The process of claiming in construction (Chapter 5)
The reason why construction projects are often associated with being late and overrunning on time and cost is not necessarily a result of incompetence or failure of managers, the result could simply be a consequence of the nature of construction. In most construction projects the design would not have been completed before the contract is awarded requiring the original scope of work to be changed in its’ implementation. The result being change occurs and a claim submitted to recover the additional costs.
The objective of this chapter therefore is to define this process of claiming and the problems that are encountered that are likely to cause disputes to develop.
Claiming in the construction industry
Claiming is a fundamental part of the construction process and it was acknowledged by Sir Michael Latham that disputes may arise despite everyone’s best efforts to avoid them .
There are three main underlying causes of disputes in construction: project uncertainty, process problems and people issues . If these causes are not addressed early they result in disagreements that may escalate to litigation or arbitration. This escalating process will involve more people, additional time and higher costs. It is therefore essential for problems to be identified as quickly as possible and then dealt with on a day to day basis.
In the book Dispute Resolution in the Construction Industry authored by Nicholas Gould, Phillip Capper, Giles Dixon and Michael Cohen, the importance of identifying the root causes of problems quickly and dealing with them straight away is emphasised:
“That construction disputes are caused by project uncertainties, problems in the process, or people issues. It is these three categories that drive the development of disputes. More specifically and by way of example a common root cause such as uncertain ground conditions which lead to inappropriate expectations and perhaps personality clashes may then generate claims based on the contractual provisions. Uncertainties which are not dealt with by the project participants on a day to day basis can evolve into protracted disagreements, claims and disputes. This process of disputing is fuelled by entrenched positions, lack of communication and clashes of personality”
It was said further:
“That dividing the causes of dispute into project uncertainties, problems with process and people issues is useful to identify causes will under normal circumstances fit under one of these headings. The difficulty lies in identifying the root cause”
The key steps therefore that are essential to construction in dealing with these problems must be as follows:
• Firsty be to identify the root causes as they occur.
• Secondly the root causes need to be dealt with by the project participants on a day to day basis as and when they occur.
• Thirdly there must be an environment where people work together with common goals designed to be as close as possible.
Because of the nature of construction being prototypical and not repetitive all these steps are problematic as there can be no standard process that can be systematically applied to all projects. Each project will have its own unique requirements and unique problems etc. Therefore problems are generally not identified quickly as there is no systematic process that is capable of identifying problems as and when they arise.
In most standard forms there is a requirement for the contractor to notify the owner when a problem occurs which could result in a claim. This is a concept that is central to the Engineering and Construction Contract. However the decisions to issue these notices are typically based on intuition and not based on fact when they are first issued . Because of the haphazard fashion contemporary records are managed in construction, the parties cannot deal with them when they arise or even at a time soon after the event has occurred . It is likely that due to these problems with step one and step two, it is very difficult to create an environment where the project participants can work together.
Conclusion
Because of the nature of construction, claiming is a fundamental process that is impossible to get away from. The question is how can the claiming process be managed effectively without it resulting in a high percentage of disputes. There seems to be a problem with the speed problems are being identified and the excessive time taken to produce claims. Therefore does the construction industry need adequate systems that identify problems in real time? When these problems are identified the relevant contemporary records need to be accessible in a format where they can be understood.
If these steps can be achieved would parties more readily be able to demonstrate there is a legitimate entitlement creating a window of opportunity to resolve problems quickly? Furthermore would this enhance the collaborative environment of working together that the construction industry is trying so hard to achieve?
The objective of this chapter therefore is to define this process of claiming and the problems that are encountered that are likely to cause disputes to develop.
Claiming in the construction industry
Claiming is a fundamental part of the construction process and it was acknowledged by Sir Michael Latham that disputes may arise despite everyone’s best efforts to avoid them .
There are three main underlying causes of disputes in construction: project uncertainty, process problems and people issues . If these causes are not addressed early they result in disagreements that may escalate to litigation or arbitration. This escalating process will involve more people, additional time and higher costs. It is therefore essential for problems to be identified as quickly as possible and then dealt with on a day to day basis.
In the book Dispute Resolution in the Construction Industry authored by Nicholas Gould, Phillip Capper, Giles Dixon and Michael Cohen, the importance of identifying the root causes of problems quickly and dealing with them straight away is emphasised:
“That construction disputes are caused by project uncertainties, problems in the process, or people issues. It is these three categories that drive the development of disputes. More specifically and by way of example a common root cause such as uncertain ground conditions which lead to inappropriate expectations and perhaps personality clashes may then generate claims based on the contractual provisions. Uncertainties which are not dealt with by the project participants on a day to day basis can evolve into protracted disagreements, claims and disputes. This process of disputing is fuelled by entrenched positions, lack of communication and clashes of personality”
It was said further:
“That dividing the causes of dispute into project uncertainties, problems with process and people issues is useful to identify causes will under normal circumstances fit under one of these headings. The difficulty lies in identifying the root cause”
The key steps therefore that are essential to construction in dealing with these problems must be as follows:
• Firsty be to identify the root causes as they occur.
• Secondly the root causes need to be dealt with by the project participants on a day to day basis as and when they occur.
• Thirdly there must be an environment where people work together with common goals designed to be as close as possible.
Because of the nature of construction being prototypical and not repetitive all these steps are problematic as there can be no standard process that can be systematically applied to all projects. Each project will have its own unique requirements and unique problems etc. Therefore problems are generally not identified quickly as there is no systematic process that is capable of identifying problems as and when they arise.
In most standard forms there is a requirement for the contractor to notify the owner when a problem occurs which could result in a claim. This is a concept that is central to the Engineering and Construction Contract. However the decisions to issue these notices are typically based on intuition and not based on fact when they are first issued . Because of the haphazard fashion contemporary records are managed in construction, the parties cannot deal with them when they arise or even at a time soon after the event has occurred . It is likely that due to these problems with step one and step two, it is very difficult to create an environment where the project participants can work together.
Conclusion
Because of the nature of construction, claiming is a fundamental process that is impossible to get away from. The question is how can the claiming process be managed effectively without it resulting in a high percentage of disputes. There seems to be a problem with the speed problems are being identified and the excessive time taken to produce claims. Therefore does the construction industry need adequate systems that identify problems in real time? When these problems are identified the relevant contemporary records need to be accessible in a format where they can be understood.
If these steps can be achieved would parties more readily be able to demonstrate there is a legitimate entitlement creating a window of opportunity to resolve problems quickly? Furthermore would this enhance the collaborative environment of working together that the construction industry is trying so hard to achieve?
posted by Will at 19.10.06
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