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Construction Project:
Claim and Dispute Resolution
by
Melaku Tadesse (Civil Engineer), CM

melakutdsse@gmail com
Tel: 0911 232267

Feb. 2020
 Discussion on Claim
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 Setting Discussion Objective: Summary of

expectations of participants
 Overview on Contract and Risk
 Contracts of Interest: FPPA & FIDIC standards
 Claim
 Interpretations & Principles
 Sources and Categories
 Procedures for Submission
 Preparation for Submission
 Discussion on Dispute Sources and
Resolution
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 Resolving Contract Disputes

 Setting Discussion Objective: Summary of
expectations of participants
 Dispute Sources
 Mechanisms commonly in use
 Practices under the NCB & ICB Contracts
 Overview on Contract and Risk
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 Risk defined (conceptual): which expression defines

project risk better?
 RISK:

a. is possibility of meeting danger or suffering, harm,

loss etc:
b. uncertainty inherent in plans and the possibility of
something happening that can affect the prospects of
achieving project goals:
c. an uncertain event or condition that, if it occurs, has
a positive or negative effect on a project’s objective
 Overview on Contract and Risk
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 Benefits: focusing on project risk management helps to:

 Prevent/mitigate surprises of events and minimize their
negative consequences through proactive actions.
 saves projects from facing failures by identifying risk
events and estimating consequences in advance
 consider various scenarios in relation to available “best
practices”
 Assure completion of the project to be within appropriate
time and cost; conforming specifications (stated quality)
 build or enhance partnership between/among parties
involved
 Overview on Contract and Risk
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 Risk requires to be identified and managed before and

after their occurrence
 Contract risks are mainly related to the works (technical),
contract time, cost and also to the safety of human and
property
 Thus, Project Managers and Planning Engineers should

consider
 the entire requirement is well understood the terms and
conditions of the contract are clearly understood

 Project management components are well addressed

 Claim: Interpretations & Principles
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 claim is an assertion of a right to money, property, or to a

remedy (dictionary definition)
 In construction contracts claim is taken to be an assertion
for additional monies due to a party or for extension of time
for completion
 claims are meant to compensate loss not a way of getting
profit beyond anticipated originally
 Usually a result of unexpected circumstance not described
in contract document
 inevitable since it is practically impossible to foresee every
event that might occur during the construction period to
plan in advance.
 Claim: Interpretations & Principles
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 Even if great emphasis is made on risk mitigation and

transfer, a party may not be able to avoid claim totally
 Hence, it is necessary to incorporate a mechanism for
implementing changes which are formal to be necessary or
desirable during the contract period.
 Except in biased contracts all fair contracts incorporate
claim clauses
 It may be a request made by a contractor or a client,
supplier, insurance co., subcontractor from respective party
 Sources (grounds) for claim
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 Generally, claims may be made on the following

grounds
 Particular provision which entitles a party on to get a
specified remedy in certain events
 the term of a contract had been but the remedy is not
stated
 The event that can be referred to the law
 Exgratia claim
 Sources (grounds) for claim (fidic 4)
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Clause Situation event claims

6.4 Providing drawings & response Late drawing/response Cost +time
to clarification questions
12.2 Physical obstruction/condition Obstruction Cost +time
17 Setting out Incorrect data Cost
20.4 Loss due to employer's risk Work damaged Cost
27.1 Fossils Discovery Time +
cost
31.2 Facilities for Other Contractors Disruption Time +
cost
36.5 Tests not provided Additional test Time +
cost
38.2 Uncovering & making openings No fault found cost
 Sources (grounds) for claim (fidic 4)
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Clause Situation event claims

40.1 Suspension Cost +time

42.2 Failure to possession (e.g. RoW) Cost +time

44.1 Extension of time for completion Time
a Extra or additional work
c Adverse climatic condition

d And delay, Impediment or prevention by

Employer
e Special circumstance other than by the
contractor
49.3 Cost of remedying defects No fault of cost
contractor
 Sources (grounds) for claim (fidic 4)
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Clause Situation event claims

51.1, 2 Variation Cost +cl 44

65.3 Damage to work by special risks Cost

69.4 Contractor’s entitlement to Non-payment Time + Cost
suspend work

70.1 Increase or decrease of cost (+ or -) rate

70.2 Subsequent legislation Change to Law cost
Acceleration (forced) ref. cl 44.2
 Sources (grounds) for claim (fidic for DB)
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Clause Situation event claims

