The inherent characteristics of construction projects present a number of risks associated with project execution and make the construction projects vulnerable to financial risks (Bunni, 2003). There are a number of risks identified with the progress of construction projects. Palmer (1999) categorizes these risks in the areas of
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- project nature,
- owner structure,
- project delivery,
- project controls.
Timing risks are associated with not only the time spent on preplanning of a construction project but also the time taken by the project during its progress. Time is the essence of any construction project, and without proper preplanning, the project cannot be physically completed within the agreed time. Because of lack of time, if the construction is done in a fast-track manner, quality problems may arise on completion of the project, which will give rise to various claims.
Therefore, in this case, the level of risks is higher for possible disputes on design and quality of construction. Project nature relates to various attributes of the project in terms of type, size, complexity, location and completeness of design plans which go to define the overall scope of the proposed project.
The chances of problems arising out of commercial buildings designed to meet normal specifications are much less as compared to the construction of industrial process plants which are built to unique and specialized designs. However, each risk factor affects the progress of the project in varying degrees of intensity based on the circumstances and also provides chances for more claims on the project. For instance, the construction of an office block in a new geographical area with an incomplete design specification may also pose larger issues to resolve.
‘Approvals’ is another area which might cause hindrance to the timely completion of the construction projects. In a construction project approvals are required at various stages of completion and even before the construction starts. Especially, construction projects that are supposed to meet stricter environmental regulations are likely to result in more time delays and cost overruns than other normal projects. This is because of the fact that the provisions in the construction to meet the environmental standards are to be reviewed by different government agencies at various levels. Delays on account of approvals are potential sources of claims on construction projects.
In respect ‘ownership’ a construction project is subjected to several risks on the consideration of the type and experience of the owners. All the future problems in a proposed construction project are closely associated with the ownership. It is always the case that an ownership organization having only limited experience and which has not appointed professionally qualified construction management professionals is prone to innumerable risks than an organization which engages defined set of procedures and professional controls over its working.
Owners who have the knowledge and skill on running the construction business understand the repercussions of changing the scope of work as to the cost and risks involved. Therefore, they try to complete the work on schedule so that the construction contractors are not put to losses. Also, those owners who do not plan the work ahead with the backing of adequate contingent funds face significant hazards to the progress of the construction activity, giving rise to different claims.
The chances of claims arising in construction projects are dependent on the type of contractual relationship that exists between the parties and the organizational structure designed to oversee the progress of the project. Oftentimes it is found that fixed-price or lump sum contracts are less risky than the fast-track construction contracts where the mode of working is a cost-plus type of arrangement. Similarly, under the circumstance where the owner himself takes up the responsibility of fulfilling the contract by subcontracting the whole or substantially the whole of the project work is likely to face severe risks with regard to the completion of the project on schedule and end up paying huge claims.
Project management control is one of the areas that have a significant impact on the completion of the construction project. With proper project management controls in place, it is possible to discover the likely problems in the construction before they lead to significant cash outflows and claims on the project management. Lack of efficient and effective project management control leads to a number of operational risks in the progress of construction projects of any size. It also results in delays and consequent claims to be settled by the project owner (Palmer, 1999).
Claims issues in the construction projects lead to many negative impacts such as cost overrun, misunderstandings between clients, contractors, and subcontractors’ besides appears to be a forerunner in straining the relationship. As far as the Conditions of Contract applicable in Oman is concerned, the contractor shall send to the engineer’s representative once in every month an account giving particulars, as full and detailed as possible, of all claims for any additional payment to which the contractor may consider himself entitled and all extra additional work ordered by the engineer which he has executed during the preceding month.
The Engineers are required to act in a quasi-judicial capacity when evaluating contractual performances of the contractors, but in most of the cases, engineers do not act with complete independence as the Engineers are having the relationship with the Clients for their future interests and reflect their views. Instances are seen that contractors claim issues are crushed by the Engineers by avoiding contractors from lodging any monthly statements on their claims.
Contractors are also in the same plight as that of Consultants not to tarnish their image with the Clients due to their future. No final or interim claim for payment for any such work or expense will be considered which has not been included in such particulars. There are cases of design faults suppressed by the strong hands of an engineer without being surfaced. Unlike the developed countries where the stringent laws make the automatic constructive acceleration of claims, most of the middle eastern countries exhibit strong negative approach towards going for claims.
This is because the contractors need to work with the same consultants and clients for future projects. But at times, an undisclosed relationship exists between the consultant and the contractors. This research aims at doing a study on types and circumstances that bring about such claims and resolve the impending issues to mitigate the ill effects.
The main objectives of the study can be summarized in the following points:
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- Identifying the types and circumstances necessitating or prompting claims on public projects in the Sultanate of Oman.
- Investigate, examine and analyze all negative and positive claim issues from the point of view of clients, consultants, contractors and sub-contractors.
- Survey of impacts of such claims from the stakeholder’s perspective.
- Making recommendations for resolving the major claims issues.
This research seeks to test the following hypotheses:
- Public construction projects in Sultanate of Oman experiences frequent and significant delays leading to claims on stakeholders.
- Different construction project stakeholders blame each other for the delays in construction projects in the public sector in the Sultanate of Oman.
- Project management of large public construction projects focuses more on the operational causes rather than identifying strategic or managerial causes.
Structure of the dissertation
To present a comprehensive research report, this dissertation is structured to have seven chapters. Chapter One introduces the research topic, provides the rational for the research and establishes aims and objectives and hypotheses to conduct the research. Chapter Two presents a description of the claims in the construction industry, including different types of claims by the stakeholders of construction projects. In Chapter Three, the causes of delays in construction projects are explored through a literature review. This chapter attempts to illustrate the reasons behind claims. Chapter Four presents a discussion on the impacts of claims in the construction industry.
The risks associated with the construction project can be grouped as
- internal factors,
- external factors, and
- management aspects.
The internal risk factors include the presence of a number of stakeholders and huge capital outlay. There are also other elements like the great diversity of end-users of construction projects and varied worksites using large and mobile equipment. The fact that works and locations are fixed having a long gestation period and are of high monetary values increase the risks involved in the projects.
Natural hazards like flood, lightning, earthquakes and storms and varying site conditions, including the characters of soil, pose significant risks to the progress of the projects (Assaf et al. 2006). The structures surrounding the location and the risks of theft of materials at the site are some of the additional factors that determine the level of risks associated with the project. War, unproductive labour and strikes also contribute to the slow pace of work in any construction project.
