October 1, 2022

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Business is my step

Exploring Some Really Effective Ways to Eliminate Construction Claims

4 min read

Unfortunately, the construction industry is observing the highest number of claims. If truth be told, one in every five construction projects has a claim. They usually arise when there is a project delay, lack of communication, unforeseen circumstances, and conflicts. Construction claims can arise from any of the project’s participants, such as owner, architects, engineer, general, or subcontractors.

The purpose of construction claims is to demand compensatory or financial compensation for damages under a legally binding contract. Sometimes, unprofessional presentation of claims leads to wastage of time, money, and resources. A survey shows that the total amount of construction project claims resulted in 40% increase in the overall project cost and 48% of project delays. Some construction claims contributed to a 30% increase in the original contract value.

This is why claim management is considered one of the most important skills every contract and project management professional should have. It is important to know all the necessary steps to settle the issue in an early stage before arbitration and litigation. Knowing the important tips to eliminate the construction claims is beneficial for both parties, ensuring the successful delivery of a project.

Let’s dive into some really effective strategies for project owners to eliminate construction claims.

Hire a Professional Team

Choosing the right professionals is one of the best strategies for reducing construction claims. Hire a team of experts with in-depth knowledge of business, operations, maintenance, construction management, and project controls. These professionals have the essential skills to efficiently manage the project, monitor the performance of contractors, and solve the issue on an immediate basis.

These professionals put their best efforts to avoid dispute and litigation. A survey suggests that only 15% of construction projects with functionally integrated teams had claims compared to the other 35% of projects with nonprofessional teams. So, it is important to hire a team of professionals who provide construction claim management and are well-versed with dispute resolution, identify risks, and can better handle project disputes.

Expected Project Completion Date

 The construction industry can lower the frequency of claims by defining the completion date of future work. A majority of claims between project owner and contractor will be resolved when the project’s delivery date and budget is already set. Sometimes, contractors have high expectations from the team, when they know the realistic deadline of the project will significantly reduce the number of claims.

Create a Better Understanding of the Site Condition

The ratio of successful completion of construction projects as planned is unfortunately very low. Anticipating potential problems is critically important while crafting a construction contract. There are many unforeseen problems that arise, once the contract has been signed. Site condition is one of the major issues contractors and owners face that affect the budget of the project and lead to a construction claim.

Therefore, it is advised to develop a better understanding of the site condition is important to mitigate risk. Intelligent contractors investigate the site conditions and make reasonable assumptions in the contract to avoid construction claims.

Involvement of Technical Team While Signing a Contract

Okay, this is the most effective strategy every project owner should practice while signing the contract, as it can significantly reduce construction claims. There is no denying the fact that lawyers play a main role in the dispute management process. In order to develop a clear understanding of each clause and develop a solid dispute resolution methodology, you should take help from experts who offer construction claim support.

Involving the team with technical knowledge can also make things better and minimize claims. These resources will create and implement a logical and more realistic project schedule with significant details that are necessary for project completion.  

Contractor Control and Timely Reporting

If there is a mutual understanding between the owner and contractor, there is little or no chance of a claim. When the contractor sends regular updates about the project to the owner, claims are less frequent. The dispute arises when the owner is not satisfied with the contractor’s control and reporting system. This situation may lead to a tense relationship between both parties, delays in project delivery, and eventually to a claim.

Define Everyone Role and Responsibilities

It is important to clearly outline and define the role of every team member at the onset of the construction project. Decide who will submit, authorize and make changes in the project, grant flexibility in the project schedule, make important decisions, resolve and avoid disputes, to name a few. It will make smooth execution of the project and minimize claim occurrence.

Use the Decided Construction Schedule

Create a construction schedule and make sure the entire team sticks to it for on-time delivery. Inform every team member about the change orders, change in the delivery date, or construction sequences to avoid any inconvenience. Make sure to logically organize all the documents for swift dispute resolution and claim avoidance.

Final Thoughts

Eliminating disputes and construction claims requires a workable strategy and sensible approach to make the construction process smooth. Strictly following the terms and conditions, maintaining a positive work environment and regular communication will make both parties happy. It will also reduce the occurrence of construction claims and ensure a successful project.   

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