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CONSTRUCTION

CLAIMS
MANAGEMENT
BY A. D. GOSAVI

Engg. Projects are different than industry


since it is characterized by multi
organizational nature. Where different task
organizations are temporarily assembled to
build the project that satisfies the owner's
needs and constraints.

BREACHES BY
CONTRACOR
DEFECTIVE, SUB-STANDARD
OR INCOMPLETE
ITEMS OF WORK

DELAYS IN EXECUTION OF WORK ATTRIBUTABLE


TO CONTRACTOR E.G. DUE TO INADEQUATE
MOBILIZATION, INCOMPETENT WORKMEN AND
SUPERVISION INSUFFICIENT FUNDS NEGLIGENCE,
IMPROPER PLANNING ETC.

LOSS OF INCOME FROM THE COMPLETED


PROJECT (E.G. TOLL IN CASE OF A HIGHWAY), LOSS
OF INTEREST ON IDLE INVESTMENT ADDITIONAL
EXPENDITURE ON OVER-HEADS, LIQUIDATED
DAMAGES N ACCOUNT OF DELAYED COMPLETION.

FAILURE

Cont.

TO SUBMIT AND FOLLOW


PROGRAMME.
FAILURE TO INSURE AS REQUIRED.
FAILURE TO TAKE SAFETY
PRECAUTIONS.
MISAPPROPRIATION OF MATERIAL
SUPPLIED BY CLIENT.
FAILURE TO ATTAIN DEFECTS.
FAILURE TO COORDINATE WITH
OTHER CONTRACTORS

COMPENSATION

Cont.

PAYABLE TO OTHER
CONTRACTORS AND RELATED
LOSSES DUE TO CONSEQUENTIAL
DELAYS ON CONNECTED WORKS
UNRECOVERED ADVANCES AND
INTEREST
REMOVAL OF MATERIAL FROM SITE
WITHOUT DUE PERMISSION

Breaches by
Client

DELAYS IN SUPPLY OF DRAWINGS, CLARIFICATIONS


HANDING OVER OF CLEAR SITE
CLEARANCES, DECISIONS ON AMENDMENTS/CHANGE
ORDER,
MATERIALS AND EQUIPMENT TO BE SUPPLIED BY
EMPLOYER (OR EVEN DEFECTS THEREIN),
PAYMENTS,
HOLD UPS CAUSED BY OTHER CONTRACTORS WORKS,
TAKING OVER ETC.
DEFECTS IN SPECIFICATIONS AND CONTRACT
CONDITIONS
NEAR IMPOSSIBLE STIPULATIONS.
CHANGED SITE CONDITIONS

CHANGES IN LAW AND CODES

Cont.

ACCELERATION IN WORK CAUSED BY THE


EMPLOYER,
SUSPENSION OF WORK BY THE EMPLOYER
RE-SCHEDULING OR PROLONGING THE
WORK FOR FINANCIAL OR OTHER
REASONS.
UNJUSTIFIED TERMINATION BY EMPLOYER.
EMPLOYERS FAILURE IN HIS IMPLIED
DUTIES.

Cont.
UNREASONABLE REJECTION OF
ACCEPTABLE WORK
UNREASONABLE RECOVERIES MADE BY
EMPLOYER INCLUDING LIQUIDATED
DAMAGES.
QUANTITY VARIATIONS BEYOND THOSE
STIPULATED AND MAJOR CHANGES IN
SCOPE OF WORK.
PERFORMANCE OF TASKS WITHOUT
PROVISION FOR EQUITABLE
COMPENSATION
NATURAL CALAMITIES ACTS OF GOD WAR
AND OTHER FORCE-MAJEURE CONDITIONS.

Cont.
ABNORMAL

WEAR AND TEAR OF


COMPLETED WORK DURING
MAINTENANCE/DEFECT LIABILITY
PERIOD
LESS MEASUREMENT FOR
QUANTITIES THAN THOSE ACTUALLY
EXECUTED
INTEREST ON NON-PAYMENT OF DUES
IN TIME
LOSS DUE TO INEQUITABLE OR
HARSH DISCLAIMER CLAUSES IN THE
CONTRACTS

DOCUMENTS
BIDDING DOCUMENTS
INVITATION TO BID INSTRUCTIONS TO
BIDDERS
ADDENDA,
PLANS AND SPECIFICATIONS NOTES OF
PRE-BID CONFERENCES
RISK IDENTIFICATION DATA
SITE INSPECTION REPORT WITH
PHOTOGRAPHS

Cont.
CONSTRUCTION CONTRACT DOCUMENTS
NOTES OF NEGOTIATION SESSIONS
FINAL CONSTRUCTION PLANS,
SPECIFICATIONS, COMPLETE WITH
ADDENDA, BULLETINS AND SKETCHES
NOTICE TO PROCEED, PERFORMANCE
BONDS
SUBCONTRACTS AND PURCHASE ORDERS
COPIES OF BUILDING PERMITS &
APPROVALS.

