In my last 3 posts ‘Construction project variations – have you included all your costs’ (Read more), ‘Understanding the real cost of delays on your construction project’ (Read more) and ‘Are you working for free on your construction project’ (Read more), I discussed the reasons for delay claims and scope changes and what costs could be included when construction companies submit their claims for these changes and variations.
However, a claim could be rejected by your client if it doesn’t include all the correct and required information.
Put the effort in
I have seen many poorly put together claims. Some for millions of dollars, yet construction companies seem to think that they can apply minimal time and effort to formulating their claims. That it will be easy money! The client will pay their claim – they just have to! Some even delegate their claim preparation to junior inexperienced quantity surveyors or contract administrators. Sometimes the construction project manager isn’t even aware a claim has been submitted and is blindsided when their client takes offence to a spurious or unsupported claim.
Some of these claims are poorly thought out and presented. I’ve seen claims with arithmetic errors, spelling mistakes (even incorrectly spelling the client’s name), factual errors, contradictory information, confusing language and unsupported evidence.
Consider how hard a contractor has to work to earn ten thousand dollars, or even a million dollars, so why then do some construction companies expect to spend minutes, or an hour, preparing a claim for the same amount. Construction companies should ensure that a knowledgeable and experienced person is allocated to draft the claim (familiar with the contract, the client and the work that’s been done) and that it is reviewed and checked by the project manager before it’s submitted.
What to include
A properly drafted and well thought out claim will be hard for your client to refute and it’s likely to be successful.
To increase your chances of a successful claim here are some points to consider. Claims should have:
1. a description of the event
2. the cause of the event
3. the date of the event, where relevant
4. the impact of the event
5. steps taken to mitigate the impact
6. the cost and time impacts of the event
7. all supporting documentation attached, or should refer to supporting documentation correctly referencing the relevant contract clause numbers, construction drawing numbers, schedule or program item numbers, correspondence, Bill of Quantity items or construction contract specifications as required
It’s essential that this supporting documentation is relevant to the claim, supports the claim and is not contradictory (any contradictions must be explained as part of the claim).
As part of formulating the impact of the event all calculations and schedules should be included. The claim schedule should reference the approved contract schedule. Calculations should reference where the facts and figures came from and how they were put together. The calculations should be checked for arithmetical errors (which can occur all too frequently).
Remember to include all of your legitimate and claimable costs (as discussed in my previous articles). It’s usually difficult to add in extra forgotten costs after you have submitted your claim. It’s unprofessional and will annoy your client. It may even cast doubts on the legitimacy of your original claim.
Notifying your client
The client must be notified of variations as soon as the contractor becomes aware of them, and certainly within the time specified in the contract. Failure to do so may mean the contractor loses their right to claim.
The claim must:
1. be lodged within the time-frame specified in the contract
2. be addressed to the correct person
3. be delivered to the correct address
It’s often a good idea to discuss large or contentious claims with the client before submitting them. This not only forewarns the client the claim is coming, but also provides an opportunity to discuss the reasons and the merits of the variation.
Also ensure the client is aware that you are willing to discuss the claim and answer any questions they may have. I use the word ‘discuss’ and not ‘negotiate’. To indicate that you are willing to ‘negotiate’ gives the idea that you have built fat into your claim and that not all the costs are legitimate, which will immediately put your client on their guard and they will already doubt that your claim is legitimate or accurate.
Claims that are clear and concise, and which have facts which are supported and can easily be justified are often agreed and settled with clients with little effort. Once contractors get a reputation of submitting inflated or bogus claims it can become difficult to convince the client when a reasonable and just claim is submitted.
Of course a claim can be more easily supported if the contractor has maintained accurate documentation during the course of the construction works, communicating regularly with the client, and has taken all reasonable steps to prevent the claim from arising.
(Paul Netscher is the author of the acclaimed books ‘Successful Construction Project Management: The Practical Guide’ and ‘Building a Successful Construction Company: The Practical Guide’ and this article has been adapted from these books. Both books are available from Amazon and other retail outlets)
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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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