Certain management aspects like contractual obligations between the parties involved, cost control and time control add to the risks of construction projects. The time span of a construction project is usually a lengthier one involving various phases such as planning, investigation, design, construction and completion of the construction. The formation of temporary project teams for completion of the contracts is yet another source of risk disrupting the progress of the construction.
There are other areas like environmental issues, health and safety management at the worksites and political risk management which need to be considered while planning the schedule of completion of any construction project (Arain and Pheng, 2005). Because of the presence of a number of stakeholders such as clients, suppliers, manufacturers, contractors and subcontractors, the construction projects are often found to be inundated with several hazards and risks.
The unique characteristics of each project lead to a significant probability of risks and claims during or after the completion of the construction. Therefore there is the need for according special treatment to the construction projects, as all these risks will culminate to huge claims on owners and other stakeholders of construction projects.
When the parties involved discuss and settle the cost of change orders up-front during the continuance of the project instead of arriving at the amount of settlement after the project is completed, it will avoid exposure of the project to a number of potential claims. In the matter of assessing the likely claims on construction projects, it is essential that all the risk factors are critically evaluated in advance so that any uncertainty relating to the project is detected before the commencement of the project.
For instance, areas such as ownership structure and project management controls are likely to be associated with more risks than others. Once the risk factors are identified and evaluated, it becomes easier to deal with them individually by developing an appropriate course of action, including insuring against potential claims. This way, the claims arising from the project are reduced to manageable levels to ensure a reduction in the likely economic losses from the project.
Al-Moumani (2000) studied the impact of a change order in public construction projects undertaken in the Sultanate of Oman. The study included case studies and field survey. It found that alterations in owner requirements are the most frequent cause of changes in construction projects. The research also concluded that changes in requirements lead to delays in completion and cost overruns and consequent claims on parties to the contract.
Claims and the procedures followed in Oman
In many of the construction projects, the increased complexity involved in the projects has led to an increased number of claims. Claims are a normal affair in the construction industry. They can arise because of several reasons leading to delays in completing projects or inferior quality construction. In order to avoid the potential disputes on account of claims at the completion of the project, it becomes important that the construction contract is drafted properly by including clauses dealing with disputes even before the project is started.
Jannadia et al. (2000) suggest that construction contracts must include clauses that relate to the resolution of disputes among the parties as and when they arise during the progress of the project. Broome and Perry (1995) reiterate the need for the inclusion of logical and procedurally correct clauses within a construction contract.
The clauses must also be relevant to the practices followed in the present day construction industry. The clauses must be capable of distinguishing the elements that affect the clarity of the standard form of contract. Well-drafted construction contract must contain detailed drawings and specifications, which advise the contractor precisely about his duties and responsibilities under the contract. A good construction contract must also provide a means of determining whether the objectives of the contract have been fully achieved (Ibrahim and Madon, 2006).
Before we deal with the claims and procedures followed in Oman, it is necessary that the background of the public construction contract practices in Oman is addressed. In the Sultanate of Oman, the public contracts are governed by Standardise Form of Construction Contracts (OSFC). This is the only contract document available, which regulate and monitor the public construction contracts in Oman. The contract format has been brought in to practice by the Ministry of Finance and National Economy of the government of Oman, and it has been in practice since the 1980s.
The Standardized Form of Contract has been the rule book for all types of construction projects in the public sector, including large industrial projects. Aligning with the practices prevalent during the 1980s, when the format was brought in to practice, the procedure of fixed-price contracts awarded based on competitive bidding has been prescribed for all government contracts. There has never been a review of the standardized format to update it and keep abreast with the developments in the international and Omani construction industry practices.
Construction contracts in Oman generally follow the FIDIC form of contracts. However, Bunni (1999) is of the opinion that the amendments made by FIDIC to the original ICE form of contract are inadequate to cover the requirements of the construction industry contractual arrangements. Moreover, the legal system in Oman follows the civil code system, particularly the Egyptian Civil Code.
Mansour et al. (2008) point out the adoption of the Egyptian Civil Code by the Omani Construction Contracts, based on the first legal issue that was considered in Oman in respect of construction contracts. This is in contrast to the usual practice of generally translating the FIDIC into Arabic language relating to contracts and the associated documents, as has been done in some other Arab countries including in Oman (Arrowsmith, et al. 2000). This has vitiated the purpose of adopting the FIDIC international form of contract largely resulting in much confusion in the construction contract drafting in Oman.
The Standardized Form of Contract is comprised of two sections. The first part is “The Principal Document of the Contract.” This part comprises of eight articles, which address the general matters pertaining to any construction contract including forms for bidding. “General Conditions” form part II of the construction contract, containing sixty-one clauses dealing with general issues as any other construction contract would deal (Ministry of National Economy, 2005). According to Abdulaziz and Soliman (1994), a number of elements need consideration to ensure the smooth progress of a construction project. However, the OSFC does not address many of them, necessitating the parties to incorporate substantial amendments to the OSFC, while drafting the construction contracts.
In the matter of dispute management, OSFC widely differs from the other international standard forms of contracts such as NEC 3 or FIDIC. OSFC provides for the referral to the arbitration of the disputes, which cannot be settled by the project engineers. Building contracts between private parties in Oman are also based on OSFC and thus requires the resolution of the disputes to be referred to arbitration also.
Decree of the Sultanate No. 03/07 governs the entire process of arbitration and the interpretation of the agreement leading to arbitration. This Decree has enacted the “Law of Arbitration in Civil and Commercial Disputes” (the Arbitration Law) in Oman. However, in the international form of construction contract FIDIC, arbitration is one of the several other measures comprised in the process of comprehensive dispute resolution. OSFC does not contain any provision for the constitution of a Dispute Resolution Board as provided by FIDIC.
Conditions of contract clauses related to claims
According to the arbitration clause contained in the standardized format, it is mandatory for any party claiming under a construction contract to refer the dispute to the project engineer for resolution. The clause further states that the project engineer must inform his decision in writing within ninety days of such referral by any of the parties of a dispute under the contract. A party can proceed to commence with the arbitration proceedings only after getting the written decision of the project engineer in respect of the dispute referred to him.
The arbitration clause contained in the OSFC is simple from the perspective of a prospective claimant. It is mandatory that a claimant must obtain the decision of the project engineer in respect of all his claims, which the claimant wants to make against the other party (Al Rashdi & Sutrisna, 2010).
