Construction Contract And Risk Management PDF

CONSTRUCTION CONTRACT AND RISK MANAGEMENT COMMON CAUSES OF CLAIMS Copyright ©2024 Project Management Institute, Inc. All rights reserved. 1...

CONSTRUCTION CONTRACT AND RISK MANAGEMENT COMMON CAUSES OF CLAIMS Copyright ©2024 Project Management Institute, Inc. All rights reserved. 1 This material is being provided as part of a PMI course. Objectives Review common causes of claims Distinguish between Identify sources and Distinguish between claims and change causes of claims claim types orders Copyright ©2024 Project Management Institute, Inc. All rights reserved. 2 This material is being provided as part of a PMI course. Claims in the Built Environment “The greatest opportunity to prevent claims comes to an end once tender documents are finalized and the contract is awarded.” - PROJECT MANAGEMENT INSTITUTE (PMI) Earlier settlement reduces strained relationships and financial repercussions Copyright ©2024 Project Management Institute, Inc. All rights reserved. 3 This material is being provided as part of a PMI course. Claims vs. Change Orders Copyright ©2024 Project Management Institute, Inc. All rights reserved. 4 This material is being provided as part of a PMI course. Built Environment Claim: Definition Request for compensation for damages Occurs when one party fails to fulfill a contractual obligation Can result in legal action or a change order Copyright ©2024 Project Management Institute, Inc. All rights reserved. 5 This material is being provided as part of a PMI course. Claim Impact Criteria SCOPE OF WORK MORE TIME AND RECOVERY OF CHANGE MONEY ADDITIONAL COSTS Copyright ©2024 Project Management Institute, Inc. All rights reserved. 6 This material is being provided as part of a PMI course. Meanwhile, on Avocet Island Applying What You’re Learning Copyright ©2024 Project Management Institute, Inc. All rights reserved. 7 This material is being provided as part of a PMI course. Discussion: Claim Impact Criteria Reflect on the Avocet Island initiative: Which claim impact criteria might best apply to the Avo scenario? Why? 6 Copyright ©2024 Project Management Institute, Inc. All rights reserved. 8 This material is being provided as part of a PMI course. Claim Deadlines Time deadlines Time-barred clauses Copyright ©2024 Project Management Institute, Inc. All rights reserved. 9 This material is being provided as part of a PMI course. Built Environment Change Order: Definition Agreement by two members Add or subtract Change the sequence of work Not a claim substitute Copyright ©2024 Project Management Institute, Inc. All rights reserved. 10 This material is being provided as part of a PMI course. Change Order Deadlines Not normally subjected to the same deadlines as claims Not a substitute for a claim Some contracts may impose no deadlines on change orders Other contracts can impose stricter deadlines on change orders vs. claims Copyright ©2024 Project Management Institute, Inc. All rights reserved. 11 This material is being provided as part of a PMI course. Change Orders and the Change Control Board (CCB) Assesses the changes raised Evaluates their impact Decides to accept or reject the proposed change Copyright ©2024 Project Management Institute, Inc. All rights reserved. 12 This material is being provided as part of a PMI course. Summary of Claim vs. Change Order A request by either party for any damages Claim caused by the failure of the other party to fulfill their obligations as outline in the contract Results from approved changes in the contract Change items between the owner and another Order contracted party. Copyright ©2024 Project Management Institute, Inc. All rights reserved. 13 This material is being provided as part of a PMI course. Meanwhile, on Avocet Island Applying What You’re Learning Copyright ©2024 Project Management Institute, Inc. All rights reserved. 14 This material is being provided as part of a PMI course. Discussion: Claim Review Board (CRB) Reflect on the Avocet Island initiative: How might the introduction of a Change Review Board impact the Avo incident? 6 Copyright ©2024 Project Management Institute, Inc. All rights reserved. 15 This material is being provided as part of a PMI course. Causes and Sources of Claims Copyright ©2024 Project Management Institute, Inc. All rights reserved. 16 This material is being provided as part of a PMI course. Claims Cause Research: Survey Says Many claims are settled through negotiations Others are resolved through dispute resolution Copyright ©2024 Project Management Institute, Inc. All rights reserved. 17 This material is being provided as part of a PMI course. Causes of Claims Delays and/or changes Unforeseen circumstances Insufficient information Other work-related conflicts and disputes 015 Copyright ©2024 Project Management Institute, Inc. All rights reserved. 18 This material is being provided as part of a PMI course. Classifying Claims Related parties Rights claimed Legal basis Claims characteristics Copyright ©2024 Project Management Institute, Inc. All rights reserved. 19 This material is being provided as part of a PMI course. Claim Categories Claims that fall within the specific clauses of Claim not specified in the contract but arise Claim has no legal basis the contract. These may in the contract, but the from a breach of Contractual include claim site conditions, Extra-contractual claim partyEx gratia claim believes they have contract that may be valuation changes, a right to file the claim either expressed or delays in providing implied. on moral grounds. information, and so on. Allows the owner to Designed to facilitate recover damages claims for damages by should the contracted the owner for any delays entity not deliver their Extension of by time Breach of time frame created theclaim work within the contracted entity in contractually specified performing their work time frame, assuming proof of fault. Copyright ©2024 Project Management Institute, Inc. All rights reserved. 