Knowledge of the different construction claim types allows owners to recognize potential claims situations. This recognition can protect the owners from incurring losses and assist in recovering compensation. Many of the claim types discussed are interrelated, and frequently more than one of them may pertain to a particular situation. For the purpose of this article, we have divided claims into eight different types.
Directed Changes – This type of claim involves a situation in which a contractor is required to perform work within the context of the contract, that is considered a change in the contractor’s scope of work. This change might be an addition or deletion of work or the use of different methods, materials, or designs.
By definition, the owner recognizes the existence of a directed change, but there may be disagreement regarding the amount of compensation due the contractor. A directed change involves either a written or verbal instruction to change some aspect of the work.
Differing Site Conditions – Also known as “changed conditions,” this claim type usually involves variations from subsurface or foundation conditions as stated in the contract. Differing site conditions can be any site conditions that detrimentally affect work performance and that could not have been known or reasonably anticipated at the time the parties entered into the contract.
Defective & Deficient Contract Documents – This claim type is also known as Errors & Omissions and usually concerns errors and omissions in the contract drawings, specifications, or the contract language. If the contractor is directed to proceed according to the owner’s plans and specifications, the contractor is not responsible for the consequences of defects in those plans and specifications.
Superior Knowledge – This type of claim is used to support allegations that the owner knew facts that were not disclosed at the pre-contract stage and that had a significant impact on the contractor’s performance. The contractor must be able to support, in writing, that facts were knowingly withheld and must demonstrate the effect it had on the project.
Constructive Change – A claim for constructive change applies to contract modifications that develop gradually and are created without notice or knowledge. Constructive change is difficult to document since the effects of such changes do not manifest themselves until after the project has been completed or is near completion.
Delay – A delay situation is one in which the activity of one party is impeded by the inactivity, inability, or constraint of another party. When a delay occurs, the impacted party should go on record and, if possible, document any resulting effects connected to the delay.
Acceleration – Acceleration normally occurs when the work scope is increased but the schedule is not modified to accommodate this increase. Acceleration also applies to situations in which the contractor is required to complete work in advance of the agreed schedule.
Interference – This claim situation frequently involves third party constraints or disruptive influences imposed by the owner’s contract administration. Contractors should be able to expect to provide efficient and productive performance without interference from the owner.
Other construction claim types about which owners should possess a fundamental knowledge include:
Breach of Contract
Impossibility of Performance
For all the claim situations described above, the separate parties must notify each other in a timely manner as soon as a claims situation arises. Failure to notify the concerned parties merely delays the resolution of the claim issue. Likewise, clear and sufficient documentation of all facts related to the claim situation is an imperative aspect of equitable resolution of the dispute. Proper records should be maintained throughout the project to avoid the necessity to recreate and remember the details of the problems that resulted in the claim.
Early recognition of a claim is a critical factor affecting entitlement and subsequent quantification. The affected party must be able to present a convincing cause-and-effect relationship between the claim type and the damages claimed to obtain a successful resolution of the disputed issue. Although knowledge of construction contract law is beneficial to both the owner and the contractor, the critical elements for recovery of compensation remain the identification, notification, and documentation of the facts of the claim situation.
Source: Interface Consulting
Released: July 27th, 2007 01:00 PM
Phone: (713) 626-2525
Fax: (713) 626-2555
Category: construction claims analysis