Our Work Is Being Delayed, What Should I Do?
Our Work is Being Delayed, What Should I Do?
How to Properly Document a Prospective Construction Claim
This article is the final of a series of three articles that discuss the need for proper construction documentation and the use of the documentation to support a construction claim. This article will focus on what additional steps should be undertaken when a potential construction claim is identified.
As all construction industry members know, there are few, if any, projects that do not involve course of construction events that impact the cost of the job. Generally, those unexpected occurrences result in change orders or construction claims. To successfully recover the costs associated with those events from the party with whom you are contracting, it is necessary to promptly identify and then support the claim with adequate documentation. If the parties cannot resolve a dispute over the additional costs associated with an unexpected course of construction event, it may be necessary to litigate the issue. The chances of prevailing are significantly diminished if there is no documentary evidence to support the claim and if proper notice was not given to the other party to the contract.
Thus, Contractors should be prepared to undertake the following actions when an unexpected event occurs that could impact the cost of the project:
1. Provide Prompt Written Notification to the party with whom you have entered into a contract.
When a potential claim is identified the home office and field personnel should immediately review the contract to determine how and when to notify the party with whom you have contracted of the condition. Generally, such clauses are found in the claims and/or change order sections of the contract. The clauses typically require written notice within days of discovery of the claim and describe the type of notice that must be given. A contractor’s failure to comply with these types of clauses can result in forfeiture of the claim.
The recent trend in government contracts is to require the contractor to present a documented claim within a short period after notice is first given. The clauses require the contractor to provide all the project documentation that was discussed in the earlier articles. It should be noted that if you are a subcontractor, the prime contract claim notification and claim presentation clauses maybe incorporated into the subcontract. If appropriate, send letters and memorandums updating the status of the event and the costs that are being incurred.
If applicable, the affected parties should be asked to make a field inspection of the event which is the subject of a possible claim.
2. Prepare a Claim Event Form.
Accompanying this article is a Project Event Report. The form is intended to act as both a checklist of what must be done once a claim is identified and as means for memorializing the event. The form includes sections that are intended to record: (a) when the event occurred, (b) who first observed the event, (c) when notice was given and to whom, (d) how the event impacts the current activity and the future activities, (e) what additional costs and labor are being incurred, (f) presentation of formal change orders, and (g) relevant conversations and correspondence.
3. Start a Separate Claim File.
The sooner any claim documentation is copied and placed in a separate folder, the easier it will be to prepare the final claim and/or change order. The file should include copies of all pertinent documents rather than the originals. The originals should be filed in the typical files in which they are maintained.
4. Regularly Update the Project Schedule.
It is a good practice to update the project schedule on a regular basis, be it weekly, bi-weekly or monthly. The prior schedules should be saved for comparison to the final as-built schedule. When the schedule is updated the field personnel should review the earlier schedule with the updated schedule to determine where there is slippage in the schedule. When delays are identified the project personnel should prepare a written analysis of what is delaying the project and how it will impact future project activities.
5. Document the event.
Once the event that is affecting the project cost or completion date is identified, the field personnel should immediately document the nature of the event. The documentation should include relevant entries in the job log and other written project documentation. Other methods of documentation should also be utilized. If, for example, there are conflicts between the plans and the field condition, that variance should be photographed and/or videotaped. In addition, the relevant sections of the plans should be identified and noted in the claim folder.
6. Document the additional costs caused by the event.
The supervisorial field personnel should identify any additional costs that are being incurred as a result of the event. If additional manpower is being expended, the names of the men, what they did, how long it took and their rate of pay should be documented on writing on a separate form. If additional materials are purchased, the invoices should be identified. In addition, the need for the additional materials should be recorded. Copies of the aforementioned documentation should be placed in the claims file or binder.
7. Document Relevant Conversations
Key conversations should be reiterated in the daily job log. The dates of those conversations along with references to the pages in the log should be noted in the claim folder.
In closing, the earlier a claim is identified and properly documented the higher the likelihood a contractor will obtain compensation for the claim. As stated in earlier articles, to prevail on a claim it is necessary to determine how the facts relate to the relevant contractual provisions. As a result, if the costs that are being incurred as a result of the claim events are significant, it is prudent to contact your legal counsel and accountant. Early involvement of your professional counsel will allow them to determine what additional documentation may be required and develop a strategy for resolving the claim.
This article, © 1998, was written by William C. Last, Jr. of Last & Faoro. Mr. Last is an attorney who has been specializing in Construction Law for over eighteen years. Mr. Last also holds a California A&B contractors license. If you have any questions Mr. Last can be contacted at 415-764-1990 or 650-696-8350. This bulletin is published periodically to provide general information about current legal issues. If you have a specific legal question or need legal advice, you should contact an attorney.