AN OVERVIEW OF CONSTRUCTION CLAIMS: - Clark Wilson LLP

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AN OVERVIEW OF CONSTRUCTION CLAIMS: HOW THEY ARISE AND HOW TO AVOID THEM I. INTRODUCTION The intent of this paper is to provide the reader with an overview of construction related claims, along with some useful, practical advice on how to avoid these claims. II. HOW DO CONSTRUCTION CLAIMS ARISE Construction claims can be caused by a number of factors. Understanding what causes construction claims is the first step in avoiding them. In general, construction claims occur because of the following: • Delays in construction and completion of the contract; • Delays in the delivery and supply of materials; • Weather which slows down or prevents construction from proceeding; • Owner requested changes; • Changes which occur not at the request of the owner; • Poor management and administration of the construction site; • Site conditions which differ from those expected; • The work becomes impossible to perform; • Insufficient plans and specifications; • Failure of any one party to disclose information which is material to the construction; • Conflicts between those involved in the construction of a project; • Termination of the contract by the owner or the contractor; • Acceleration of the work; • Failure to adequately schedule and coordinate the work; and © 2005 Clark Wilson LLP www.cwilson.com Samantha Ip, T. 604.643.3172
p. 2 • Failure of parties to cooperate with each other in the performance of the work. III. GENERAL RECOMMENDATIONS FOR AVOIDING CONSTRUCTION Those readers who have been involved in construction claims, and especially those which have resulted in arbitration or litigation, are aware that they are often a costly process. I encourage my clients to avoid such expenditures by performing effective risk management at the outset by trying to avoid construction claims in the first place. Effective risk management for avoidance of claims involves a cost/benefits analysis at each stage of the construction. The realities of the construction industry and the profit driven bottom line often make it unrealistic and not cost effective to take all or even most of the recommended steps for avoiding construction claims. However, employing some of the following steps may save you more money in the long term by allowing you to avoid claims: • The best way to ensure that something occurs or does not occur is to put it in the contract. Obtain good legal advice before entering into the contract in order to ensure that your interests are properly and adequately reflected in the contract. The standard general conditions may not be adequate for your needs. This is particularly true of public entities which have special and diverse needs and interests; • Owners should try to hire contractors and consultants with whom they have a good relationship and who have a good reputation in the industry. You may have to do some research in order to determine a party’s reputation in the industry; • Owners should realize that the lowest bid is not always the best bid; • Owners should ensure that the contract allows them to have some say in the general contractor’s selection of its subtrades; • Each party to a contract should ensure that they understand their duties and obligations under the contract and that they have the ability to perform these duties and obligations as required by the contract; • Owners should ensure that a project is well planned from the outset to minimize the need for change orders or change directives. At least one study has shown that changes to the contract work increase the risk of construction claims and decrease productivity 1 ; • Both owners and contractors should do what they can to ensure proper management and administration of the project, including proper and adequate staffing and co-ordination of the project and trades; 1 The Construction Industry Institute study on the quantitative effects of project change (May 1995). © 2005 Clark Wilson LLP www.cwilson.com Samantha Ip, T. 604.643.3172
Page 1 and 2: AN OVERVIEW OF CONSTRUCTION CLAIMS:
Page 3: p. ii VIII. CLAIMS.................
Page 7 and 8: V. CLAIMS ARISING OUT OF DELAY A. D
Page 9 and 10: p. 3 • Excusable delays may be fu
Page 11 and 12: p. 5 5. What Is Required For A Succ
Page 13 and 14: p. 7 PRODUCTIVITY • Productivity
Page 15 and 16: p. 9 • The presence of subsurface
Page 17 and 18: p. 11 2. Withholding Contract Monie
Page 19 and 20: p. 13 time extension due to the eff
Page 21 and 22: p. 15 elevations, sections, details
Page 23 and 24: p. 17 compensable delay for the con
Page 25 and 26: p. 19 3. The General Conditions - S
Page 27 and 28: p. 21 Finally, schedules serve as a
Page 29 and 30: p. 23 that the coordination of cons
Page 31 and 32: p. 25 3. The Standard of Care - Rea
Page 33 and 34: p. 27 8. Other General Conditions T
Page 35 and 36: p. 29 (b) (c) What is noticeably ex
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