Cont.
COST

CONTROL TABULATIONS AND


REPORTS, CHANGE ORDERS

CHART

OF WORK CLASSIFICATION

CODES
EQUIPMENT

UTILIZATION REPORTS

Cont.

CONSTRUCTION PROGRESS AND CONTROL SCHEDULES

CPM SCHEDULES

BAR CHARTS AND SCHEDULES

LABOR UTILIZATION CHARTS

TIME-COST FORECASTING CHARTS

PROJECT

Cont.

MANAGEMENT PLAN
LOSS CONTROL PLAN
ENVIRONMENTAL CONTROL PLAN
QUALITY CONTROL PROGRAM.
GENERAL CORRESPONDENCE
DOCUMENTS
MINUTES OF JOB CONFERENCES
REQUESTS FOR INFORMATION
NOTICES

OF INTERRUPTION, DELAY
OR CHANGES

Cont.

DAILY REPORTS , ACCIDENT AND DAMAGE


RECORDS

PHOTOGRAPHS WITH SPECIFIC TIME, DATE,


PROJECT LOCATION, NAME OF
PHOTOGRAPHER AND CAMERA DATA
WEATHER DATA

DAILY DESCRIPTION OF ACTIVITIES

DAILY RECORD OF SUBCONTRACTOR


ACTIVITY WITH

EQUIPMENT AND LABOR IN USE

Fig. 1. Claims administration model

PROCEDURE TO
RESOLVE

It is almost inevitable that disputes will arise in complex,


unique and long-term construction and infrastructure
contracts.
Important provision in a contract is the provision of a fair
method of dispute resolution. Such a provision instills
confidence that the contract will be justly operated.
Arbitration is a process whereby parties in dispute agree to
submit the matter in dispute to the decision of a person or
more in whom they have confidence and trust and they
undertake to abide by the decision of that person's.

Cont.
The arbitration agreement in the FIDIC is embodied in Clause 20
(sub clauses 20.1, TO20.8).
This clause however incorporate more than the arbitration
agreement.
2.2
In that it provides in the first place a mechanism for the
resolution of disputes through a two-tier system viz. i) reference to
the Engineer. and ii) if the dispute is not resolved, sub-clause
includes a mechanism for amicable settlement.
2.3
Submission of a claim does not necessarily (although it may)
clause a dispute to arise. However, the rejection of a claim will
probably do so, but not always, for the Contractor might accept
either wholly or in part the views expressed by the Engineer.
2.4
If the claim is not met with a clear rejection, but with a
request for further information or even with a stalling reply, then
no dispute may arise.

ENGINEER S POWERS
Engineer

is expected to decide all disputes including


those that call into question his own conduct.

The

Contractor cannot object to such situations since


he is taken to have known at the time of tendering and
to have known at the time of tendering and to have
accepted, that the Engineer may be called upon to
decide certain matters that will place him in a position
of conflict between his duty to be fair to the Contractor
and his own self interest.

PROCEDURE UNDER CL. 20


BECOMES
WHEN
The procedure
set out in clauseOPERATIVE
20 only becomes operative
when a dispute occurs. It begins
the words: OCCURS
A with
DISPUTE
If a dispute of any kind whatsoever arises between the
Employer and the Contractor in connection with, or arising out
of, the Contract or the execution of the works..
The procedure can be summarized under the following
headings:

An assertion of a claim is made and rejected in connection


with or arising out of the contract or the execution of the work
including matters under the provision of the contract or in
breach thereof.
Contd.

Where the assertion or claim is simply ignored, a dispute must


be generated through a notice requesting an answer within
certain time limits.

A dispute arises between the Employer and the Contractor


only. The dispute can be of any kind whatsoever.
a. Arising in connection with, or arising out of, the contract or
the execution of the works.
b. during the execution of the works or after the completion.
c. Before or after repudiation or other termination of the
contract.
d. And may be with regard to any
i.
Opinion
ii.
Instruction
iii.
Determination
iv.
Certificate
v.
or valuation
Contd.
of the Engineer.

The dispute must, in the first place, be referred in writing to the


Engineer for his decision, and copied to the other party, stating
that it is made in accordance with clause 20.
The term decision is reserved for use in clause 20. No other
clause contains a reference to decision of the Engineer.
Disputes involve claims or assertions by either party to a
contract against the other party, either under the provisions of
the contract or in breach of these provisions.
It is important to recognize that sub-clause 20.1 does not impose
restrictions on the type of dispute, which could be submitted to
the Engineer.
The Engineers task is to interpret the Contract as written and to
determine the legal rights of either party.
The decision of the Engineer once given is final and binding on
the parties unless either or both require that the matter in dispute
be referred to dispute adjudication board.

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