Effective Claims Management

Effective Claims Management in Construction Pr
ective Claims Management in Construction Pro

Introduction - Claims in Construction Projects
Types of Contractual Claims
Causes and Types of delay
Extension of Time (EOT) and Cost implications
Claims Procedures and detailed particulars
Understanding of Contractual provisions
This session will cover all conceptual issues related to claims in Constru
industry . Attendees will understand the various types of claims , delays
effects of delays as per the standard forms of FIDIC.
A] Introduction - Claims in Construction Proje

ictionary meaning of ‘claim’ is ‘an assertion of a right ‘ and,
r standard form of contracts the word conveys the concept of
itional payment which the Contractor seeks to as
ition to value of work done.
Definition of claim in Oxford dictionary

demand or request for something considered one’s d
TYPES OF CLAIMS Effective Claims Management in Construction Pr
1. Common Law claims : which are those arise

apart
• They from
relate to breaches by the provisions
the express Employer (Client) of either
of the Contract.
mplied or express terms of the contract.
: if the Employer delayed/held up progress of the works,
or if the Engineer/Architect were negligent in carrying out
his professional duties, resulting in loss to the contractor.
2. Ex gratia claims : which are those without legal
foundation and are usually made on moral or
hardship grounds.
• No legal base, but are claims which the Contractor considers the Employer has a
moral duty to meet, e.g. if he has seriously underpriced an item whose quantity
hasbeen increased substantially because of the variation which will cause him considerable
loss.
• The Employer has no obligation to meet such a claim
3. Contractual claims : which are those made

specific provisions of under
the Contract are usually
mitted by the Contractor/sub- contractor for
vering additional sums of money or for extendin
original duration of the Contract to get r
m liquidated damages .
“Conflict is the fundamental

disagreement between two
parties, of which a dispute is
one possible outcome”
e who have opposing interests, values, or needs are
tate of conflict.
a conflict same as a disput

1] Costintino, C.A. and Merchant C.S. Designing Conflict Management Systems: A Guide to Creating Productive and Hea
Organizations. San Francisco: Jossey-Bass, 1996, pp 4-5
"a conflict can exist without a

dispute, but a
dispute cannot exist without a
conflict."[2]
So, what is a dispute?
2] Douglas H. Yarn, ed. "Conflict" in Dictionary of Conflict Resolution, San Francisco: Jossey-Bass 1999. p
A “dispute” can only arise once the subject claim, issue or other matter
has been brought to the attention of the opposing party and that party
has had an opportunity of considering and admitting, modifying
or rejecting the claim or assertion.
In order to constitute a dispute, a

claim must have been made which
has been rejected.
So, what is
a claim?
ssertion of a right to money, property, or to a remedy
s per FIDIC 2017, “Claim means a reques

sertion by one Party to the other Party for an
entitlement or relief under any Clause of these
Conditions or otherwise in connection with, or aris
out of, the Contract or the execution of the Works.
Larva Pupa Butterfly
Conflicts Claims Disputes

B] Types of Contractual Claims in Constructio
Extension of
Disruption Acceleration
Time (EOT)
Claims. Claims.
Claims
above claims may have additional components such as indirect costs, h

, finance charges, escalation costs for resources, loss of profit et
onstruction project, claims can occur between any of the contracting pa
ms on construction projects generally relate to the fol
1.Claim for additional time to complete the work

- Claim from Contractor to the Employer .
Claim for additional monies for Delay & Disruption to

oject Works
- Claim from Contractor to the Employer or vice versa.
3. Claim for Acceleration of the project works

- Claim from Contractor to the Employer
4. General Claims from the Employer to the Contractor

unforeseen delays/disruption from the later to other
contractors working on the same project.
Parties in a Construction contract and

their role in Claims Management
Employer Engineer Contractor
The other players are subcontractors, specialist consultants and supplier

