Claims Avoidance

and Mitigation in
Projects
PREPARED BY
SARBAJIT ROY CHOUDHURY

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  Purpose
 Introduction
 Potential Issues for Claim
 Claims Avoidance and Mitigation Approaches
• Contract Provisions
• Schedule Management
• Change Management
• Risk Management
• Project Documentation
• Partnering

Content • Elevated Project Issue Resolution

 Alternative Project Delivery Methods
• Fast-Track Construction
• Multi-Prime Construction
• Construction Management at Risk
• Design-Build
• Public-Private Partnership
• Integrated Project Delivery
 References

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Purpose

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Purpose
 The purpose of this presentation is to summarise and to present the methods to avoid claims and their mitigation
in construction projects
 As the construction projects frequently face claims for various reasons, avoidance and mitigation of the claims will
be a win-win situation for all the project stakeholders
 In preparation of the presentation, the author has referred various literatures and guide books. Among them
‘Construction Claims Guide’ from Arcadis has been very insightful

Disclaimer: The information used in the presentation has been taken from the guide books and literatures as
mentioned in the references. The presentation is prepared and shared for knowledge sharing and study purpose only
by the author

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Introduction

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Introduction
 Claims are costly, lead to delays and damaged relationships, but they are avoidable

 Strategies and practices can be used to reduce the frequency of claims, because a number of claims appear to be
unwarranted

 In a formal survey owners identified the following as primary drivers of claims:

•Increased profit pressures on contractors: 30 percent
•Poorly developed or executed contracts: 20 percent
•Increasing risk allocated to contractors: 20 percent
•Inadequate owner involvement: 10 percent
•Overly aggressive schedules: 10 percent
•All of the above: 10 percent.

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Potential Issues
for Claim

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Potential Issues for Claim
 Project and risk go hand in hand
 A risk to a project is a potential claim in future. Disruptions, delays, unavoidable conditions leads to disputes
 Risks need to be allocated to the party best able to manage those risks
 A claim can damage reputation, put the project in danger and drain the resources of the stakeholders

Example Smooth work

Price increase progress
covered through without any
Unavoidable Impact escalation clause dispute
2 likely
Condition
outcomes
Increased cost
Sudden to the
increase in steel contractor
prices

Price increase not Disputes, Slow

clearly work progress,
covered/mentioned Drain on
in contract resources

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 Potential Issues for Claim
Potential
Issues

Contract Labour
Country Client Issues Financial
Issues Issues Equipment
Issues •
•
Client default
Late payment Issues Material • Availability
• Escalation
• Changes in
Labour laws
• Environmental • Extension of • Payment Issues • Labour payment
increase
Issues
clearances time • Retention money • Specifications • Restricted
• Change in legal • BG Release • Taxes and Duties • Facilities for
• Termination • Availability working hours
laws • Discount • Subsequent labour
• Suspension • Increase in • Restricted
• Economic • Acceleration of legislation • Safety issues
• Liquidated prices movement
Stability works • Release of retention • Nominated Sub
damages • Changes in • Sound pollution
• Exchange rate • Authority money contractors
• Variation material • Age of equipment
fluctuations approvals • Change in Taxes
• Defect liability
period

Site Access Design Issues Operational Risk

Issues •
•
Change in design
Delay in design • Utility shifting
• General access • Existing utilities
• Delay in design
• Site access • Force majeure
approval
• Land for temporary • Dewatering
• Delay in shop
use • Ground conditions
drawing approval
• Land for permanent • Method statement
works approval delays

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Claims Avoidance
and Mitigation
Approaches

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Claim Avoidance and Mitigation Approaches
 Disputes in the construction projects can be resolved if attended on time before it becomes a claim
 It should be the priority to avoid disputes before the start of the construction and mitigate them at the earliest during
the construction
 The following may be some of the methods/approaches to reduce the claims

Approaches

Elevated
Contract Schedule Change Risk Project Project
Partnering
Provisions Management Management Management Documentation Issue
Resolution

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Contract
Provisions

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Claim Avoidance and Mitigation Approaches
Contract Provisions

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Claim Avoidance and Mitigation Approaches
Contract Provisions

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Schedule
Management

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Claim Avoidance and Mitigation Approaches
Schedule Management Schedule specification need to cover the following:

Max activity duration

Schedule Format – Timeframe and
to be less than
procedure of
critical path method duration between two
program review
updates

Timeframe and
Qualification of Procedure for EOT
procedure of
contractor scheduler requests
program approval

Remedies for failure

Timeframe for Ownership of project
to meet schedule
baseline submission float
specs

Submittal and
Program update procurement Submission of
frequency-monthly activities to be schedule format
included in schedule