It is also necessary that the counter-party must also get a written decision from the project engineer if the party wants to make a counter-claim against the original claimant. If the counter-party fails to obtain this decision from the project engineer, it may act to his detriment while the arbitration proceedings progress, when the counter-party produces his reply to the statement of claim by the original claimant. In reply to the claim by any of the party to the contract, the counter-party would prefer to raise counter-claims.
“However, when the counter-party does so, the claimant then may retaliate by arguing that the counter-party has fallen foul of the procedural requirement in the contract’s arbitration clause for obtaining a written decision from the project engineer in relation to any dispute or difference. The claimant may assert that the arbitral panel has no capacity to hear the counter-claims because the engineer first must make a written decision on those counter-claims before they can form part of the subject matter of the arbitration proceedings” (Curtis, 2010).
Therefore, it becomes important that the parties desirous of raising counter-claims must seek the written decision of the project engineer first in respect of all counter-claims.
Types of claims by contractors
Selecting the right contractor for carrying out the construction project will solve half of the issues connected with the project (Singh and Tiong, 2006). This implies that the contractor holds an important position in ensuring the timely completion of the project and responsible for the timely delivery of the project. Faridi and El-Sayegh (2006) out of a study on the construction industry in the UAE, found that five out of ten most important causes for delays in the construction projects relating to the contractors’ faults. Assaf et al. (1996) have identified several issues concerning the role of the contractor in making a construction project to succeed or fail.
Lack of experience of the contractor is one of the potential sources of claims in the construction industry. Obviously, contractors with more years of experience in the industry are able to handle project-related issues efficiently than those who do not possess much experience. Professional contractors are able to plan and schedule construction activities efficiently. Lack of planning on the part of the contractor invariably leads to delays in project completion and consequent claims from stakeholders and the client.
The contractor should have sufficient resources in the form of human resources, materials, construction equipment and financial strength, which represent the fundamental tools for the successful execution of any project. Shortage of skilled workforce or lack of finance will pull back the contractor in performing to his best. If because of lack of resources, the construction process is slow, there will be consequent delays in the final completion of the project and claims are likely to arise. In addition to the availability of resources, the contractor must have full knowledge of the contract requirements to complete the project in time (Pickavance, 1997; Robinson, 1972).
It is essential that the contractor is aware of his rights and responsibilities in a construction contract. The contractor must also engage professional people, having the expertise to document and prefer claims that could be won by the contractor. The professionals must identify the right cause of claims (Vidogah, and Ndekugri, 1997, 1998; Yates and Epstein, 2006). Cooperation of the contractor with the representatives of the client is another essential element in achieving success in project delivery. With both parties cooperating with each other, project issues could be resolved smoothly and speedily without affecting the progress.
Lack of an efficient system of quality control with the contractor’s establishment is most likely to result in reworks involving additional cost and time in completing the project. In some cases, a lack of quality is the main cause of claims to arise. Any construction project is subject to change orders, and change is defined to include any modification in the original scope of the construction contract. Such changes may have significant implications on time, cost and quality of construction. If the contractor is unable to manage the changes swiftly, it might lead to serious issues in project completion, giving rise to claims (Assaf et al. 1996).
Efficient organization by the contractor in the matter of procurement of materials will avoid significant delays in the project completion. With proper planning, the contractor should identify the source of proper materials and avoid the delays in organizing the required materials in order to avoid serious delays in projects for want of materials. Proper management of subcontractors is an important element in ensuring the timely completion of construction projects.
According to Arditi and Chotibhongs (2005) by engaging subcontractors, the contractor would be able to derive the benefit of the formers’ specialized experience and could achieve the project completion faster with lesser costs. Because the contractor is liable for delays caused by the subcontractor, the contractor must be careful in engaging the subcontractors to avoid claims for delays caused by the subcontractors (Arditi and Pattanakitchamroon, 2006).
Types of claims by consultants
The consultant assumes the position of the guard to protect the interests of the client in a construction project. The consultant holds a pivotal responsibility to monitor and control the progress of the construction project so that the project is delivered successfully on schedule with good quality. Meredith and Mantel (1989) define a consultant as “a professional (individual or company, either in-house or outside of the client’s organization) designated by the client to advise and act on his behalf as a distinct member of the project team to monitor, make decisions, resolve disputes and coordinate the various parties of the project within limits set by the client,” (Krima et al. 2007).
Any shortcoming on the part of the consultant to fulfil his responsibility will lead to delays in completing the construction project in time and consequent claims. For instance, a delay from the consultant in approving the shop drawing will result in a delayed start of the relevant activities in the construction project, and this will subsequently lead to the completion of the project.
It is the responsibility of the consultant to approve the work completed by the contractor. Before he accords his approval, the consultant must test check the work completed to satisfy him about the quality of the completed work. The consultant’s approval may be the prerequisite for the start of any subsequent activities. In those cases, if the consultant makes a delay in his approval, the start of the subsequent activity may be delayed and so the entire construction project.
The consultant has the responsibility to approve the materials used in the construction and then forward to the client for approval (Shi et al. 2001). Here also, if there is a delay in approving the materials, the progress of the construction will get affected. The performance of a contractor depends largely on the timely release of payments against his bills, and the bills need to be certified by the consultant for payment. From an efficient project management perspective, making timely payments to contractors will ensure the timely completion of the projects (Wood, 1988). Therefore, it is important that the consultant checks the bills of contractors and passes them for payment without delay.
The consultant is expected to work closely with the contractor for eliminating any obstacles in the progress of construction and solve the problems, which might hinder the progress of the project. The consultant has an obligation to comment on the methods of work suggested by the contractor and offer suitable alternatives to improve the progress of construction. In fact, offering suggestions for improvement is considered as one of the criteria for measuring the consultant’s performance (Ng and Chow, 2004).
Therefore, the success of any construction project depends largely on the effective communication between the consultant and the contractors, which will ensure a smooth flow of work within the construction project. If there is a lack of communication, it might have a repercussion on the progress of the project, leading to delays and claims.
Types of claims by employers
The client or the employer or the project owner is the pivotal party in the construction contract. The construction contract is put into motion on the decision of the employer to go ahead with the project. The employer is the person who pays for the work done under the contract. He is the one who will decide on the quality and timeliness of the project delivery (Zack, 1993). It is the endeavour of all those connected with the construction project to meet the requirements of the employer in the building process.
Meeting the requirements is the criteria for assessing project performance. Krima et al. (2007) find that one of the most challenging tasks of the employer is to find the right contractor and consultant so that the project runs smoothly. According to Lo et al. (2007), some employers have a tendency to appoint the lowest priced bidder, even when the price offered by such bidder is much below the estimated cost. This attitude will lead to poor quality of construction, once the project is completed leading to quality claims.
