Claims Prevention Guidelines

General

The objective of claims prevention is to keep the number of claims to a minimum. The majority of claims can be mitigated, if resolution action is taken promptly. Claims prevention involves being sensitive to potential claim situations and taking appropriate action to avoid them. For the most part, it is a matter of good project and contract management. The following guidelines have been developed to assist project managers in their efforts to reduce the probability of claims.

Risk Management Planning

(Anticipate problems contractors may encounter in carrying out the work)

  • Complete a Risk Management Plan to identify potential risk exposures at the earliest stage in the planning process.
  • Encourage project team input at all key stages in the project delivery process.
  • Ensure the construction schedule is compliant with the specifications, is prepared at the start of the project, provides reasonable time frames, is utilized as a baseline to study the effect of changes and assess responsibility for delays; ensure the contractor. prepares/maintains detailed construction schedules to monitor progress and slippages.
  • Ensure the contractor prepares/maintains detailed construction schedules to monitor progress and slippages.
  • Utilize the traditional RPB single lump sum contract, or the unit price contract methodology (any departure from these methodologies requires RPB, RPC, and legal approval).
  • Ensure project site is available to the contractor at the time of contract award (any site restrictions must be outlined in the contract documents).
  • Consider seasonal impacts when establishing the timing of contracts (excavation, paving, roofing contracts are best completed during the summer).
  • Define completion dates in terms of 'numbers of weeks' rather than 'calendar dates' (a date must be provided in the Articles of Agreement, however the choice of time periods remains flexible up to the formal signing of the contract).
  • Establish the scope of work and size of contracts by considering preliminary work that can start ahead of the main work (demolition), volume of work that may be completed in one working season, size of contract that can be handled by local contractors, advantages/disadvantages of engaging more than one contractor, provision of specialized equipment (pile foundations, tunneling, etc.).
  • Consider problems arising from local conditions and address such in tender documents (aboriginal land claims, security clearances, hazardous conditions, restricted working conditions, municipal by-laws, etc.).
  • Carry out sufficient investigative work to provide adequate data regarding site and subsoil conditions to the designer and the contractor (ambiguity/non-disclosure of data often leads to claims).
  • Anticipate problems at the 'design stage' when resolution costs are lowest (more creative design may increase foundation costs but mitigate higher costs for extras and delays during construction).
  • Plans and specifications must be current and consider the availability of the material/equipment/expertise of the workforce required.
  • Specify requirements for inspection/quality control/responsibility for testing and warranties in contract documents (prompt, ongoing inspections and insistence on quality are essential in assuring that deficiencies and unacceptable workmanship do not 'pile up' through to interim inspection).
  • Ensure specified construction tolerances are realistic and reasonable.

Provision of Quality Plans and Specifications

(Ensure accuracy and quality to extent possible)

  • Ensure competency of consultants engaged for architectural and engineering contracts.
  • Establish client - consultant interface to identify client requirements.
  • Ensure plans and specifications are vetted by a quality control group.
  • Ensure documents contain all required information in sufficient detail for the contractor to prepare tenders.
  • Avoid vague statements such as 'equal to', 'match existing', 'by others'.
  • Provide quantifiable amounts for bidding purposes wherever possible.
  • Clearly define trade packages for all specifications divisions.
  • Clearly define commitments by Public Services and Procurement Canada (PSPC) to supply material/equipment/services.
  • When listings of subcontractors/suppliers are requested they must be thoroughly reviewed and the contractor advised of any situations where it appears that the requirements of the plans and specifications will not be met or where the subcontractor is a known poor performer. (Problems usually arise from the fact that the material or equipment does not meet the requirements of the specifications).
  • All addenda to plans and specifications must be in writing and issued in time to ensure that they reach all interested parties prior to the tender closing.
  • Each item in an addenda must refer to a precise specification paragraph/subparagraph or note on a drawing.

Selection of Contractor

(Existing federal policy to secure public tenders and award to the lowest bidder impedes the ability of PSPC to contract with the most competent contractors).

