Evaluation of claims

[edit] Introduction

Claims commonly arise between the parties to construction contracts. This can be as a result of delays, changes, unforeseen circumstances, insufficient information and conflict. Claims might be made for things such as loss and expense, extension of time and liquidated damages. The contract should set out exactly what can constitute a claim and how it should be dealt with. There may also be claims associated with the appointment of consultants.

Evaluation is the process of assessing disputed issues associated with a claim. The article, Evaluation and Preparation of Claims in Construction Projects, suggests the evaluation process most commonly relates to lost money or extensions of time - or “...costs associated with prolongation and costs associated with disruption. As Burden of Proof is on the claimant, the claimant must show that there is a direct link (causal link) between the breach (cause) and the loss (effect) thereby sustained.”

[edit] Examining the evaluation process

According to the book, Evaluating Contract Claims by John Mullen, Peter Davison, the claim evaluation process can include an examination of duty, cause, effect and damage. The book states, “The prime source of information for any evaluation has to be the contract between the parties and its requirements. There is no substitute for reading the contract and any incorporated relevant documents. Regrettably, this is often a starting point more often honoured in the breach than in observance in practice.”

Claims must be properly constituted and documented. This means:

• Proper legal entitlement must be established.
• Cause and effect must be clearly demonstrated by contemporaneous records.
• Additional costs must be backed up by full supporting documents.

Records from both parties may be considered in the evaluation of claims. Records may include:

• Tender and contract documentation.
• Staffing/labour records.
• Materials/equipment records.
• Correspondence.
• Photographs/videos.

Any other documents exchanged between the parties related to scheduling, pricing, risk or eventual project outcome may also be used in the evaluation of claim. These records should be accurate and include substantial details, “...to the standard required in formal dispute resolution procedures under English law,” according to Mullen and Davison.

Certain types of contract may be more susceptible to claim issues than others.

The fixed price contract, which is defined by The Code of Estimating Practice, seventh edition, published by the Chartered Institute of Building (CIOB) as, ‘…a contract where the price is agreed and fixed before construction starts’. Under a fixed price agreement, contractors may be compelled to pursue evaluation of claims based on changes resulting in disputes over money and time. The establishment of a contract baseline, including a defined scope, schedule and conditions of work, can set conditions that can help to formalise the consequences of changes made by the client that may justify additional compensation for the contractor.

[edit] Related articles on Designing Buildings

• Alternative dispute resolution for construction ADR.
• Arbitration in the construction industry.
• Contract claims in construction.
• Dispute avoidance.
• Evaluation.
• Fixed price construction contract.
• Lump sum contract.
• Mediation in construction.

[edit] External resources

• LawTeacher.net, Evaluation and Preparation of Claims in Construction Projects.
• John Mullen and Peter Davison, Evaluating Contract Claims.
• Society of Construction Law.