The employer has the responsibility to pay the contractors on time for the completed work. If the employer delays the payments, it will lead to schedule delays and cost overruns (Kaliba et al. 2009). Government clients normally take a long time in releasing contractors’ payments, which in turn leads to claims from the contractor for enhancement in the contract value. This is because, in government contracts, the payments are passed after scrutiny by several departments leading to bureaucratic delays.
Similarly, in the case of public projects, the responsibility for the coordination with other governmental project stakeholders lies with the employer or the client organization. It is for the employer to ensure that the obstacles to the progress of the project are eliminated. The employer has to align the interests and requirements of all the project stakeholders. Failure to achieve this will result in frequent change orders, giving chances to the contractors for making claims against the employer in respect of both time and cost overruns.
Process of decision-making in the client organization is one of the crucial factors that influence the progress of the construction project. Normally, the top management is entrusted with the responsibility of taking decisions having financial implications. When in some of the client organizations, senior management personnel who need to take financial decisions are not technically sound in the construction activities, may act slowly in taking critical decisions, which might lead to delays in the progress of construction resulting in huge claims from the aggrieved party.
Some of the decisions might need the concurrence of other government authorities, which might also cause delays in the process of decision-making, leading to serious claims. Many other causes like delays in handing over the site to the contractor and delays in providing approvals to variation orders will lead to delay. If there is high pressure by the employer or other stakeholders on the contractor for completing the project early, it may also result in delays and subsequent claims. Similarly, absence of qualified and experienced personnel in the contractor or client organization and excessive workload in the employer’s organization will cause disruption in the progress of the project, (Odeh & Battaineh, 2002; Mills, 2001; Miller & Lessard, 2001)
General attitudes of contractors as to claims in Oman
The construction industry has remained robust in the Sultanate of Oman, as in the case of any other GCC countries. The major expansion of several infrastructure projects in the public sector as well as the construction of private and commercial buildings gave a thrust to the industry. However, the growth of the industry was hampered by the high level of inflation. High oil prices led to increased government spending, which in turn resulted in excess liquidity and an increase in demand. Because of high growth, the country experienced a vacuum in resource availability. This has created major problems for the construction companies to complete the projects on time, resulting in large claims on contractors.
In the context of the construction industry, the contract documents define the rights and obligations of the parties to the contract. Normally a request for extension of time or a request for reimbursement of additional costs will result in a disagreement that might not be settled amicably among the parties. Any construction project in Oman or for that matter elsewhere results in considerable additional costs to the contractor for various reasons.
The additional costs may also be incurred by the owner or both by the owner and the contractor, because of the action or failure to act by the other party. Disputes over the right to claim compensation or over the extent of time or monetary compensation to be provided by the owner often necessitate the parties resorting to arbitration, which is the settled method of dispute resolution in Oman.
Claims in the construction industry in Oman appear to be a common phenomenon as the working in the industry is affected by several factors such as weather conditions, lack of cost data, shortage of resources, lack of experienced contractors and frequent design changes by employers. Since the arbitration is the immediate dispute resolution mechanism, the contractors and employers do not hesitate to precipitate the disputes. In most instances, the parties are unable to come to amicable settlements in respect of construction issues and make the issues result in claims and counter-claims. In some instances, the lethargy of consultants in certifying the work completed by the contractor leads to delays and consequent claims.
Frequent misinterpretations of the contractual terms and excessive use of expatriate labour provide more opportunities for mistakes on the part of the contractor with the result that they do not meet the expectations of the employer. This often leads to hefty claims raised by the employer on the contractors. Too many holidays, in some cases, cause delays in projects and consequently make the contractor face the situation of paying claims to the employer.
Because of the complexities involved, in the construction industry, it may not be possible to avoid disputes among the parties altogether. However, in this chapter, we identified several instances, which might give rise to disputes and claims by the inaction of the employer, contractor and the consultant. By taking suitable precautions to avoid such instances or by improving the performance in the identified areas, which are susceptible to giving rise to claims, the parties to a construction agreement might avoid raising claims each other.
A suitably designed construction contract will also help the parties avoid possible disputes. In case any disputes arise during the progress of the project, the parties can by mutually discussing the issues could resolve the problem amicably. This chapter also reviewed the provisions of the construction agreement with respect to claims and arbitration in the context of the Sultanate of Oman. Next chapter deals with reasons behind claims arising from construction contracts.
Reasons Behind Claims
The objective of entering into a contract is to balance the demand and supply side of the construction industry. A contract represents a form of agreement, which is enforceable by law (Turner, 1999). In the context of a construction project, a contract outlines the rights and responsibilities of the parties to the contract and their obligations in respect of the execution of the construction project.
Traditionally, building contracts covered only the essential elements of the contract, namely, price, estimated time of completion and specifications relating to construction (Thomas, 1993). With the development of complexities in the construction industry, building contracts were enlarged to accommodate several other aspects like mechanisms for resolving disputes among parties to the contract. In general, a contract underlies the promises made by the parties to it.
A contract is concerned with keeping the promises made by the parties (Lau, 2001). When the promises made under a contract are broken by the parties, particularly in the construction industry, there is the likelihood of disputes arising among the parties to the contract. Against the broken promises, project stakeholders take action in respect of the failure of the contractor to meet their expectations by preferring claims against the contractor. They also feel that it is just to prefer such claims.
Despite the number of occasions in which claims arise in the construction industry, a consensus has not developed on the definition of the term “claim.” Until 1998, no mention has been made of claims in any of the JCT contracts. According to Lord Smith (1994) claim is “shorthand that describes a situation where a party, in the context of a construction project, submits, a justified and substantiated request for compensation based on the terms of the contract.” While no unified definition of the term “claim” in the context of the construction industry has been developed, in general, it has been agreed that a claim is an application preferred by a contractor for added payment or additional time to compensate the loss incurred by the contractor.
A claim may relate to the application for an extended time, where no financial compensation is requested. They may also relate to losses where financial compensation is demanded. Thus claims in construction contracts take two types of requests
- contractual entitlement
- damages for breach of contract conditions.
The following section discusses some of the instances in which claims arise in the construction industry.
Claims resulting from Site Possession or Handover
Claims may arise on account of idleness of the resources of the contractor, even when they are made available at the construction site, but were not put into use effectively. An example of this situation may be found in the workforce present on-site, but having no work to perform. When a contractor finds him in this position, he claims compensation for offsetting the expenses incurred by the contractor (Iyer et al. 2008).
