A request , demand for cost, time or A request , demand for cost, time or performance compensation above that performance compensation above that granted or contemplated from one granted or contemplated from one contract party to another.contract party to another.

Contract PartiesContract PartiesWho can PresentWho can PresentClaimsClaims

* Owner* Owner ( Reduction Of contract price/ ( Reduction Of contract price/ Performance)Performance)

( Additional Time / Additional ( Additional Time / Additional Compensation from owner Compensation from owner

DefinitionDefinition::

* Contractor* Contractor

* A/E* A/E* Subcontractor* Subcontractor* Others* Others

Claim FormatesClaim Formates

Informal or Verbal RequestsInformal or Verbal Requests

Voluminous, Highly Structured and Heavily Voluminous, Highly Structured and Heavily Documented Claims Package Documented Claims Package

( Mostly Litigious )( Mostly Litigious )

Ranges FromRanges From

ToTo

I- Owner Claiming Against a Contractor :I- Owner Claiming Against a Contractor :

A. A. Unsatisfactory Contractor’s ProductsUnsatisfactory Contractor’s Products

Cost of Repair, Replacement, or Removal of Defective Work Cost of Repair, Replacement, or Removal of Defective Work to meet specifications.to meet specifications.

B. B. Delays Caused By Contractor due to:Delays Caused By Contractor due to:

Loss of use of the facilityLoss of use of the facilityRipple effects on other contractorRipple effects on other contractorIncreased Cost of Other Delayed Works.Increased Cost of Other Delayed Works.

C. C. As a Claim Defense :As a Claim Defense :

- Retaliate Claims Represented by Contractors by Presenting - Retaliate Claims Represented by Contractors by Presenting a Counter claim.a Counter claim. - To discredit, the Elements of Original Contractor Claim.- To discredit, the Elements of Original Contractor Claim. - When Termination or Brach of Contract Due to Contractor - When Termination or Brach of Contract Due to Contractor Failure to Complete the Work. Failure to Complete the Work.

II- Contractor Claiming Against Owner :II- Contractor Claiming Against Owner :

1. Late or Defective Owner-Furnished Information, Drawings or 1. Late or Defective Owner-Furnished Information, Drawings or Specs.Specs.

2. Late or Defective Owner-Furnished Material or Equipment. 2. Late or Defective Owner-Furnished Material or Equipment.

3. Changes in Regulatory Requirements, Drawings, or Specs.3. Changes in Regulatory Requirements, Drawings, or Specs.

4. Changed or Unknown Site Conditions.4. Changed or Unknown Site Conditions.

5. The ripple Effect of collateral Work.5. The ripple Effect of collateral Work.

6. Restrictions in Work Method.6. Restrictions in Work Method.

7. Ambiguous Contracts or Contract7. Ambiguous Contracts or Contract Interpretation. Interpretation.

I- Owner Claiming Against a Contractor :I- Owner Claiming Against a Contractor :

Elements of a Construction Claim :Elements of a Construction Claim :

1. Increased Cost of Performing the Changed Work :1. Increased Cost of Performing the Changed Work : (Easy to Determine)(Easy to Determine)

Increased Labor CostsIncreased Labor CostsAdditional Material or Equipment RequiredAdditional Material or Equipment RequiredAdditional Supervision, Administration and overheadAdditional Supervision, Administration and overheadIncreased Time Required for PerformanceIncreased Time Required for PerformanceDecreased Productivity or EfficiencyDecreased Productivity or EfficiencyWeather EffectsWeather EffectsSchedule Disruption and delaysSchedule Disruption and delaysDemobilization, RemobilizationDemobilization, RemobilizationRedundant Material HandlingRedundant Material HandlingShift-Time and Overtime Shift-Time and Overtime Misallocation of EquipmentMisallocation of EquipmentLoss of Material EconomicsLoss of Material EconomicsCongestion in work PlaceCongestion in work PlaceInefficient Crew Size or MixesInefficient Crew Size or Mixes

2. “Impact Costs” on 2. “Impact Costs” on UnchangedUnchanged Work . Work . ( Difficult to Determine( Difficult to Determine))

Q. What were the increased costs of performing of Q. What were the increased costs of performing of BB and and CC after after AA Has Been Changed ? Has Been Changed ?