C] Causes and Types of delay

Types of delay
• Excusable / Compensable - Employer’s Delay

• Excusable / Non-Compensable - Neutral or (Employer + Contractor Delays)
• In-excusable / Non-compensable - Culpable Delay of Contractor
D] Extension of Time (EOT) and Cost implicat
EOT Claims
• Extension of Time
• Time with Cost -
Employer’s delays
• Time without Cost -
Neutral Delays or
• Concurrent Delays by
Employer and Contractor
Cost s Claimable Prolongation costs

• Site Overheads • Site costs - at time of delay
• Insurances / Bonds - overrun
• HO Overheads
period
• Finance charges • Head office overhead / Loss of
• Disruption profit
• Cost Escalation
• Claim Preparation Cost
Other Claims
• Acceleration Claim
E] Notices and Detailed particulars of Claim

F] Understanding of Contractual
provisions - FIDIC
What is FIDIC?
French language acronym for
Fédération Internationale Des Ingénieurs

Conseils
Commissioned in 1913 by France, Belgium and Switzerland
100 year old institution

Old FIDIC suite of Contracts (1987) -
4th Edition
The RED book For Construction of Civil

Engineering works
The Yellow book For Construction of

Electro-mechanical works
The Orange book For Design and Build

works
Claims Provisions in FIDIC Contracts (99, 20

Sub-clause 20.1 of the FIDIC form states that:
should have become aware

Why time limit ?
• Alerts the Employer / Engineer so that they can mitigate / change

instructions
• Alerts Engineer so that he can observe / keep records
• Good practice - theoretically should lead to timely EoT and

cashflow
• Usually no reason why notices cannot be issued within 28 days

particularly if standard pro-formas.
Contractor claiming monies from Employer - FIDIC 198

Employer claiming monies from Contractor

Extensions of time / Claims - FIDIC 1999

• EoT allowed for the following reasons:
- 1.9 Delayed drawings - cost plus profit
- 2.1 Right of access - cost plus profit
- 4.7 Setting out - cost plus profit
- 4.12 Unforseeable conditions - cost
- 4.24 Fossils - cost plus profit
- 7.4 Testing - cost plus profit
- 8.5 Delays by Authorities - no cost
- 8.9 Suspension - cost
- 10.3 Tests - cost plus profit
- 13 Variations - Cost (profit in the VO ?)
- 13.7 Legislation - Cost
- 16.1 Suspension by C. - Cost plus profit
- 17.4 Employer’s risks - Cost plus profit
Claims
Employer claiming monies from Contractor (2.5
If the Employer considers himself to be entitled to any payment

under any Clause of these Conditions or otherwise in connection
with the Contract, and/or to any extension of the Defects
Notification Period, the Employer or the Engineer shall give notice
and particulars to the contractor.
The notice shall be given as soon as practicable after the

Employer became aware of the event or circumstances giving rise
to the claim.
FIDIC RED BOOK 1999 - PROCEDURE FOR EMPLOYER CLAIMS
Employer or Engineer confirms

Employer Engineer consults
Engr gives notice agreement or
becomes aware with Employer
& particulars to makes fair
of event or and Contractor
contractor (Sub determination (Sub
circumstance (Sub clause 3.5)
clause 2.5) clause 3.5)
YES Engineer includes

Either party may
refer dispute to Contractor or deduction in
Employer disputes payment
DAB (Sub clause Contractor must the determination certificate (Sub
20.4) advise before clause 2.5)
statement at
completion (Sub
clause 14.14) NO
Finish
Disruption Claim
This is basically a delay claim but delay may or may not affect the
project completion. Cost that are generally claimed are:
•Reduced Productivity
• Idle resources
Demobilization
• / Re-mobilization
•Unproductive Overtime.
Disruption is not the same as delay; disruption is an interference, disturbance,
hindrance or interruption to a Contractor’s intended method of works resulting in
out of sequence work and/or lower productivity.
If caused by the Employer, it may give rise to a right to compensation either