2.2 Access to & Possession of the site Obstruction Cost + time -cl 3.5
2.4 Termination by Employer Cost
4.11 Unforeseeable sub-surface Time + Cost
condition
8.3 Extension of time for completion Time + Cost
13.8 Delayed payment cost
14.1 variation

16 Employer’s default

17.4 Employer’s risk

19.5 Force Majeure Damage to

works done
 Sources (grounds) for claim (fidic yellow
DB1999)
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Claus Situation event claims
1.9 Errors in the Employer’s Obstruction Cost + time
Requirements
2.1 Right of Access to the site Obstruction Cost + time
2.5 Employer’s Claim payment Cost
4.7 Setting out Cost + Time
4.12 Unforeseeable sub-surface condition Different work Time + Cost
4.13 Right of Way and facilities Time + Cost
(contractor’s responsibility)
5.4 Change in technical standard Variation Time + Cost
7.4 Testing (other than after completion) Delay Time + cost
8.1 Commencement, delay & suspension cost
8.3 Program Approval timeline Time + Cost
8.4 Extension of Time for Completion Variation, adverse
weather conditions
 Sources (grounds) for claim (fidic yellow
DB1999)
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Claus Situation event claims

8.5 Delay caused by authorities Delay or disruption
8.7 Delay Damages Contract time Cost
8.9 Consequence of Suspension
13.7 Adjustments for Changes in Cost
Legislation
16.4 Payment on Termination by Time + Cost
Contractor
17.4 Consequences of Employer’s Risks Time + Cost
20.1 Contractor’s Claim procedure, 28
days timeline
 Sources (grounds) for claim (PPA 2011)
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Clause Situation event claims

15 Modification by change order Impact on work Cost + time
schedule
16 Change in laws & regulations Change to Law Cost
17 Tax and duties Change to Law Cost

18 Force majeure Progress or loss

19 Breach As stated cost
20 suspension Progress affected Time + cost

21.1,2 Termination by Client Loss cost

31 Access to site Work schedule affected Time + cost

 Sources (grounds) for claim (PPA 2011)
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Clause Situation event claims

42 Drawing Delay in approval Time + Cost

49 . 2 Setting out Wrong data Time + Cost

54.2 Overlapping contracts Obstruction Time + cost

62.3 Price Adjustment Increase in price cost

67 Delayed payment cost
73 Extension for contract time various Time + cost

74 Compensation events As per Listed cost

 Time Related Claim Issues
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 Programe of the works
 To be provided in CPM considering site possession, drawings,
work sequence, supply of input other contractors, etc.
 Approval by Engineer doesn’t relive the contractor from his
responsibilities nor prevent the Engineer from giving
instructions which may vary the schedule
 Approval means the Engineer would be satisfied if the works
are executed according to the schedule approved by him
 Progress of the works is affected due to various reasons the
contractor shall revise the program and submit for Engineer’s
approval
 In the revised program the time for completion may or may
not be affected. This requires resolving responsibility.
 Time Related Claim Issues
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 Programme of the works

 Whose responsibility is the delay? A delay may be:
 Excusable if it is justified that it occurrence is beyond
the control of the contractor
 Inexcusable if the cause is thought to be controllable had
the contractor planned and acted to avert the occurrence.
A contractor is generally expected to make best efforts to
avert
 Concurrent if events (at least two) for which both the
owner and the contractor are responsible respectively
occur
 Time Related Claim Issues
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 Programme of the works

 Decision on responsibility may entail extending the time for
completion or accelerate the works
 If the contractors accepts responsibility he has to
accelerate the works at his own cost
 The Engineer, without taking responsibility, may instruct
to speed up to keep the time for completion unaffected by
adding resources, working extended hours or in shift. This
is forced acceleration.
 If the Engineer accepts that the contractor is not
responsible then he may extend the time for completion or
pay for acceleration and keep the time for completion
unaffected.
 Time Related Claim Issues
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 Granting Time Extension
 In disagreement: the Engineer may try to identify hidden
float in the work program using actual productivity instead
of what was considered in base schedule.
 Decision should not be delayed. Because the grant has to be
given for the contractor to plan using the time. Thus
granting time already elapsed is not in line with the intent
 If the Engineer fails to give decision for the contractor’s
request for extension at the right time, the time for
completion may result in time at large (reasonable time).
 Does contractor’s work programme form obligation
between the parties?
 Time Related Claim Issues
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 Granting Time Extension