A. Owner and Contractor Must Determine the Cost to A. Owner and Contractor Must Determine the Cost to perform perform BB and and CC When When AA Had not Been Changed. Had not Been Changed.

Elements of a Construction Claim :Elements of a Construction Claim :

1. Increased Cost of Performing the 1. Increased Cost of Performing the ChangedChanged Work : Work : (Easy to Determine)(Easy to Determine)

EXAMPLE :EXAMPLE :If the Owner Delays the Contractor and Causes him to Postpone If the Owner Delays the Contractor and Causes him to Postpone Work it Planned During Summer into Winter Season. Work it Planned During Summer into Winter Season.

The Work itself remains the same, but the Contractor WillThe Work itself remains the same, but the Contractor Will Claim “Impact Costs” Associated with Winter Work :Claim “Impact Costs” Associated with Winter Work :

1. Cost of Protecting the Work from the Winter weather1. Cost of Protecting the Work from the Winter weather

3. Costs of Heaters and Fuel for Personnel and Work Protection.3. Costs of Heaters and Fuel for Personnel and Work Protection.4. Damage to Materials and Equipment Caused by Weather4. Damage to Materials and Equipment Caused by Weather5. Increased Maintenance Costs for Equipment5. Increased Maintenance Costs for Equipment6. Inability to Secure a Work Force.6. Inability to Secure a Work Force.7. Lost Time Due to Extreme Temperature or Climate Conditions7. Lost Time Due to Extreme Temperature or Climate Conditions8. Increased Housing and Transportation Costs.8. Increased Housing and Transportation Costs.

9. Delay Due to Chrismas Holidays.9. Delay Due to Chrismas Holidays.10. Extension of Insurance Premuims or Bond Payments10. Extension of Insurance Premuims or Bond Payments11. Inflation.11. Inflation.

2. Inefficiency in Production caused by Workers performing in cold 2. Inefficiency in Production caused by Workers performing in cold

EXAMPLE :EXAMPLE :

Impact CostsImpact Costs

Structure of Contract Claims :Structure of Contract Claims :

1. A description of the Contractual Terms and Conditions.1. A description of the Contractual Terms and Conditions.

2. A factual Description of Events Happened in 2. A factual Description of Events Happened in Chronological order.Chronological order.

3. The Results of the Claim -Provoking Circumstances.3. The Results of the Claim -Provoking Circumstances.

4. A cost Analysis.4. A cost Analysis.

Claim Analysis :Claim Analysis :

Owner Must Analyze the Claim in three Stages ;Owner Must Analyze the Claim in three Stages ;

1. Factual Analysis (what happened)1. Factual Analysis (what happened)

2. A legal or Contractual Analysis. ( Easy when good control)2. A legal or Contractual Analysis. ( Easy when good control)

3. Cost Analysis ( How Much Money / Time )3. Cost Analysis ( How Much Money / Time )

Two Methods :Two Methods :

1. Total Cost Method1. Total Cost Method

2. Incremental Cost Method (Recommended)2. Incremental Cost Method (Recommended)

Delay Claims :Delay Claims : Most Common Claims. Three Types:Most Common Claims. Three Types:

1. Excusable Delays 1. Excusable Delays

2. Compensable Delays2. Compensable Delays

3. Concurrent Delays 3. Concurrent Delays

Claim Cost Items :Claim Cost Items :

1. Interest 1. Interest 2. Insurance2. Insurance3. Home Office Overhead3. Home Office Overhead4. Utilities4. Utilities5. Rentals5. Rentals6. Equipment Maintenance6. Equipment Maintenance7. Supplies7. Supplies

8. Engineering Support8. Engineering Support9. Contact Administration9. Contact Administration10. Quality Program Administration10. Quality Program Administration11. Security11. Security12. Supervision12. Supervision13. Extension or Loss of Warranties13. Extension or Loss of Warranties14. Demurrage14. Demurrage15. Material Storage and Protection.15. Material Storage and Protection.