under the contract or as a breach of contract.
Acceleration Claim
eration occurs when the Contractor attempts to mitigate
ays to the Contract programme by increasing his resou
king overtime etc. cceleration may be sub-divided into 2
ories:
nstructed Acceleration - This occurs when the Contra

accelerates the work as per instructions from the Engineer to do so
in order to expedite the works.
.Constructive Acceleration - This occurs when the

tractor
works.
elerates It is difficult
the work where to herecover monies for
was responsible forconstructive
delaying theacceleration.
cceleration claims generally have costs associated with the follo
a) Additional plant e.g. scaffolding, hoists, passenger hoists, pumps

b) Weekend Working / Night-shift working / dditional Shifts
c) Additional lighting for night shift operations
d) Additional mobilisation/demobilisation costs.
e) Additional supervision for night/extra shifts, more labour gangs.
Variation Vs Claim
onstruction claim differentiate from a simple variation. Standard

rms of Contract, like FIDIC, provide separate clauses for variatio
nd claims.
Some variations may result in claims but not all variations result
claims.
riation becomes a “claim” when there is a delay/disru

rks as a result of the variation; then the Contractor will notify
oyer for additional “time” or “money” or “ both”.
MODEL NOTICE LETTERS

TO
THE ENGINEER
FROM
THE CONTRACTOR
Claim submission
Identify the CAUSE of the event
Establish entitlement by reference to

the specific contract clause
Link cause and effect
Claim for additional Payment

Presentation of Extensions of Time Claim by the Contr

In any claim for an extension of time, and whether or not there is a require-
ment to give details and particulars, it is good practice to include the following:
1. Description of the cause of delay and the contractual provision which is being
relied upon for the extension;
2. The date when the delay commenced and the period of delay (giving
details
3. The date effects,
of intermittent of noticeif of delay, the reference of the relevant document;
appropriate);
4. A summary of records and particulars relied upon (with copies included in
an
5.
a narrative
Diagrammatic
of theillustration
events andshowing
effects on
theprogress;
status of the programme, progress
and
6current
.Diagrammatic
completion
illustration
date priorshowing
to the the
commencement
effects of theof
delay
the on
delay;
progress and
the
completion date (including subsequent delays which may have reduced the float
tement
in therequesting
programme); an extension of time for the delay to comple
eriod shown on the submitted illustrations.

Delay analysis Methods and Evaluation of Cla

Terminologies
s-Planned Programme - The Project Baseline
programme which clearly sets out the sequence and methodology of operations
that the Contractor intends to utilise to complete the project.
s-Built Programme - The programme which details the
sequence and methodology of operations that the Contractor actually utilised to
complete the project.
Impact Analysis Techniques

• Planned Impact
• As-Built Collapsed
• Window Analysis
FORENSIC ANALYSIS OF CONSTRUCTION DELA

 What is ‘delay analysis’?
 Delay analysis is the forensic investigation into the events or
issues that caused a project to run late.
 It investigate the ‘critical’ and ‘non-critical’ delays;
 Critical Delays; are events causing delay to the project’s

completion date.
 Non-critical Delays affect progress on the project but do not

directly impact the project completion date.
M] Principles behind successful Claims Manage

A reasoned approach to construction disputes
that integrates the following concepts into one
consistent program:
•Better project management
•Improved interpersonal skills
•Partnering & collaborative problem solving
•Effective claims management
•Alternative Dispute Resolution (ADR)
•Firm but fair legal strategy and tactics
A list of sections to be included in the claim

1)Executive summary
2)Statement of Claim
3)Abbreviations and Clarifications
4)Relevant Contract Particulars
5)The Contractor’s Entitlement Under the Contract
6)How to deal with claim issues
7)Method of Delay Analysis
8)The Events Giving Rise to Entitlement
9)Calculation of Additional Costs
10)Appendices
Claims: How to submit (guidelines).