One of the common reasons for such types of claims is the late handing over of the construction site to the contractor. If the construction site is not handed over to the contractor in time, he may have to keep his resources idle. Hegab et al. (2005) found that an international consortium of contractors lost about £ one million in a sewer system project in Egypt because of 2 months delay in the commencement of the project.
Claims due to Design Faults
A design that is flawed is bound to cause damages to the goals of the employer. It will also impact the schedules and budgets of the contractor negatively. Turner and Turner (1999) observe that when a contractor is confronted with a design that is ambiguous, the sequence of activities in the construction project is most likely to get disturbed. Similarly, inconsistencies in designs will also affect the progress of the construction project. In both instances, the contractor is duty-bound to demand clarifications and his waiting for the reply will be at the cost of time and cost overruns of the project concerned (Iyer et al. 2008).
Additional costs will be incurred by the contractor as he has to make his resources remain idle, until such time he gets the clarifications on the designs. In the case, where the discrepancies in the designs are discovered after the commencement of the project, the necessary rework will result in the need for additional cost and time. Diekman (1985) found that 40% of the loss and expenses claims were on account of faulty designs. The reflections on claims due to faulty designs reveal that the seeds of delay leading to disputes and disagreements, which eventually culminate into claims, are sown, even before the commencement of the construction project activities.
Claims because of Misrepresentations in Tender
In a building contract, the principals are under an obligation not to make misrepresentations at the tendering stage, as to the existence of certain conditions, which might affect the progress of the construction at a later stage (Iyer et al. 2008). Even if the misrepresentation is accidental or otherwise, such action will give rise to chances of claims to the contractor and other parties to the contract.
Although the employer does not have the legal responsibility to disclose any material facts at the tendering stage, he is clearly obligated to be careful to ensure that he does not misrepresent any material facts about the state of the construction site or the availability of some records affecting the title of the land or any other matters, which may have an impact on the progress of the construction project (Assaf et al. 2006). “While risk allocation clauses in contracts will generally be effective, a principal may not be able to rely upon them if the principal has engaged in misleading and deceptive conduct which induces entry into a contract or causes prejudice to a contractor in the preparation of its tender,” (Ebsworth & Ebsworth, 2008).
Claims because of Inspection or Approval Delays
Delay and disruption in the progress of construction contracts often result in time and cost overruns (Sun and Meng, 2009). These overruns become a major source of claims and disputes among the parties to the construction contract. The extent of each party’s responsibility for the delay in completion of the contract is at the core of the disputes. In some instances, the contractor will not be entitled to payment because he has carried out work in addition to what he has originally contracted to do. Moreover, the contractor cannot also claim extra payment on the ground that he has provided a better quality of work than was specified by the consultant.
Although the legal provisions may not allow an employer to get without paying any extra benefit than what he had instructed the contractor to carry out, the contractor cannot claim for the work which he has carried out and which is outside the scope of the contract. However, on certain occasions, there may be a dispute because the consultant has held up a portion of the work for further investigation on the plea that the quality of work completed has not met the required standards (Semple et al. 1993).
In this case, if it is found that the portion of the work completed has really been not up to the required standards, the contractor has the obligation either to rework the portion complained or to pay a claim to the owner (Li et al. 2001). On the other hand, if both the owner and contractor agree to accept the quality of that part of the work which was held a further investigation, no claims would arise. In case if the part of the work completed was of required quality and it was held for negligence or mistake on the part of the consultant or architect, the contractor would be entitled to a claim for direct loss against the owner of the construction project (Ng and Chow, 2004).
Claims because of Inclement Weather
Contractors consider a wide range of unforeseen incidents, which are uncontrollable to be of events giving rise to claims. Perhaps the most frequently used event as a basis for claims is adverse weather conditions. From a theoretical perspective only a severe and prolonged change in the weather conditions, which could not have possibly been subject to any prediction would be a proper justification for using adverse weather condition as a relevant event for basing the claims. Semple et al. (1994) observed that 37.5 % of the samples selected for their study cited weather conditions as a contributing factor for the delay and consequent claims.
However, delay due to inclement weather which is a neutral event is of no concern to the employer. If the construction is delayed because of bad weather, it is for the contractor to take the necessary steps for making up the delay. Otherwise, he may have to face the consequence of paying liquidated damages to the employer for the delay in completion (McInnis, 2001).
In case if the employer decides to grant additional time to make up the loss of time because of bad weather conditions, such an extension does not entitle the contractor to claim any additional payment. However, where a contractor has been forced to face an adverse weather condition by a variation in contract terms, the contractor may become entitled to reimbursement of direct loss/expenses. Under these circumstances, it is not necessary that the adverse weather conditions need to be exceptional for making the contractor qualify for making a claim for extension of time as well as additional payment (Kaliba et al. 2009).
Claims due to Lack of Data
Claims in construction contracts because of lack of data may be considered as a prolongation claim (McInnis, 2001). A prolongation claim is a simple one which states that employer or architect has acted in a manner or failed to act, which made the contractor unable to complete the construction project by the date contracted. The lack of data might be one of the reasons for the prolongation of the contract period and as a result of which the contractor might have been made to incur additional costs.
In that case, the contractor is entitled to claim his direct and actual loss/expense incurred by him because of the prolongation of the contract period. In the case of prolongation, due to a lack of data, a claim for extension of time from the contractor is the usual precursor to monetary compensation (Kaliba et al. 2009). Many of the contractors and architects are of the opinion that unless the contractor is first granted an extension of time, he might not be eligible for a monetary claim.
Notwithstanding the right to claim a monetary compensation, the contractor will find it convenient to get the extension of time first, because he can produce the evidence in support of the claim for extension of time and use the same evidence later for claiming compensation for direct loss/expense incurred. For loss of time because of lack of data, once the architect is satisfied with the duration for which the contract is delayed, the contractor has the obligation only to prove the quantum of loss or expense incurred (Semple et al. 1993).
Claims due to Late Approvals
Although the overall delay in construction projects is caused by many factors, late approval of drawings and designs is one of the common factors that lead to delayed completion of orders and consequent rising of claims by the contractor (Krima et al. 2007). This type of claim involves delay and/or disruption to the regular progress of the construction project. The delays in approval are within the responsibility of the employer, and hence the contractor becomes entitled to time extension as well as monetary compensation for the direct loss/expense incurred by him because of such delays.
Here again, the onus of proving the delay in approvals of drawings, designs or part work completed by the employer is cast on the contractor. For claiming an extension of time as well as damages, the contractor has to provide documentary evidence supporting his claim (Iyer et al. 2008).
