argued the merits of the claim with the client’s team.
So I find it alien that some project managers leave the preparation of variation claims entirely to their quantity surveyors, contract administrators, or other people in their team. Some companies even pass variation claims directly to external legal teams to put the claim together. Now I’m not saying that these people aren’t capable of preparing claims, but I believe that project managers should play an active part in the process.
I’ve written several construction books, and I find it interesting that my book ‘Construction Claims: A Short Guide for Contractors’ sells the least copies of them all, and sells only one tenth, sometimes fewer, of the copies of my top selling book, ‘Successful Construction Project Management: The Practical Guide’. Now at first I was concerned that my claims book wasn’t great. I know that there are more detailed claims books on the market, but I tried to make my book an easy read that gave a general overview to variation claims. Fortunately the claims book has received some good reviews. So why are there so few sales? I realise now that having a better title may have helped! But looking at the other construction claims and construction contract books I’m surprised to see that they also sell as poorly as my claims book, while there are many general construction management books that sell equally well, even sometimes better than my top seller. Obviously reading books about variation claims is not high on the priority list for project managers. Is it because they are boring, maybe because project managers believe that they already have a good understanding of the topic, or because project managers believe that all contractual matters should be left in the hands of others?
But, this is where many of the problems arise on construction projects.
Why project managers need to be contractually savvy
It is vital that project managers (site managers, construction managers, site agents) have a good understanding of variation claims.
I always enjoyed preparing variation claims, arguing their merits and winning the claims. I found it a very satisfying part of my job.
It is almost inevitable that projects will have changes and delays. It is vital that the contractor is compensated for these. However, no matter how legitimate the variation claim may appear to the contractor they must present the variation claim timeously, in accordance with the contract documents, and with all the supporting facts and documents. Contractors usually have only one opportunity to quantify the full time and cost impacts of the variation.
It’s therefore vital that project managers read and understand the project’s contract documents, that they ensure that proper systems are in place to maintain accurate records, and that they take an active role in the formulation, preparation and the presentation of variation claims. These claims can be worth millions.
It’s time that project managers brushed-up on their contractual knowledge. There are many valuable courses and books available.
What do you think?
Should project managers take an active role in preparing variation claims?
This article is adapted from information in the author’s popular books: 'Successful Construction Project Management: The Practical Guide' and 'Building a Successful Construction Company: The Practical Guide' and 'Construction Project Management: Tips and Insights'
'Construction Claims: A Short Guide for Contractors' is another of Paul's useful books.
Paul has recently published 'Construction Management: From Project Concept to completion'.
These books are available on Amazon and other online book stores.
Paul publishes articles regularly on LinkedIn and his website.
Paul writes regular articles for other websites, gives lectures, mentors, and is available for podcasts and interviews.
© 2017 This article is not to be reproduced for commercial purposes without written permission from the author.
Copyright 2016 - The attached articles cannot be reproduced for commercial purposes without the consent of the author.
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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