20 This material is being provided as part of a PMI course. Meanwhile, on Avocet Island Applying What You’re Learning Copyright ©2024 Project Management Institute, Inc. All rights reserved. 21 This material is being provided as part of a PMI course. Discussion: Claim Categories Reflect on the Avocet Island initiative: Which claim category might apply to the Avo incident? Why? 6 Copyright ©2024 Project Management Institute, Inc. All rights reserved. 22 This material is being provided as part of a PMI course. Contracts and Claims Stipulate what constitutes a claim or dispute How to address the claim or dispute Copyright ©2024 Project Management Institute, Inc. All rights reserved. 23 This material is being provided as part of a PMI course. Impact of Claims Productivity Relationships Overall cost Project Time lines Copyright ©2024 Project Management Institute, Inc. All rights reserved. 24 This material is being provided as part of a PMI course. Dealing With Claims Owner agrees or disagrees Requires time and resources Common interest of all to prevent, minimize, or resolve claims Copyright ©2024 Project Management Institute, Inc. All rights reserved. 25 This material is being provided as part of a PMI course. Documenting and Analyzing Data Identify, document, and analyze data Highlight problem areas Track and keep records Copyright ©2024 Project Management Institute, Inc. All rights reserved. 26 This material is being provided as part of a PMI course. Claim Types Copyright ©2024 Project Management Institute, Inc. All rights reserved. 27 This material is being provided as part of a PMI course. Top 10 Claim Types DELAY SPIN ACCELERATION START & STOP DONE Copyright ©2024 Project Management Institute, Inc. All rights reserved. This material is being provided as part of a PMI course. Payment-Related Claims A majority arise from: Nonpayment or delayed payment PAYMENT- Deduction of money from bills without RELATED explanation Delay in payment security and maintenance deposit QUESTION BACK Copyright ©2024 Project Management Institute, Inc. All rights reserved. 29 This material is being provided as part of a PMI course. Change Claims Occurs when there is a change in the scope of work (SOW) or other revision CHANGE Potentially impact a project’s cost and schedule due to additional work QUESTION BACK Copyright ©2024 Project Management Institute, Inc. All rights reserved. 30 This material is being provided as part of a PMI course. Delay Claims Unexpected project circumstances that prolong the time line DELAY Many common causes for schedule delays Proving delays/disruptions can be QUESTION ponderous, especially with megaprojects BACK Copyright ©2024 Project Management Institute, Inc. All rights reserved. 31 This material is being provided as part of a PMI course. Extra Work Claims Additional requests from the owner after construction has started EXTRA WORK Tasks not originally stated in the contract QUESTION BACK Copyright ©2024 Project Management Institute, Inc. All rights reserved. 32 This material is being provided as part of a PMI course. Contractual Claims A disagreement on responsibility or liability not specified in the documents CONTRACTUAL Usually result from poorly written contracts QUESTION BACK Copyright ©2024 Project Management Institute, Inc. All rights reserved. 33 This material is being provided as part of a PMI course. Different Site Conditions Claims A physical aspect of the project/site that differs materially from contracted DIFFERENT SITE documents or conditions ordinarily CONDITIONS encountered by the contractor QUESTION BACK Copyright ©2024 Project Management Institute, Inc. All rights reserved. 34 This material is being provided as part of a PMI course. Differences in Pricing and Measuring Claims Arises from disagreement on measurements at the final stage of PRICE AND construction MEASUREMENT DIFFERENCE Includes the difference in material pricing by the contractor and owner QUESTION Added work may create a difference in pricing BACK Copyright ©2024 Project Management Institute, Inc. All rights reserved. 35 This material is being provided as part of a PMI course. Acceleration Claims Arise through owner-directed acceleration ACCELERATION Transpire when the contractor is required by the owner to complete the project within an agreed time frame after delays QUESTION Party responsible for the slowdown is obligated to compensate for additional costs BACK Copyright ©2024 Project Management Institute, Inc. All rights reserved. 36 This material is being provided as part of a PMI course. Damage Claims May occur by the fault of owner or due to safety issues DAMAGE These claims are rare, as contractors are typically responsible for the site QUESTION BACK Copyright ©2024 Project Management Institute, Inc. All rights reserved. 37 This material is being provided as part of a PMI course. Contract Termination Claims If the contract is terminated before … CONTRACT If the owner terminated the contract after TERMINATION … If the contractor has fully and contractually completed the work before QUESTION termination … BACK Copyright ©2024 Project Management Institute, Inc. All rights reserved. 38 This material is being provided as part of a PMI course. Questions Copyright ©2024 Project Management Institute, Inc. All rights reserved. 39 This material is being provided as part of a PMI course. Thank You! Copyright ©2024 Project Management Institute, Inc. All rights reserved. 40 This material is being provided as part of a PMI course.