Claims due to Force Majeure
“Force Majeure” risks fall outside the purview of assigned responsibilities. Therefore, they belong to the employer. In construction contracts, all the risks are identified and assigned either to the contractor or the employer, depending on the nature of the risk (Ibrahim and Madon, 2006).
Although the construction contract imposes a general obligation on the part of the contractor to take care of the construction works, these excepted risks are not covered within the general risks, and hence they are assigned to the employer. The term “excepted risks” or “Force Majeure” is used in many construction contracts to indicate the risks for which the employer is responsible. The traditional phrases used to include the exceptional risks are “claims, proceedings, compensation and costs which are payable due to the event” (McInnis, 2001).
Each of the elements in the phrase has wide connotation giving rise to the responsibility being taken up by the employer for the happening of any event not specifically mentioned in the contract. The phrase has significant legal implications and can be interpreted differently in the event of a dispute arising between the employer and the contractor on arriving at an amicable resolution.
Claims due to Delay in Payments
It is the absolute responsibility of an employer under a construction contract that the bills of the contractor are certified and paid in time so that no disruption occurs in the progress of the construction project. In the case of all construction contracts, the contractors provide for a certain sum of finance charges on the working capital required for carrying out the construction works. It is usual for the employer to retain a certain percentage of the payment for the work completed as retention, which will be released after the successful completion of the contract (Faridi & Sayegh, 2006).
Therefore, the contractor may not enjoy a positive cash flow until the retention amounts are released. There have been significant changes for compensating the contractor for the losses incurred by him because of belated payments. The contractor will incur an extra cost because of delay in payments, as the delay by the employer will lead to additional financing charges, as the contractor has to lock up his funds for more time in the project. However, the legal provisions do not recognize the reality and full extent of high cost and potential loss to the contractors because of delays in payments (Hanna et al. 2005).
It is necessary that a claim for finance charges on belated payments has to be based on a provision contained in the construction contract or against a breach of contract. However, clauses in ICE sixth and seventh edition and FIDIC had made express provision for payment of finance charges, when the company failed to make payment to the contractor, where the engineer has certified the bills.
Claims due to Various other Reasons
The contractors have the responsibility for the quality of the work completed by them. They have to carry out the works in accordance with the specifications mentioned in the construction contract. However, claims on account of quality defects cannot be easily maintained, because defective work cannot be spotted and decided upon, based on the definitions specified in the contractual terms (Li et al. 2001).
The contractor may take the plea that the defective work was because of the faulty design or lack of detailed specifications in the contract. The contractor may also blame the employer for having changed the original design agreed upon. On the other hand, the employer may blame the contractor for lacking the skills required to complete the assigned tasks. Therefore, many claims on account of deficiency in the quality of work completed may arise in construction contracts (Li et al. 2001).
In some instances, the contractors may be asked to temporarily suspend the work for reasons, which are not within the control of the contractor. In these cases, the contractor will be entitled to compensation in respect of time and cost incurred by him because of such suspension of work. The contractor is entitled to claim compensation even for a part of the suspension. This claim becomes maintainable even in cases where the contract document contains “work-around” directives. It is essential that the contractors maintain complete data on the time and cost incurred on the suspension period to make his claim from the employer valid (Chester and Hendrikson, 2005).
Apart from the above reasons claims in a construction contract may be preferred against the employer in respect of changes in the scope of the contract, errors and omissions on the part of the owner, lack of productivity, problems in accessing sites, strikes and acts of God and any other actions of the employer resulting in suspension or stoppage of the work of the contractor. Similarly, the employer may claim against the contractor for using out-of-specification materials, defective work and damages to the property belonging to the employer (Chan and Kumaraswamy, 1997).
This chapter reviewed the different circumstances that may lead to the preference of claims by the owner and the contractor in the construction contracts. Differing site conditions, changes in the scope of the contractors’ work, deficiencies and defects in the contract documents have been identified to be some of the causes for claims. Delay in the progress of the construction caused by inactivity, inability or constraint of any of the parties to the contract may give rise to the opportunity for claims by one party against the other. The claim for extension of time or monetary compensation against direct loss/expense incurred needs to be supported by documentary evidence by the party claiming from the other. The responsibility for proving the claim lies with the party claiming.
The Impacts of Claims
A claim is often seen as an undesirable word in the employer section of the construction industry. This is because claims result in an extension of the original budget for the contract. Construction activity can have only justified and unjustified claims to be met by the different parties to the agreement. While a justified claim is the one which is made in compliance with the terms of the contract, an unjustified claim does not comply with the express provisions of the construction agreement (Chappel et al. 2005).
One cannot find anything unnatural with a justified claim, because most of the standardized forms of the contract provide for the right of the contractor to apply for and get a reimbursement of direct loss and/or expense additionally incurred by him, because of certain clauses included in the contract, which are within the direct purview and control of the employer or other parties who are expected to take responsibility under the terms of the contract.
On the other hand, unjustified claims are those which are engineered before the commencement of the project or even during the tendering process, and these types of claims can cause significant financial loss to the employer. Unjustified claims lead to a misconception that some of the contractors enter into a contract with the specific purpose of entering into disputes for claiming large amounts from the respective employers (Chappel et al. 2005)
Employers under certain situations may be found to pay significantly large sums of money as claims because of circumstances, which are mostly out of his control or the control of the consultant or the architect employed by him. For example, huge claims may arise because of major redesigning of foundations caused by different ground conditions, which would not have been revealed by field surveys undertaken before the commencement of the project (Scott, 1993).
The implied conditions of the contract would provide for the payment of claims if the ground conditions are different causing rework on the foundations, As a matter of fact, claims for both time and costs in construction contracts are normal in any construction project. Although it is easy to raise a claim, it is much difficult to substantiate it, which provides protection to the employer. The employer is liable to settle only those claims, which are bound by express or implied provisions of the construction contract or the law governing the contract and it is for the contractor to prove his claims against the employer (Scott and Billing, 1990).
Where the contractor brings a claim within the procedure laid in the contract, the contractor must prove that he has, in fact, adhered to the administrative procedure provided by the contract. It is necessary that the contract claims are based on facts, and the contractor is legally obligated to substantiate these facts (Scott, 1993). The fact that the contractor loses money in a contract does not automatically give the right to claim compensation from the employer.
In order to claim, the contractor must be able to prove that such loss resulted directly from some act or omission on the part of the employer or otherwise the loss can be associated with some referable clause of the contract which entitles the contractor for reimbursement from the employer. Claims in a construction contract have varying implications on different parties associated with a construction contract, which forms the subject matter of the following sections.