 Time at large principles include:
 The contract has provision for time extension due to
responsibilities other than the contractor but the Engineer/
Employer fails to give decision for contractor’s request for
extension at the right time. The right time includes:
 Within the time specified in the contract, if it has
 as soon as it is possible to estimate the length of delay
and its effects on the completion date.
 should consider time available within the contract time
for the contractor to plan ahead!
 If no extension to the time then, liquidated damage & other
financial costs to the contractor unless he wins in dispute.
 Finance Related Claim Issues
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 Disruption Claims
 Losses resulting from delay not from contractor’s responsibility
 idle or fall in productivity of resources
 Cost incurred to execute a delayed activity
 Difference in Cost = Cost of execution of unchanged
work at the changed date less cost of execution at
original scheduled date
 Acceleration Claim (directed or constructive)
 constructive acceleration, though difficult to get entitlement in
any case, approved schedule and contemporary records are
crucial
 Finance Related Claim Issues
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 Prolongation Claims
 Time related costs resulting from excusable and compensable
delays (contractor’s overhead costs).
 Fluctuations
 Adjustment to market price fluctuation, if provided in the
contract, as stated therein
 What practice have participants in this?
 legislation changes claim for the unanticipated additional
costs may arise
 Finance Related Claim Issues
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 Variation
 Change of circumstance
 The varied work situation may be more difficult or easier
than the one in the bill hence the Bill rate should be
changed by adding/subtracting and then add overhead
 Major Change in Quantity
 If the change requires appreciably more or less overhead
than envisaged, then the overhead part of the rate may be
adjusted with respect to the rate in the bill. For
insignificant quantity of a bill item change may not be
initiated even if the change is significant as an item
 Finance Related Claim Issues
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 Variation Related Claims

 Entirely new type of Work
 requires building up of the rate based on performance
rates and market prices of the required inputs. The
performance rates require agreement as the bases may be
customary or project relevant practices
 For additional works that are within the original scope
payment may be made based on hourly/daily rates (day
work rate) taking from the values envisaged in the bid
 For extra (work outside the original scope) it requires
fixing a new rate up on negotiation.
 Finance Related Claim Issues
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 Variation Related Claims

 Overheads: variations should reflect consistency to
contractor’s time related overhead estimate in his bid
(usually taken in %)
 Large increase may entail payment of large amount than
warranted in the contract hence reduction in the rate may be
considered
 Large reduction may likewise require increasing the rate to
compensate the contractor to recover his anticipated fixed
sum
 Time to apply for: Can be postponed till final quantities
and costs are known but consider the presence of the staffs
who know the details- documenting may be and option
 Finance Related Claim Issues
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 Delay in certifying or settlement of Payment

 The first is by the Engineer while the second is by the
Employer. The remedies are cost claim and interest as stated
in the bid
 Advance payment is considered as any interim payment

 Insurance and bond (conditional) or guarantee

(unconditional)
 Contractors are required to insure against damage or injury to

works including access related to the works, their employees,

other people (third party) as may be required by statutory or
the contract
 Liabilities specified as employer’s responsibilities do not

require coverage from the contractor.

 Finance Related Claims
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 Items that require coverage

 Vehicles: policy to cover third party, (visitors, passengers)
 Project site: all work sites including accesses operated by
the contractor for the purpose of the works
 “omnibus” polices: the policy may cover the whole of the
works covering both the contractor and owner
 Claims against insurer: the owner can apply directly with
a copy to the contractor
 Performance Bond and Guarantee for advance, retention
money
 Force majeure- Couldn't provide before entering in to
contract
 Finance Related Claims
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 Items that are required to be fulfilled

 Amount of cover: for works permanent and temporary,
construction plant, material and other properties mobilized
to the site need to be covered for full values or with some
plus as specified. Also to be increased as the contract value
increases
 Excesses: paying premium to cover full amount may be
difficult to obtain so instead facilitating bank guarantee
may be easier to cover significant excess amounts
 Exceptions: check the consequences to contractors or
employers by accepting the exceptions proposed by the
insurers
 Finance Related Claims
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 Items that are required to be fulfilled

