Claims Evaluation Techniques
Once the claim is a 'fait accompli', the Project Manager (PM) requires answers to the following questions:
- What chain of events or circumstances caused the claim?
- Who had responsibility for and had control over the events or circumstances?
- Do the events or circumstances provide a basis of claim under the contract?
- Is a notice of intent to claim required, and if so, was it properly provided?
- Is specialist advice required on any element of the claim?
As a result of a preliminary review, it is usually possible to assess whether there is a sound basis for a claim. If, after serious consideration, the claim appears unjustified, the PM must advise the contractor promptly and provide a clear logical statement of the reasons the claim is not justified. The objectives in claims evaluation and resolution are threefold:
- minimize the disruptive effect of the claim on the project
- negotiate reasonable settlements promptly
- reject unjustified and unreasonable claims
Detailed Claims Study and Evaluation
Most claims involve delay. The best tool to study delay claims is a planned schedule on which actual completion dates or times are shown. In many cases, however, schedules are incomplete and it may be necessary to prepare a chart showing the actual completion date and what would have been a reasonably planned completion time frame. Responsibility for delay can be determined more easily. Strikes, weather, and acts of God might cause a delay that could be referred to as an excusable delay, the effects of which would normally not be chargeable to either party. PSPC's liability to the contractor may now be calculated as well as the contractor's liability to PSPC. The difference between these two figures is what would constitute a reasonable settlement.
A detailed analysis of a complex claim may require months of study by a party(ies) with a good understanding of construction methods, scheduling and estimating. In studying a claim, the following steps are recommended:
- review all the project documentation with a view of fully understanding details of the project, whether it was delayed, cause of delay, who delayed it, etc.
- list other possible causes/problems such as poor performance of the contractor, subcontractors and suppliers' strikes, inclement weather, late delivery of materials, etc., which are not the responsibility of PSPC and may be the true cause of the claim
Determine contractual clauses applicable
- list all the stated causes for the claim
- identify contract clauses that claimed items/causes can be associated with, such as GC6.2, etc.
- if any of the contractor's allegations in the claim are correct the contractor must assess and demonstrate the impact on the project, and any delay issues
- PM must verify the alleged losses by the contractor by measuring/verifying units of time, material, equipment and labour, and all other costs purportedly incurred that were beyond the control of the contractor
- obtain the assistance of experts or third party neutrals, where necessary
- ascertain that the claimed amounts were thoroughly reviewed
- certify that the claimed amounts deemed payable are fair and reasonable; the time and cost required to provide the services was fair, reasonable and based on industry standards and our experience with similar projects
Determine your "Best Alternative To a Negotiated Agreement"
Completing a claims evaluation includes preparation for negotiations. This is essential so that the PM is satisfied that all possible options for settlement have been explored. This is especially important in cases where no agreement can been reached. In order to prepare for negotiations, each disputant must consider all of their alternatives and identify the best one or BATNA. This process will enable the PM to weigh offers and counter-offers that they will receive during negotiations. This should also protect a PM against reaching an agreement that possibly should have been rejected. The BATNA can be developed with the assistance of the Claims Prevention and Management Unit or your regional claims representative and by consulting with RPC and Legal Services to evaluate the litigation risk value as well as the legal exposure risk percentage. During negotiations, the proposed settlement should be more advantageous than your BATNA to be acceptable.
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