Section 1:
Claim Name : Subject
Claim Number : as per sequence project wise
Date when given notice to Engineer : as per Contract DAYS
Date when Engineer replied : as per contract Show DAYS
Date of First submit : as per Contract - within 28 days
Date when referred to DAB/arbitrator : as per contract DAYS
Section 2: Contents and attachments:
Section 3: Claim Pointers (Clauses and other details like TIME & COST claimed.
Section4: A detailed Narrative summary and tabulated pointes.
Section 5: The Claim in details with a logical flow, references to facts and documents.
•When and why issue & What is standard or Best practices
•The sequence of the issue & your CLAIM
•Engineer/employer objection and views
•Detailed analysis of all aspects and a schedule in most cases or the cost involved
•Conclusion & Summary.
Section 6: Attachments: Total evidences (CPM schedules or CAD or Excel sheets )
Model Claim Submission

Introduction: contract particulars
Names of the parties; description of the works; details of tender and accep-
tance; the form of contract and any amendments thereto; the contract sum;
dates for commencement and completion; phased completion (if applica-
ble); liquidated damages for delay; the programme.
Summary of facts
Date of commencement and practical completion; dates of sectional or

partial completion (if applicable); summary of applications for extensions
of time; extensions of time awarded; of claims submitted; final account and
claims assessed (if any); amount of latest certificate and retention;
payments received; liquidated damages deducted (if applicable).
73
Model Claim Submission ( contd.,)
Basis of claim
Contract provisions relied upon; common law provisions;
contractual
analysis and explanation of the basis of the claim.
Details of claim
Full details of every matter which is the subject of the claim. Each
separate issue should be carefully set out in a logical format. Key dates,
events, causes and effects, references to relevant documents and the
like should form the basis of a narrative which fully describes the history
of the project and the effects on progress, cost and completion. It is
important to distin- guish between the causes and effects of delay
(and/or disruption), extensions of time and the financial effects of
delay and/or disruption. Wherever possible, diagrams, programmes,
tables and the like should be included in the narrative (or in an
74
Model Claim Submission ( contd.,)

Evaluation of claim
Each head of claim should be calculated, step by step, with explanations and reasons
for the methods adopted. Supporting source documents (from which financial data
has been used in the evaluation of the claim) should be given in an appendix, or
listed, so that the recipient may examine such documents at the contractor's office
when considering the claim.
Statement of claim
A brief statement setting out the claimant's alleged entitlements and
relief sought, such as extensions of time; sums claimed; repayment of
liquidated and ascertained damages (if applicable).
Appendices
Copies of all documents referred to in the claim; programmes; diagrams;
schedules; financial data
CLAIM RESPONSES BY CONSULTANTS

Basic three options for a reviewer of claim :
1.Reject the claim on the grounds that the claimant has not proved his case.
Obviously the respondent has to provide and substantiate reasons for such a
rejection in his response.
spond with a request to the claimant to provide additional parti

hat a proper review may be undertaken. In such a case, it would be
necessary to either advise the claimant exactly what additional particulars are
necessary and/or which aspects of the claim do not provide sufficient
information for a determination to be made.
duce a determination which is not only based upon the claim sub
but also on the respondent’s own knowledge of the matter and additional
records available to the respondent.
obstacles to prompt settlement of claims for EOT clai
A )Erroneous assumption that an EOT is automatically linked to additional payment

B) Late, insufficient or total lack of notice of delay on the part of the contractor
C) Failure to delay at the appropriate time and maintain contemporary records
D) Failure to regularly update the programme
E) Poor presentation of the claim to show how progress of the work has been
delayed;
F) Insistence, on the part of the employer's professional advisers, that unreasonably
detailed critical path programmes are essential in order to assess the effects of the
delay
G) The probability that the cause of the delay will reflect on the performance (or lack
of it) on the part of the employer's professional advisers;
H) Pressure, on the part of the employer, to complete on time, irrespective of delays
which occur.
76
NGINEER’S DETERMiNiTiON REPORT