  • Consider disqualifying lowest bidder for previous unsatisfactory performance, lack of experience, or submission of a price which is unusually low in relation to PSPC estimate and other tenders received (obtain advice from RPC).
  • Consider limiting the number of tenders, or the use of mandatory evaluations criteria that necessitate a two-envelope system (technical qualifications/experience in one envelope and pricing in a second envelope) for highly specialized projects. If the contractor does not meet the mandatory technical requirements, the price envelope is not opened (obtain advice from RPC).
  • Resolve problems with contractor selection during the tender validity period when PSPC is in a better position to take action rather than after contract award.
  • Disqualify contractors at the pre-award meeting when they cannot fulfill the contract requirements, such as providing an acceptable schedule, or demonstrating a complete understanding of project requirements.

Management during Construction

(Resolve problems as they arise)

  • Work closely with the consultant to ensure their familiarity with RPB procedures for contract administration.
  • Promptly process shop drawings, change orders, and resolve disagreements with the contractor while ensuring he/she is treated equitably under the terms of the contract.
  • Insist on the preparation and maintenance of a quality, realistic schedule from the contractor, as stipulated in the specifications.
  • Ensure that the time frames established for approvals, inspections, testing, commissioning, etc., are reasonable.
  • Ensure regular progress reporting to monitor the actual vs. planned scheduled activities
  • Be aware of 'indicators' to potential claims such as:
    • contract price is too low;
    • commencement of the work is unreasonably delayed;
    • abnormal amount of changes;
    • work is falling behind schedule;
    • complaints from subcontractors and suppliers re: non payments, job organization, scheduling, etc.;
    • increased incidence of letters from the contractor re: administration of the contract, and lack of decisions by RPB.
  • Ensure any claims (or threats of claims) are submitted as per the contract within stipulated time lines, substantiated in writing and promptly responded to in writing.
  • Take immediate action to determine the validity, quantum, and causes of claims.
  • Ensure delay claims are not as a result of lack of decisions required from the client or the consultant.
  • Consider accelerating work to bring the work back on schedule, particularly in the early stages of a project (increased cost may be less than the cost of the resultant delay).
  • Maintain a good on-site relationship with the contractor:
    • ease cash flow problems to the extent practicable;
    • ensure contractor is paid promptly as required by the Terms of Payment;
    • ensure the contractor or subcontractors are not financially burdened due to failure to agree on costs for extra work completed;
    • for large extras where a price cannot be negotiated, issue a change order in at least the amount considered justified; if the contractor can subsequently demonstrate that this amount is inadequate, a supplementary change order can be issued in the correct amount.

Exercise PSPC Responsibilities

(Avoid situations which give rise to claims and accept responsibility for their prevention and prompt evaluation)

  • Maintain detailed project records (contract documents, minutes of meetings, project reports, job diaries, progress photographs, job schedules, consultant reports, correspondence/e-mail).
  • Enforce consultant and construction contract clauses with respect to project schedules and non-performance.
  • Ensure that the following activities take place during the design stage:
    • client/owner requirements are communicated clearly to the consultant, and that their needs become translated into a proper Project Charter;
    • working drawings are reviewed as design progresses to ensure professional standards are maintained at all times;
    • potential claims areas are identified during risk management planning phase and steps taken to reduce risk of their occurrence to an acceptable level (subsoil conditions is one such area);
    • consultant is kept aware of current requirements/forewarned of possible changes.
  • Ensure that the following activities occur during the construction stage:
    • proper job organization takes place to ensure efficiency in records keeping and processing of changes, claims, disagreements and disputes;
    • realistic schedule established/maintained to identify actual vs. planned progress;
    • close monitoring of the work and establishment of regular monthly meetings to review all issues that may impact on the successful completion of the project;
    • contractor is paid as per the terms of payment with particular emphasis placed on prompt payment for change order work;
    • PSPC's interests are protected and the contractor is treated fairly;
    • due consideration is given to recovery of PSPC costs incurred as a result of poor performance by the consultant and/or the contractor.
  • Forewarn the client of the potential costs and/or claims resulting from numerous changes during the construction phase, in particular those that are not essential to operational needs.
  • Take immediate action where a potential claim situation is foreseen to ascertain whether the situation can be avoided or its impact lessened by means such as redesign or rescheduling of certain activities.