Claims for extra money
Claims can be categorized as
- excusable delays
- Non- excusable delays.
Contractors are excused for delays that are not caused by them. Excusable delays are further sub-classified under compensable delays and non-compensable delays. Compensable delays are delays traced to the actions of the client and client representatives. Excusable delays attract time extensions but not necessarily payment unless they are compensable. Concurrent delays could be a third category of delays whereby excusable delays and non-excusable delays occur at the same time.
Claim for loss and/or expenses is a means of placing the contractor back in the same financial position had the contract been completed without any interruption or delay. Therefore, the claim for loss and/or expenses does not represent a notional figure, but it is the actual amount calculated based on the actual loss or expenses incurred by the contractor. Clause 37.1of FIDIC address “claims for loss and/or expenses”. Under this clause, the contractor is entitled to recover “direct loss and/or expenses caused by disturbance of regular progress of works” (Mbaya, 2008).
This implies that the contractor will be able to recover the financial loss and expenses, which are the direct result of the occurrence of events in the ordinary course as specified in the construction contract. FIDIC makes use of the term “additional payment” to denote the costs arising from any of the events mentioned in the contract. It is mandatory that the contractor proves either orally or through the production of relevant documentary evidence that he has in fact incurred loss or spent extra money, which is as a result of the events contained in the provisions of the contract.
The contractor is obligated to prove that the loss or extra cost incurred has sufficient link to the events mentioned in the contract, they are the actual loss or expenses incurred and not merely notional or estimated figures. In the cases of claims for losses and/or expenses, the contractor has a legal duty to take such actions to reduce the incidence of losses. The contractor has to take such actions as may be reasonable for him to reduce the loss or expenses.
For example, if a contractor receives a variation order from the employer, which requires the idling of the plant for a certain period, the contractor cannot simply keep the plant idle. He has a duty to make reasonable efforts to use the plant in a productive way on another site, or he has to persuade the employer to resolve the situation of delay early. The following are the events that may be considered as giving rise to monetary claims by the contractor.
- “Delay in receipt of instructions, drawing details or levels from the architect.
- Opening for inspection and testing where materials are found to be in accordance with the contract.
- Delay in the appointment of Architect or Quantity Surveyor.
- Discrepancy or divergence in conditions, drawings specifications or bills.
- Delays arising from the nomination of subcontractors.
- Delay in receiving possession or access.
- Contractor suspending work in accordance with provisions of the contract.
- Not all grounds entitling the contractor to the extension of time lead to the automatic recovery of loss and expense” (Mbaya, 2008).
Legal principles involved in preferring and quantifying the claims in construction contracts for direct loss and/or expenses are well established. However, a number of practical difficulties are encountered in applying these principles in real-life situations. The main objective of claiming and settling damages is to place the aggrieved party in the same position with respect to monetary involvement as if the contract was performed without any hindrance.
Thus the basic idea involved in the monetary claims, representing the right of the aggrieved party is to pay back, what the claimant has paid for. However, in practice, this principle is not strictly applied, if another lesser remedy is available to compensate the injured party or the cost of such entitlement to reimbursement is disproportionate to the benefits out of the claim.
Claims and extension of time
Generally, disputes are likely to occur between parties to a construction contract for a number of reasons. Disagreement over the period of the contract is a common cause of dispute among the parties. Delays leading to protracted contract period beyond the original date of completion very often give rise to differences of opinion among the parties as to who is actually responsible for the delay (Chan and Kumaraswamy, 1997).
While claims for liquidated damages is a common resolution for the delays in completion, requests for additional time may also be made, which will form the basis for disputes between the parties. Workday charges are another common issue on which disputes may arise. In this type of dispute, a difference of opinion usually arises as to whether or not a workday is to be included in the contract time (Chester & Hendrickson, 2005; Davies, 1989).
Standard construction contracts provide for excusable, inexcusable and compensable delays in contracts. Under excusable delays, the contractor becomes eligible for grant of additional time (Alkass et al. 2005). These delays occur because of changes or other actions initiated by the employer. In some cases, severe weather conditions and other force majeure considerations may provide for an extension of time. Design problems are one of the usual sources of excusable delays. Inexcusable delays occur because of events, which the contractor is normally expected to foresee. These delays occur because of own makings of the contractor.
Unlike the other two delays, compensable delays make the contractor entitled for both an extension in the contract period as well as additional monetary compensation. Modifications in the nature of the contract work or out of sequence work ordered by the employer may represent instances of compensable delays. Differing site conditions may also provide the chance for compensable delays.
Risk of Quality as a Result of Claim
The principal objective of any client will be to have the construction completed in time, within the budgeted capital outlay and to an appropriate standard of design and quality (Flanagan & Normann, 1993; Gray & Larson, 2008). Achieving these objectives normally depends on a number of factors. The cost and time are the major determinant factors in deciding the scope for design and specifications for the work.
However, when a claim arises because of a misunderstanding of the exact requirements of the employer, it may lead to quality degradation. Another aspect of claims is that because of the inability of the contractor to recoup any claim from the employe. , he may have an inclination to make up the claim amount by supplying substandard materials, which will have a serious impact on the quality of construction and materials used in the construction, Perhaps the supply of inferior materials may give rise to fresh claims under the contract.
Health and Safety
Because of the claims in a construction project, certain staff-related effects are most likely to take place. First is the loss of learning curve, as in some instances, there might be disruptions of work until the settlement of claims between the parties. This will leave the employees having not only lower morale but will also increase the staff turnover (Arain and Pheng, 2005). There may be site congestions resulting from the accumulation of work, which is likely to result in hazardous working conditions affecting the health and safety of workers. The contractor or the employer may not care about the health and safety aspects of the workers in their pursuit of shifting the blame for the claims to each other.
Disruption to normal work because of claims arising in the construction contracts affecting the working conditions of workers, including their health and safety, is not new in the construction industry.
Misunderstandings resulting from claim issues
Many relationship- and people-related issues arise from the claims in the construction contracts. Disputes and claims often lead to misunderstanding between the contractor and the employer being the parties to the contract. Claims leading to arbitration and litigation further strain the relationship between the parties with the situation going to the point of no return. This is likely to cause changes in the contractor’s teams and poor coordination, as the contractor might shift his efficient workers and supervisors to some other contract sites, until such time the claim issue is resolved. Chances of the employer mistaking every action of the contractor, and vice versa, increase the chances of growing misunderstanding between each other.
