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A brief introduction to Construction Claims !


Construction claims

Complicated EPCM (engineering, procurement, construction, and project management) contracts always include changes as a normal part of daily operations. It's hard to conceive of a project where no claims were filed. Claims Experts in the EPCM sector are often called upon to draft claims, evaluate them, and provide recommendations for dealing with them.


Writing claims and recommendations has a long and storied history that predates even the emergence of modern legal systems. Although, the EPCM sector still has a claim writing issue, claims that are approved on the first try remains a very modest percentage of total claims. The simplest definition might be as follows:

A claim is intended to assert, awaken, insist on one's own, including one's right in accordance with the terms of the contract or according to the law.

In the ECPM sector, however, "claim" might mean either the right to additional time to finish work or the right to additional payment, and very often both.


Types of Claims:

Even though, claims include two distinct aspects viz., DELAY AND QUANTUM, typically claims can be of following types:


types of claims
Types of Construction claims
  • Variation Claim

A variation claim is a legal claim made by a party in a construction project who has incurred additional costs or suffered financial loss due to a change in the project scope or design. Variations can occur when a project owner requests changes to the original project plan, which can impact the work and costs involved.


To make a variation claim, the party must demonstrate that they suffered a financial loss as a result of the variation, and that the variation was requested by the project owner. Variation claims can be complex and require detailed evidence to support the claim, so it is important to work with an experienced construction law attorney to ensure that the claim is properly documented and presented.


  • Extension of Time (EoT) Claim

EOT claim is the second most prevalent type of claim which is a request for additional execution time by the Contractor due to delays associated with the project that were not caused by the Contractor's default. Very adverse weather circumstances, an unanticipated lack of resources, and delays attributable to the Employer or the Engineer can result in these delays or additional time costs (engineering company). For instance, the late delivery of drawings or instructions, the late handover of a plot or a site area, etc.


The Client may not collect liquidity damages or penalties from the Contractor as a result of granting of the Contractor’s request for a duration extension. Delay Analysis is an imperative area in EOT Claims where Delay Analyst needs to choose the suitable delay analysis method carefully to substantiate delay to the contract completion date.


  • Prolongation Cost claims

A prolongation cost claim is a legal claim made by a party in a construction project who has suffered financial loss due to an extension of the project duration. Prolongation can occur due to various reasons such as changes to the scope of work, unforeseen site conditions, or delays caused by other parties. Prolongation can involve additional labor, equipment, and materials costs, which can result in financial losses for the party affected by the prolongation.

To make a prolongation cost claim, the party must demonstrate that they suffered a financial loss as a result of the prolongation, and that the party responsible for the prolongation caused the need for the extension. The claim can be complex and requires detailed evidence to support the claim, so it is important to work with an experienced construction law attorney to ensure that the claim is properly documented and presented.


The cost heads involved in a prolongation cost claim can include - INDIRECT TIME RELATED COSTS in the extended period such as

  1. Additional equipment and material costs required for the prolongation

  2. Increased overhead costs due to the prolongation

Proper documentation and evidence of the costs associated with the prolongation are essential to successfully make a prolongation cost claim.


  • Acceleration Claims

Sometimes it happens in a project that the Contractor has to use additional resources in order to increase the pace of work to complete the project in a shorter time frame than was planned at the initial stages of the project. Acceleration requests can be Directed or Voluntary or Constructive. Below are the items of expenses for which the Contractor may incur additional costs due to the acceleration of work completion:


1. Extended working hours.


2. Additional mobilization cost by increasing the number of equipment & workmen.


3. Loss of efficiency of equipment as well as a decrease in the productivity of workmen due to use of additional resources.


Some of the most common cost heads under an acceleration claim include:

  1. Additional labor costs incurred due to the acceleration

  2. Overtime pay for workers involved in the acceleration

  3. Additional costs for equipment and materials required for the acceleration

  4. Additional costs for project management and supervision related to the acceleration

  5. Increased overhead costs due to the acceleration

To successfully make an acceleration claim, it is essential to document all the costs associated with the acceleration and provide supporting evidence to demonstrate the impact of the acceleration on the project. It is recommended to work with a construction law attorney who has experience handling acceleration claims to ensure that the claim is properly documented and presented.


  • Disruption Claims

A disruption claim is a legal claim made by a party in a construction project who has suffered financial loss or delay due to a disruption to the project. Disruptions can include unexpected events such as changes to the scope of work, delays in getting materials or labor, or unanticipated site conditions. Disruption claims can be difficult to prove, as they require detailed evidence of the disruption and its impact on the project. However, if a disruption claim is successful, the party making the claim may be entitled to compensation for their losses.


Some of the most common cost heads involved in a disruption claim include:

  1. Additional labor and material costs incurred due to the disruption

  2. Increased project management and supervision costs

  3. Extended overhead costs due to the delay caused by the disruption

  4. Loss of productivity and efficiency due to the disruption

To successfully make a disruption claim, it is important to carefully document all of the costs associated with the disruption and to provide supporting evidence to demonstrate the impact of the disruption on the project.


  • Claims due to changes in Legislation

It is possible that changes in legislation, especially those related to taxation, may lead to changes in the costs incurred by the contractor. This may require adjusting the contract price accordingly and therefore may lead to a claim. While the right to such a claim is easy to establish, on the other hand, the justification for the amount of compensation desired can be difficult.


For example, let's say a change in legislation leads to an increase in fuel prices. In a multidisciplinary project, it will be difficult to determine exactly how the increase in fuel costs will affect the total contract price.


  • Global Claims

Global claims, also known as "total cost claims" or "composite claims," are a frequent occurrence in construction disputes and international arbitrations, especially when projects are delayed. Global claims are claims made by contractors without attempting to demonstrate a cause and effect relationship. According to Keating on Construction Contracts, a global claim is one that

provides an inadequate explanation of the causal nexus between the breaches of contract or relevant events/matters relied upon and the alleged loss and damage or delay that remedy is claimed for.

Even while the Society of Construction Delay and Disruption Protocol (the "SCL Protocol") normally rejects global claims and discourages contractors from pursuing them, in its 2nd version issued in February 2017, the SCL Protocol acknowledged that

courts and arbitral tribunals have taken a more "lenient stance" toward such claims.

Some less common types of claims

In addition to the most common types of claims mentioned above, there are also some claims that are less common in construction projects, and these are listed below:


Cancellation claim:

application is cancelled when one of the parties prematurely terminate the contract.


The claim for reimbursement of the cost of rectifying actions:

This requirement may be presented by the Employer to the Contractor in connection with improper design or performance of work at the facility.


Lawsuits file by either party:

These types of claims arise when the contractual relationship is destroyed. Complaints of this type are usually reviewed by professional lawyers and not covered them in this article.


Claims for Loss of Opportunity:

The loss of a chance to profit, gain, or benefit might give rise to a claim for loss of opportunity in the event of a breach of contract, negligence, personal injury, or fraudulent or deceptive behavior.


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Disclaimer:


The views expressed in this article are those of the author and do not reflect or represent the official policy, position or recommendation of any individual or organization. Any written or verbal recommendation has a general nature and should not be used for any decision making without further assessment for specific project and organization requirements.

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