Claims Processes

Since claims differ in content and complexity, the establishment of standard claims resolution processes is a difficult task. Minor claims may not require an entire array of process steps in order to be resolved, whereas, a major claim usually requires all of the steps in the process before a resolution can be achieved. Claims are to be processed in accordance with General Conditions GC6 - Delays and Changes in the Work and GC 8—Dispute Resolution. The following processes should be adopted upon receipt of a claim:

Project Manager will promptly

Awareness of stakeholders

• acknowledge receipt of the claim as soon as possible (within one week of receipt), advise the contractor that action will be taken to review the claim
• advise their SPM, the Contracting Officer (CO), the client, CPMU/ regional claim representative of the receipt of a claim, in accordance with "Claims Processes Table"
• meet with the CO to ensure the basis of claim is within the contract limits, and devise communications and resolution strategies
• If required either the CO or the CPMU will communicate with Legal Services to determine if there is liability to pay and evaluate the litigation risk value and a percentage of legal exposure risk
• determine need for additional expertise/creation of a Claims Resolution Team
• advise all stakeholders when the claim is settled

Evaluation

• evaluate the legitimacy of the claim
• analyze the claim in accordance with "Claims Evaluation Techniques" (if legitimacy is demonstrated)
• obtain and review all project, contract and financial documentation of the project in order to understand its details and peculiarities, and to determine the facts and the causes of the claim
• highlight all documented evidence to support or refute the claim
• determine responsibilities of all parties to the contract including additional funding where applicable
• complete the Claims checklist (see sample)

Negotiation

* Where the ADR clauses are applicable in the contract, those procedures must be followed. (GC8 Dispute Resolution)

• meet the contractor/consultant to provide analysis and preliminary amount considerations. Several meetings could be required which might involve more than one offer or counter-offer. Each new offer has to follow the above process (evaluation)
• provide the contractor with a written response and resolution offer, once an agreement is reached. The offer should bear the annotation: "Without Prejudice"

Resolution

If the contractor accepts the offer, complete the claim file by gathering all appropriate attachments listed on the "Claims checklist" (see sample) in order to obtain RPC approval.

• prepare a "Settlement Memorandum" (see sample) explaining the background and demonstrating the rationale used to calculate the offer (see 'Claims Resolution Mechanisms' ).
• prepare the Release form to the effect that the contractor accepts the amount as full and final settlement and has no further claims against the contract
• Forward unsigned documents to CPMU for Quality Assurance
• CPMU will prepare settlement docket for review and approval by Legal Services
• PM to assist the Financial clerk in the preparation of the payment requisition form (9317-1)
  • Ensure that the priority payment box is checked and that the CPMU are the contact to obtain the cheque
• CPMU will return the docket to the PM for Director and Director General approval
• The CPMU initiate a meeting with the contractor, and have the contractor sign the Release in exchange for the settlement cheque
• CPMU will forward a signed copy of the Release to the claims resolution team

National Capital Area Only

RPB pre-approves an upset settlement amount including a negotiation margin dealing with litigation risk provided by Legal Services, to allow the SPM/PM to settle at the negotiation/mediation table.

Senior Project Manager/Project Manager roles

• PM informs SPM that a claim has been received. Together with the assistance of the CO they ensure there is a contractual basis for the claim. A decision is made whether other expertise should be involved in the negotiations with the contractor

Calculation of the upset limit

The full amount of a negotiated settlement may be comprised of two or more elements:

• a portion approved by SPM/PM that is supported by documentation demonstrating that the amount is fair and reasonable for the extra work, and/or impact, delay etc.
• a portion within the value of known work but withheld for specific reasons (not paid -ex. holdback pending final inspection or warranty period)
• another portion is the amount that may have to be added to the offer to reach a settlement that takes taxpayers' interest into consideration, i.e. more advantageous than the BATNA ( Best Alternative To a Negotiated Agreement). This amount must be determined in conjunction with Legal Services in consideration of the litigation risk value and the legal exposure risk percentage. In order to prepare for negotiations, each disputant must consider all of their alternatives and identify the best one or BATNA^{Footnote 4}. This process will enable the SPM/PM to weigh offers and counter offers that they will receive during negotiations. This should also protect them against reaching an agreement that possibly should have been rejected

Pre-approval of upset limit

• once the SPM/PM have set an upset limit for the settlement of the claim, the SPM/PM seeks the necessary approvals - the method of which would be determined by the estimated settlement amount

Negotiation

• negotiations begin
• once the SPM/PM has obtained the necessary approvals for the upset limit, SPM/PM may make an offer and settle the claim at the negotiation table if within the approval previously granted
• in the making of an offer the claims checklist is used to demonstrate the rationale supporting the value of the offer

Resolution

• if an agreement is reached below the approved upset limit, the standard process is followed
• if an agreement is reached above the pre-approved upset limit, a conditional offer may be made

Date modified:

2019-11-06