Claim for an Extension to the Time for Completion
The Cause.
The Effect.
Delay Analysis.
Examination of how the claimant’s delay analysis has been created and its suitability
and accuracy.
Revised Time for Completion.
Concurrent delays.
Entitlement to an extension of time under the Contract.
Examination of conditions precedent.
Examination of entitlement in cases where claimant has not complied with
conditions precedent.
Examination of the Employer’s entitlement to delay damages.
Conclusion - a brief summary of the section.
Substantiation by reference to the project records.
NGINEER’S DETERMiNiTiON REPORT

Claim for Additional Payment
Cause and effect for additional payment. Appendices; Calculations
Entitlement to additional payment. Appendix reference and title included.
Nature of the additional payment claimed. Revision number and date included.
Measured works. Page numbers included.
Disruption. Item numbers included.
Site establishment costs. Column headings clearly describe the
Contractual costs i.e. insurances, bonds column contents.
Head office overheads and profit. Explanatory notes included.
Finance costs and Profit on costs Units clearly annotated.
Basis of evaluation / Method of evaluation. Cross-references to substantiating
Calculations. documents included.
Substantiation of the costs.
THANK YOU
FLORA@CONTOSO.COM
HTTP://WWW.CONTOSO.COM/

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Effective Claims Management in Construction Pr

Effective Claims Management in Construction Pr

ective Claims Management in Construction Pro

Types of Contractual Claims

Causes and Types of delay

Extension of Time (EOT) and Cost implications

Claims Procedures and detailed particulars

Understanding of Contractual provisions

A] Introduction - Claims in Construction Proje

Definition of claim in Oxford dictionary

1. Common Law claims : which are those arise

3. Contractual claims : which are those made

“Conflict is the fundamental

a conflict same as a disput

"a conflict can exist without a

In order to constitute a dispute, a

s per FIDIC 2017, “Claim means a reques

Larva Pupa Butterfly

Conflicts Claims Disputes

B] Types of Contractual Claims in Constructio

above claims may have additional components such as indirect costs, h

ms on construction projects generally relate to the fol

1.Claim for additional time to complete the work

Claim for additional monies for Delay & Disruption to

3. Claim for Acceleration of the project works

4. General Claims from the Employer to the Contractor

Parties in a Construction contract and

Employer Engineer Contractor

The other players are subcontractors, specialist consultants and supplier

C] Causes and Types of delay

• Excusable / Compensable - Employer’s Delay

D] Extension of Time (EOT) and Cost implicat

Cost s Claimable Prolongation costs

E] Notices and Detailed particulars of Claim

Fédération Internationale Des Ingénieurs

Commissioned in 1913 by France, Belgium and Switzerland

100 year old institution

The RED book For Construction of Civil

The Yellow book For Construction of

The Orange book For Design and Build

Claims Provisions in FIDIC Contracts (99, 20

should have become aware

Why time limit ?

• Alerts the Employer / Engineer so that they can mitigate / change

• Alerts Engineer so that he can observe / keep records

• Good practice - theoretically should lead to timely EoT and

• Usually no reason why notices cannot be issued within 28 days

Contractor claiming monies from Employer - FIDIC 198

Employer claiming monies from Contractor

Extensions of time / Claims - FIDIC 1999

If the Employer considers himself to be entitled to any payment

The notice shall be given as soon as practicable after the

FIDIC RED BOOK 1999 - PROCEDURE FOR EMPLOYER CLAIMS

Employer or Engineer confirms

YES Engineer includes

If caused by the Employer, it may give rise to a right to compensation either

nstructed Acceleration - This occurs when the Contra

.Constructive Acceleration - This occurs when the

cceleration claims generally have costs associated with the follo

a) Additional plant e.g. scaffolding, hoists, passenger hoists, pumps

onstruction claim differentiate from a simple variation. Standard

riation becomes a “claim” when there is a delay/disru

MODEL NOTICE LETTERS