Overhead Costs in Claims :Overhead Costs in Claims :

1. Home Office Overhead1. Home Office Overhead

2. Staff Expenses2. Staff Expenses

3. Rents, Taxes, Advertising Expenses.3. Rents, Taxes, Advertising Expenses.

Arbitration to Resolve the Claim :Arbitration to Resolve the Claim :

- Most Contract Contain an Alternative : Arbitration.- Most Contract Contain an Alternative : Arbitration.

- What Arbitration Organizations and Rules Will Apply.- What Arbitration Organizations and Rules Will Apply.

Advantages :Advantages :

* Low Cost* Low Cost* Speedier Resolution* Speedier Resolution* Involves Construction and Engineering Experts* Involves Construction and Engineering Experts* Can be Done on a more Informal, Friendly Basis.* Can be Done on a more Informal, Friendly Basis.

EX: ENGINEERING COMMITTEEEX: ENGINEERING COMMITTEE

ChangeChange AgreementAgreement

Change Change RequestRequest

Resolved?Resolved?

NotificationNotificationYesYesChange Change Order Order IssuedIssued

YesYesKnow inKnow inAdvanceAdvance

ClaimClaim

Informal Informal ChangeChange

NoNo

LitigationLitigation

YesYes

Evolution of a ClaimEvolution of a Claim

NoNo

ArbitrationArbitration

NoNo

Suggested Procedure For Handling ClaimsSuggested Procedure For Handling Claims

- Contract Administrator should Ensure that Claim is Given Proper - Contract Administrator should Ensure that Claim is Given Proper Management Visibility, Carefully Analyzed, Documented and Management Visibility, Carefully Analyzed, Documented and Resolved ASAP.Resolved ASAP.

- All Conversations, Correspondence, Documentations,…etc. - All Conversations, Correspondence, Documentations,…etc. Pertaining to the Claim Should be Obtained and Compiled.Pertaining to the Claim Should be Obtained and Compiled.

- Separate File Should be Maintained for Each Claim.- Separate File Should be Maintained for Each Claim.

ProcessProcess

Compile of Required DocumentationCompile of Required Documentation

ContractorContractor OwnerOwner Contract Contract ManagerManager

RecordRecordDetailsDetails

ReviewReviewContractContract

DocumentsDocuments

AnalyzeAnalyzeClaimClaim

Negotiate w.Negotiate w.ContractorContractor

ChangeChangeOrderOrder

DocumentationDocumentation

More More DetailsDetails

InsufficientInsufficientInterviewsInterviews

sufficientsufficient

ContractsContracts

ShortShort LongLong

- Used for Medium to Large Scopes of Work, Risk and Cost.- Used for Medium to Large Scopes of Work, Risk and Cost.

- For Medium to Large Scopes, Risk and Cost.- For Medium to Large Scopes, Risk and Cost.

- Massive Documents for qualifying bidders, RFP’s, Bid- Massive Documents for qualifying bidders, RFP’s, Bid Preparation and Reception and Evaluation.Preparation and Reception and Evaluation.

Long Form Contracts:Long Form Contracts:

Short Form Contracts :Short Form Contracts :

- Used for Low-Cost Work that Cannot be Planned and Priced well in Advance.- Used for Low-Cost Work that Cannot be Planned and Priced well in Advance.

- Contracts Agreement Must be formed in Few Days.- Contracts Agreement Must be formed in Few Days.

-They are Abbreviated Documents and Conditions.-They are Abbreviated Documents and Conditions.

- Insignificant Formation Cost Compared to Long-Form Contracts.- Insignificant Formation Cost Compared to Long-Form Contracts.

Applications :Applications :

- For Emergency Works (Fire, Storm Damage).- For Emergency Works (Fire, Storm Damage).

- House Keeping (Site Cleanup, Maintenance).- House Keeping (Site Cleanup, Maintenance).

- As a Relief for Large Contractors ( Unable to Perform Additional Limited Work).- As a Relief for Large Contractors ( Unable to Perform Additional Limited Work).

