When dealing with construction claims—whether one for construction defects, outstanding payment, or delay damages—an initial hurdle is making sure that proper notice has been given. Generally, you have to make sure that you comply with the contract or insurance provisions by: (1) giving written notice of the claim; (2) to the correct party; (3) within the time required; and (4) identifying the event giving rise to the claim.
Notice is important because it is usually a precondition to recovery. Recently, a court in New York held that notice to an insurance broker was not the same as the contractually required notice to the insurance carrier. This decision illustrates the importance of following a process when dealing with a claim. Some other equally important tasks include:
- Identify the best person to manage the team. You need to select someone who is responsible and can lead in the following areas, which may involve more than one person: (a) Project personnel, who have detailed knowledge of the facts; (b) Estimator or project engineer, who has knowledge of the project, but is more objective than field personnel; (c) Legal representative, who can provide the proper legal framework for a claim and can identify and develop the legal strategy for recovery; and (d) Scheduling personnel, who can provide proper schedule analysis if there is a time consideration.
- Identify issues and establish a roadmap. This is often the starting point for reviewing a claim and the key to a successful analysis of issues. The leader should: (a) Interview estimator/project engineer, superintendent and other project personnel; (b) Review aspects of project that changed from the time of bid; (c) Review cost reports with most knowledgeable person; (d) Review segregated job costs, if any; (e) Compare your bid with other bids; and (f) Prepare a roadmap for potential claim preparation.
- Review the contract terms. As you develop the claim, the contract documents are the first set of documents that you should review. The following provisions are important: (a) Changes (including notice provisions); (b) Differing Site Conditions (including notice provisions); (c) Delays (including notice provisions); (d) Disputes (specifically required steps); and (e) Schedule. Also, you will want to identify any contract interpretation issues.
- Review the contractor’s plan of work. This includes talking about the anticipated means and methods with estimator/project engineer; reviewing crew sizes and anticipated crew movements; analyzing the anticipated productivity (per cy, sf, etc.) and determine whether that productivity was realistic; identify anticipated equipment and expected time to be on project; and identify planned staffing (tasks and durations).
- Analyze the schedule. At first, take a look at the initial approved schedule to determine whether the logic makes sense, review the durations for reasonableness, and decide whether the has any restraints. Next, check the updates which can include the Owner’s responses and any notes or memos reflecting status of the project each month. At this point, determine if contract procedure was followed. If not, why not?
- Review change orders and correspondence. At this point, your focus should be on what has been documented on the project to date. You are going to go back to the original scope of work to see if that was well defined, and changes have been made either in the field or as part of a negotiated, detailed change. You are going to review the actual change order to confirm that all costs and time have been captured and make sure you have not otherwise released any claims by language in the change order. You need to confirm that the changes procedure in the contract was followed. If not, why not?
- Assess other pertinent documents. Make sure your files have been organized so that you can review the following: (a) requests for information (RFIs): determine the number of RFIs and the cause; (b) daily reports; identify pertinent ones (determined by roadmap) and use as supporting documentation for proof of events or impacts.
- Identify whether there was loss of productivity. Determine actual productivity and compare it with the anticipated productivity. Identify any trends and determine whether there is a causal event for any loss of productivity that may be compensable.
- Evaluate any costs that are recoverable. Identify differences with plan on staffing (number and durations) and evaluate the reasons for any differences. Perform a “bottom up” analysis, which starts with the cost reports and works up. Review each major cost code in job cost reports and try to determine every possible reason for differences between budgeted and actual costs. Determine which cost increases were caused by events for which the owner or other contractors may be responsible.
- Prove legal entitlement. Too many facts and no law could hurt your claim, just as much as too much law and no facts could limit your recovery. You need to paint the right story based upon the facts and use the law to prove your legal entitlement. Your recovery could be based upon or limited by a contract provision, some applicable statute (such as a no damages for delay clause being invalid), or the applicable case law.