 Period of Insurance: check start and expiry dates of the
policy and compare with the requirement by the contract.
Extension required for prolonged contract period
 Termination of Policy: check the policy conditions stated
for termination
 When the repayment will be returned to the contractor
 If the policy is terminable at the will of the insurer
 If dependent on number of claims made
 Cross liabilities: if one insurer covers both the contractor
and client for same project where one of the parties claim
for damage done by the other
 Requirements (procedure) for
Submission
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 Conditions required: claiming for extension of time or

additional payment requires:
 Give notice within a specified time limit (time bar)

 the contractor is required to provide notification and

detailed particulars
 Follow procedure or may be from to whom to submit

(Engineer or Employer or both)

 20 & Clause 53.1: notice of claim
 Irrespective of notices given under other clauses as
stipulated, or even if requirement is not stated, it is still
vital to give notice under this sub-clause
 Requirements (procedure) for
Submission
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 Conditions required
 Clause 53.1: notice of claim…continued
 Clause 17.1. setting out is the responsibility of the
Engineer and the contractor is not required to give notice
 Sub-clause 52.2 expressly require the contractor to give
notice within 14 days of the Engineer’s instruction to
vary
 Give notice for both, to the Engineer with a copy to the
Employer; even if the requirement is for Clause 52.2
 Requirements (procedure) for
Submission
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 Conditions required
 Clauses for which notice requirement is stated in express
terms
Clause Situation Notice
6.4 Providing drawings & response to In advance
clarification questions

12.2 Physical obstruction/condition ‘fothwith’

27.1 Fossil ‘immediately’
44.1 Extension of time for completion 28 days (cl. 44.2)
69.1/69.4 Default of Employer 28, the 14 days

In case of DB/Turnkey follow procedure under clause 20.1

 Requirements (procedure) for
Submission
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 Conditions required (PPA 2011)

 Clauses for which notice requirement is stated in express
terms
Clause Situation Notice
69 As stated for each In advance

73.2 As stated for each Intent within 15 days and

21 days after details
74.3 Compensation events submit early warning
77 Early warning At the earliest opportunity
 Requirements (procedure) for
Submission
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 Strength factors: factors for a winning claim include:

 Having clear understanding of the contract and make sure the
item under consideration is claimable
 Identifying and managing risks
 Ensuring that there is contemporary detailed record and
documentation to substantiate the case
 Assigning responsibility- decide who should handle what part
of a claim at project site & main office levels
 Making sure about the claim (you must substantiate)
 Timely submission to the appropriate person
 following the presentation procedure stated in the contract
 Requirements (procedure) for
Submission
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 In-house approach
 The PM foresees or encounters a claimable situation ( as well any
team member of the project can aware the PM). As a general purpose it is
advisable if the project records daily event.
 Discuss with project and head office concerned staff members on the

contractual conditions and legal principles that can be used to

substantiate the case
Communicate the case, within the time frame, to the RE with a copy to all
relevant bodies as may be specified in the contract. At this stage it
suffices to state the effect of the case on the project time, cost and/or
scope; and the intent to claim by referring the relevant provision in the
contract
 Claims in construction contracts
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 In-house approach
 without waiting for the reaction of the RE depending upon the case, the
PM may submit a proposal to resolve the case without cost estimate
and/or time extension
 If the RE accepts and requests to submit details, with further
justification the PM has to prepare a relatively broad estimate
 if the case is a variation work then the cost and time may require
decision by the RE or the owner. But if the work is urgent the RE
may issue a letter to proceed without prior approval of the estimate.
 if the case is for compensation and the RE does not accept proceed
to the next as stipulated in the contract as the case becomes a dispute.
 Requirements for Submission
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 Strength factors (communication style)

 Stating the issue tactfully in the submission letter
 The notice need not be aggressive (avoid aggressive
tone)
 Never point a finger at anyone in particular (keep
individuals out). See this example.
(a)We have been asking information for the last 6 months but
you failed to give us timely reply to prevent the delay
resulted. We, therefore, have to divert our resources to
other activities/location and we shall claim for the delay
and disruption; demobilization and mobilization costs.
 Requirements for Submission
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 Strength factors (communication style)

 Stating the issue tactfully…continued
(b)We appreciate the effort you have been making to resolve
the issue bearing in mind the circumstance of the issue. We
believe we can minimize the effect of the delay by diverting our
resources to other activities/locations. We trust that you will
agree to reimburse the losses and expenses we incurred
No one likes to be on the receiving end of a claim; may be
due to:
 Financial limitation (budget or cash flow of the owner)
 survival or future job access, pressure from the owner or
role confusion of the engineer or lack of professionalism
 Requirements for Submission
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 Strength factors (communication style)