- As a Competition for Change Orders to Existing Contractors- As a Competition for Change Orders to Existing Contractors

- When Existing Contractor Has Been Performing Unsatisfactory.- When Existing Contractor Has Been Performing Unsatisfactory.

- To Perform Backcharge Work.- To Perform Backcharge Work.

Procedure forming Short-Form Contracts : Procedure forming Short-Form Contracts :

Short-Form Documents Should Parallel the Content and Short-Form Documents Should Parallel the Content and Format of Long-Form Contract. Format of Long-Form Contract.

Competitive Bidding Should be Encouraged if Possible. Competitive Bidding Should be Encouraged if Possible.

Existing Contracts Should be Reviewed Before the Need forExisting Contracts Should be Reviewed Before the Need for the Short-Form Contracting is Established.the Short-Form Contracting is Established.

The Alternative of Adding Work to an Existing Contract ShouldThe Alternative of Adding Work to an Existing Contract Shouldbe not Overlooked.be not Overlooked.

Administration of Short-Form Contracts Should be Identical toAdministration of Short-Form Contracts Should be Identical to Other Contracts. Other Contracts.

Close Coordination between Long-Form and Short-Form Contracts Close Coordination between Long-Form and Short-Form Contracts Should be Maintained to Avoid Duplication, Redundant, andShould be Maintained to Avoid Duplication, Redundant, and Loss of Scope.Loss of Scope.

Procedure forming Short-Form Contracts : Procedure forming Short-Form Contracts :

Protection Versus BrevityProtection Versus Brevity

Some or all of the Following Conditions May be Eliminated:Some or all of the Following Conditions May be Eliminated:

1. Progress Payments.1. Progress Payments.2. Changed Work.2. Changed Work.3. Contractor Submittals.3. Contractor Submittals.4. Equipment Warrantees4. Equipment Warrantees5. Close out Ducumentation.5. Close out Ducumentation.6. Technical Specification and Drawings.6. Technical Specification and Drawings.7. Required Contractor Controls.7. Required Contractor Controls.8. Retention.8. Retention.

Short-Form Change OrdersShort-Form Change Orders

* Field Originated Changes.* Field Originated Changes.* Emergency Works.* Emergency Works.* Minor Alternation to the Contractor’s Scope.* Minor Alternation to the Contractor’s Scope.* Result from Unplanned Conditions ( Bad Weather)* Result from Unplanned Conditions ( Bad Weather)

Long-Form Change Orders :Long-Form Change Orders :

* Well Planned in advane, Originated in the Home Office.* Well Planned in advane, Originated in the Home Office.* For Changes Requiring Significant Time/Cost.* For Changes Requiring Significant Time/Cost.

: Short-Form Change Orders Should be Identified, Evaluated: Short-Form Change Orders Should be Identified, Evaluated and Approved Like Home-Office Change Orders. Avoid Duplicationand Approved Like Home-Office Change Orders. Avoid Duplication or Conflict with Home-Office Change Orders.or Conflict with Home-Office Change Orders.

** Caution** Caution

Short-Form Contracting Cautions Short-Form Contracting Cautions

Short-Form Contracting Cautions Short-Form Contracting Cautions

Short-Form Contracting Cautions Short-Form Contracting Cautions

Short-Form Contracting Cautions Short-Form Contracting Cautions

Short-Form Contracting Cautions Short-Form Contracting Cautions

* Pay Attention to Insurance Coverage and Bonding Capacity.* Pay Attention to Insurance Coverage and Bonding Capacity.* Avoid Duplication of Effort between Short and Long* Avoid Duplication of Effort between Short and Long Form Applications.Form Applications.* Ensure That Critical Contractual Protection is not Lost by* Ensure That Critical Contractual Protection is not Lost by Abbreviation.Abbreviation.* Avoid to Price Short-Form Contracts/Change Orders in a * Avoid to Price Short-Form Contracts/Change Orders in a Cost-Reimbursable Manner When Other Fixed Price MethodsCost-Reimbursable Manner When Other Fixed Price Methods Are Used.Are Used.* Monitor Adherence to Time, Cost or Scopr Limitations.* Monitor Adherence to Time, Cost or Scopr Limitations.