Loss of Credibility
Claims in construction projects arise mainly because of misunderstandings among the parties to the contract, as it is always not possible to provide for all the requirements and expectations of the employer in the various clauses of the construction contracts. Some of the provisions may be ambiguous, leading to misunderstanding (Sun & Meng, 2009). When the parties are unable to settle the issue amicably among them, they have to submit to arbitration for settlement. Some of the parties would take the issues to court for settlement. When the dispute comes to the court for decision, there will be negative publicity for both the contractor and the employer.
Any supplier or creditor dealing with the employer or creditor is likely to view the transaction with either of them risky and therefore would like to apply restrictions on their dealings with the parties claiming against each other. This is a clear loss of credibility to the contractor and the employer. Similarly, when the contractor or employer is unable to succeed in his claim and recover from the other party, it may lead to financial difficulties. With the result that they may be forced to hold on to the payments to others, including its employees and suppliers. This will become the talk of the market and hence will act to reduce the credibility of the parties claiming under the contract.
Loss of Chain Management
Claims issues in construction projects are likely to cause serious disruptions in construction supply chain management. Team effect of claims will lead to a claim for extension of time and productivity degradation (Construction Industry Institute, 1995). Slower work pace in one part of the construction project, resulting from disputes and claims is most likely to affect the progress of work in many other areas, and as a result, disruption in the chain management is likely to impede the progress of the construction project. (Hanna et al., 2005).
Harmful Impact on Project
The most frequent effects of claims in the construction industry are the drastic increase in the project costs and delays in the completion of the projects (Li et al. 2001). More than often, projects might find that these two effects are interrelated, resulting in financial losses to the employer. Claims are most likely to have a significant impact on the productivity of the contractor by affecting his financial schedules (Aibinu & Jagboro, 2002; Bower, 2000).
Research has established a negative correlation between variations in contracts and productivity. Claims, apart from causing a significant impact on the current working on the project, is likely to have further interruptions. Because claims are caused mostly by delays, in order to catch up with the delays, the contractor may have to undertake certain tasks on an accelerated phase, and in the process of claiming and settling the claim, there might be loss of the available floats on the contract (Josephson et al. 2002; Love et al. 1999). This is likely to cause further delay in the completion of the project.
The major harmful effect is the strain on the relationship between the contractor and the employer. Since claims arise from changes in the contractual terms, which define such relationship, any claim is bound to affect the normal and cordial relationship between the two parties. Differences in understanding the reasons for variations in contractual terms lead to claims and counter-claims (Goodacre and Hunter, 1990). When the contractor is unable to succeed in his claim, he may be facing financial difficulties. As a result of this, the contractor may tend to supply materials of inferior quality, affecting the quality of final construction.
Claims Resulting from Variations to Contracts
Unscheduled changes in construction contracts cannot be ruled out, and they often cause additional work than planned. Such extra works are likely to cause additional cost and time to complete the construction project (Civitello, 1987). Understanding the terms of the contract by the parties is bound to vary, which may give rise to changes in the scope of work. However, since the parties to the construction contract have diverse viewpoints chances for disputes to arise between owners, contractors and subcontractors are more. Moreover, in the present day’s context, because of the fact that construction schedules are compressed for faster completion, building activity starts even before the final design is completed (Chen & Hsu, 2007). This might lead to the following of inaccurate design.
Because of the changes in the needs and preferences of the industry, changes in the employers’ needs from the contractors are inevitable. All these factors have led to a significant increase in the change orders in construction projects, often leading to disputes among various parties involved in the project. It is to be accepted that owners and design professionals must have the liberty to provide change orders so that appropriate changes can be made in the construction projects to suit the particular needs of the employers.
Any construction project is subject to change orders, and change is defined to include any modification in the original scope of the construction contract. Such changes may have significant implications on time, cost and quality of construction. If the contractor is unable to manage the changes swiftly, it might lead to serious issues in project completion, giving rise to claims (Assaf et al. 2006).
Disputes and resultant claims in the construction industry have serious impacts on the progress of the construction project. The effects of claims may be relationship and people related, resulting in changes in the pace of work, affecting the quality of output, lower employee morale and higher staff turnover. Financial issues such as additional payments to the contractors, interruptions in cash flows, additional cost incurred in increasing the supply of materials and equipment cannot be ruled out. Apart from creating misunderstandings among the contractor and the employer, claims may also result in loss of reputation in the market and poor working conditions for the workers affecting their health and safety.
As you know, claims in construction projects are unavoidable. Several factors are responsible for the incidence of claims in the construction industry. My current research extends to the exploration of causes, effects and resolution of claims in the construction industry in the context of Sultanate of Oman. This questionnaire is sent to you as a part of my research leading to the award of …Degree from the University …. I solicit your contribution in answering the questions contained in the questionnaire based on your personal experience in the industry. Your responses will be summarized, and the summary will form part of my dissertation. I confirm that complete anonymity will be maintained with respect to the information/data provided by you in response to this questionnaire.
|A. Reasons and Causes for Claims |
|Never||Occasionally (1 or 2 projects in 10)||Frequently (3 – 7 projects in 10)||Constantly (8 – 10 projects in 10)||No effect||Fairly severe||Severe||Very severe|
|B. Reasons and Causes for Claims |
-Site Condition Based
|Never||Occasionally (1 or 2 projects in 10)||Frequently (3 – 7 projects in 10)||Constantly (8 – 10 projects in 10)||No effect||Fairly severe||Severe||Very severe|
|C. Reasons and Causes for Claims |
|Never||Occasionally (1 or 2 projects in 10)||Frequently (3 – 7 projects in 10)||Constantly (8 – 10 projects in 10)||No effect||Fairly severe||Severe||Very severe|
6. The following is a list of impacts of the claims.
From your experience, please comment on the frequency (how often occur) and the severity (how harmful is) of the following impact of claims in construction?
Impacts on Claim issues
|Never||Occasionally (1 or 2 projects in 10)||Frequently (3 – 7 projects in 10)||Constantly (8 – 10 projects in 10)||No effect||Fairly severe||Severe||Very severe|
|1. Misunderstanding between all parties|
|2. Loss of profit to the contractor|
|3. Loss of profit to the Client|
|4. Failure to maintain the expected quality|
|5. Time overruns|
|6. Loss of productivity|
7. If you know any other causes of claims and impacts in public/private project construction other than those stated above, please specify:
8. Please offer your suggestion of best practices based on your experience to avoid claims in the construction projects.
Thank you very much for your cooperation.
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