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Change
Management

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Change Management
1. Quality of drawings and documents
helps in scope clarity
2. Adequate time need to be provided for
the design works
Changes are most 3. Feasibility of construction need to be
also checked at the early stage of design
common causes for to reduce later changes
construction claims 4. When change is unavoidable, then
minimum time to be taken to
implement the change
5. Contractor need to give timely
notifications to the client for the
impacts –schedule, cost, risk, quality
and safety

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Risk
Management

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Risk Management
1. Forward planning is essential to avoid/minimize the risks

2. Risk assessment and quantitative modeling will help to reduce the risks which impacts schedule and cost

3. Risk assessment at the start of the project and periodic review throughout the project life

4. It helps the project team to prioritize the risks and justify the measures to mitigate or avoid the risks
completely

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Project
Documentation

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Project Documentation
1. Single point contact for claim correspondence

2. Response to be given in a timely manner whenever

required

A well-structured and - 3. Well established central filing system to be maintained

implemented document for hard and soft copies of the documents
management plan, including
organized project record 4. Address only one topic in correspondence and subject
keeping, is an important line to be clear and concise
component of successful
project management, claims 5. Daily progress report to be submitted daily mentioning
avoidance, and cost-effective the drawings received, stoppage of works, actions
fact-based dispute resolution required from client, major issues hindering work
progress other than construction activities

6. Maintain site DPR and site instruction book to

document the changes as per client verbal instructions

7. Keep productivity reports at site for all ongoing

activities –as much detail as possible

8. Cost of the changes to be tracked and documented in a

timely manner

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Partnering

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Claim Avoidance and Mitigation Approaches
Partnering
Key features of Partnering

Involve key decision Appoint an external Workshop at the

makers who can expert for partnering beginning of the
affect project success workshop project

Follow-up workshops Better

Reduces risks of
during the communication is
disputes becoming
construction period key to avoiding to
claims
claims

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Elevated Project
Issue Resolution

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Claim Avoidance and Mitigation Approaches
Elevated Project Issue Resolution

Key Features

Many project level issues
cannot be resolved at the
project level
These type of issues can be
resolves by executives of the
owner and the contractor
Project executives meet Promotes early resolution of
periodically issues and avoidance of
claims
Meetings can be monthly or
quarterly
A formal issue resolution
process is very helpful

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Alternative
Project Delivery
Methods

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Alternative Project Delivery Methods
 Claims are associated with all type of project delivery methods
 Claims are predominant when the allocation of risks is not consistent with the parties abilities to manage and control
the risk

Project Delivery
Methods

Construction Public Integrated

Fast Track Multi-Prime Design-Build Private Project
Management
Construction Construction Partnership Delivery
at Risk

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Fast Track
Construction

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Fast Track Construction

Concept Benefit Risks

Construction is Costs associated Risks include to
started early even with an earlier coordinate
before the design overall between different
of the later part completion interfaces to
of the project is outweigh the risk avoid disputes
completed associated with and claims
early construction
start with
incomplete
design

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Multi-Prime
Construction

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Multi-Prime Construction

Concept Benefit Risks

Project is broken Specialized Timely
up in several contractors coordination is
prime contracts- performs required between
civil, mechanical, specialized works all the prime
electrical etc. in the project contractors

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Construction
Management at
Risk

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Construction Management at Risk

Concept Benefit Risks

CMAR is engaged When the design Risk of claims is
by the owner to is near to less in this
perform pre- completion, the method
construction CMAR develops a
services contract for
specific scope and
price. It helps to
generate fewer
claims as scope
and risk is well
defined

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Design Build

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Design Build

Concept Benefit Risks

D&B contractor Shifts design and Risk of dispute
will design the schedule related and claims
works and then risks from owner persists due to
do the to the contractor ambiguity in the
construction contract language

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Public Private
Partnership

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Public Private Partnership

Concept Benefit Risks

Developer works With minimum Financial
with an owner upfront cost, condition of the
and gives various owner can developer is a key
services like site develop the factor
selection, infrastructure
financing, design
and financing Control of the
project is with the
developer

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Integrated
Project Delivery

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Integrated Project Delivery

Concept Benefit Risks

Three-way Risk and Only specialized
contract between responsibility of agencies who
owner, contractor each party is well have worked
and designer established together
frequently can
Greater certainty perform
of cost and risks
Unique insurance
Parties are less coverage is
likely to claim required

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References
1. Construction Claims Guide – 3rd Edition-Arcadis
2. Acceleration Claims on Engineering and Construction Projects – Richard J Long –Long International Inc
3. Reducing Construction Costs: Uses of Best Dispute Resolution Practices by Project Owners: Proceedings Report-
2007

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