 Develop Negotiation skill
 Mostly, only limited number of claims are paid in full.
As a result, generally claims require negotiation. If
negotiation fails then, the next step is to submit the case
to dispute resolving body as stipulated in the contract or
to the relevant court

 Feedback and experience from participants

 are there situation that participants classify as common
grounds leading to claim and to dispute?
 Requirements for Submission
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 Preparation of claims
 Delay Claims may be presented:
 based on work schedule demonstrating effects of each
claim event on the critical path of the approved schedule
 Global y mainly using situations before and during the
occurrence of various claim events at a time
 Delay analysis techniques
 When desired to base delay claims on approved work
program it will be necessary to demonstrate the effect of
events by selecting appropriate one from the following
available methods. As any of these is not mandatory it helps,
if possible, to get consent of the Employer’s side staff. Other
wise the choice itself needs elaboration
 Requirements for Submission
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 Preparation of claims
 Delay analysis techniques commonly in use are:
 Impacted as- planned: impact of delay events are shown
on approved CPM schedule. the difference b/n the schedule
dates without and with impact gives the delay
 Collapsed as –built: only the as-built schedule is used and
only the contractor’s or employer's delay events are applied
 As-planned vs. as built – the impacts of the delay events of
both parties are shown on the as-built schedule. the
difference b/n as-planned and as-built completion dates
gives the delay
 Time impact or window Analysis- concentrate on specific
delay event for periodical updating of schedule
 Requirements for Submission
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 Preparation of claims
 Delay analysis techniques: the purpose of using the
different techniques is to respond to:
 What was supposed to happen according to the schedule?
 What did actually happen?
 What variance resulted on the schedule affected?
 How was the schedule affected?
 The events with their respective durations are shown
 Requirements for Submission
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 Preparation of claims
 Cause –statement of fact which can be substantiated
adequately
 E.g. late possession of site
 Effect or consequence- what the event affected
 Does the event affected operation of activities in the
sequence stated in the approved work program?
 Does the event affect/already affected the work Program?
 Demonstrate the effect of each activity including how they
are affected?
 Are records being made and notice submitted?
 Requirements for Submission
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 Preparation of claims
 Entitlement–the merit of the case should be proved. Thus,
it is imperative for the claimant to state the basis of the
claim to the contract or relevant law. The questions are:
 is there a remedy in the contract? Or in the Law? May be
in both.
 Whose risk is the event in the contract?
 Substantiation/justifying the claim
 Projectrecord can be used
 Correspondences, minutes of meeting, photographs,
any other document to use evidence
 The occurrence of the event, the effect need justification
 Requirements for Submission
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 Preparation of claims
 Substantiation/justifying the claim
 Documents doesn’t mean chronological correspondences
which do not substantiate cause-effect scenario and serving
of notice in the procedure stated in the contract
 Follow contractual and legal requirements and consider
practical aspects of the issue raised
 Use acceptable and appropriate method of analysis
 Some which are referred as global claim are apprised in
more subjective manner than following cause-effect. In this,
the approach is to add up all delays and grant as one delay
ignoring the cause-effect
 Assessment and Evaluation of Delay
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 Example Case 1:
 A contractor’s request for extension due to a claim
event was rejected by the Engineer. The contractor
accelerated the works and completed after few weeks
delay. During dispute settlement process it was
discovered the contractor’s acceleration was forced.
Discuss on the contractor’s entitlement to time.
 What if a contractor is delayed by a qualifying delay
event and as a result of which he was encountered with
another non-qualifying delay event?
 Assessment and Evaluation of Delay
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 Example Case 2:
 A construction project was due to be completed on 31
July, 2010. a variation work issued in April extended
the contract to Oct 31, 2010. from 10st Oct 2010 until
may 1st 2011 the work was suspended due to social
strike in the locality of the project for fear of the
situation and prolonged delay the contractor
demobilized his equipment. The Engineer instructed the
contractor to resume work from 15 May 2011
 What can the contractor claim? How can he present
his claim?
 What if these claims are rejected?
50

Thank you
for your Attention and Participation

melakutdsse@gmail.com
Tel: 0911 232267