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3.       Claim Development Process

 

3.1. Client Change Orders

 

Timely submittal of Client Change Orders (CCO) is an essential precedent to the incurrence of cost and provides the foundation to establish our contractual rights for additional compensation or extension of time requests.

 

 

3.2. Claim Situation

 

When the Client Change Orders are not processed promptly or fairly, for purposes of this procedure, we consider all the unresolved issues as a "Claim". Generally the claim development process and strategy is oriented to issues of contractual entitlement and proof of facts, but some of the strategy techniques could also be used in situations where cost/ schedule recovery is sought for issues with limited firm contractual basis.

 

 

3.3. Assessing when Escalation may be Required

 

If Company believes that it’s entitled to a change order and the Client refuses to approve, or delays approval of Change Order requests through normal means, then Company may be moving into a Claims situation requiring escalation. Company Project Teams are actively engaged in solving problems, maintaining schedules, ensuring safety, controlling costs and fostering Client relations and this can divert attention from actively engaging the Client in the resolution and approval of our Client Change Order requests.

 

 

3.4. Documentation for Claim Situation

 

The following documents below will need to be revised and developed to support claims resolution including Client Change Order re-submittals, schedule analysis, and claim summary documents.

 

 

3.4.1. Client Change Order Re-submittals

 

Client Change Orders are typically submitted prior to a change or an event occurrence. They are often developed from estimated cost and schedule impact. If Client Change Orders have not been processed and move to a claim situation, actual cost and schedule impacts are likely to be known (as long as suitable contemporaneous documentation is available) and client comments have been received. Change orders may need to be revised in a claims situation to reflect actual costs and schedule impact based on Client concerns or future arbitration, mediation and other legal action. As the claim moves toward litigation or arbitration, the need to document a solid contractual, legal and factual basis for our claims is of paramount importance. A typical change order reworked for a claim would have the following components; change order number and title, requested and client offered amount in cost and schedule, client position and Company response to each, unbiased facts of events, notifications given, and mitigating actions taken, client and Company contract references with Company interpretation of each, discussion of over riding contract and legal considerations, correspondence, schedule and cost methodology discussion, and cost and schedule analysis. Actual contemporaneous supporting documents such as daily/ weekly/ monthly reports, formal correspondence, email correspondence, time sheets, invoices, etc. are critical to substantiate impact and are included in the correspondence or as attachments.

 

 

3.4.2. Schedule Analysis

 

A critical path schedule analysis is essential for proving schedule delays and related cost impact. It also identifies where mitigation expenses have possibly been incurred and also impact of subsequent knock-on delays. Knock-on delays can occur if an earlier delay causes another event to be delayed (e.g. work delayed into a less productive season, etc.). Mitigating steps may reduce or eliminate critical path delays. The cost to institute the mitigating factor is recoverable (e.g. overtime, out of sequence work activity costs, air freighting, etc.).

 

As initial schedules are developed at the start of the project and periodic updates (including major re-base lining) are conducted, they must be done using sound scheduling principles of proper logic ties, float analysis and resource levelling. The initial project schedule is used as a comparison point for critical path claim analysis. Activities with excessive (unrealistic) float may detract from an impact analysis at a later date and it would be better to realistically predict the activity duration. If the contractor has based its execution plan on a completion date earlier than a contractual completion date, the contractor's target completion date should be shown on the schedule and float calculated to the target date. This step to establish target date is especially important if an event leads to a delay or a constructive acceleration situation.

 

There are a number of methodologies that may be used for assessment of delay or prolongation, each having a number of variations. The method used to analyze and assess delay and prolongation after a project has been completed is largely dictated by:

 

• The relevant conditions of the contract.

• The nature of the causative events.

• The time available.

• The records available.

• The program information available.

• The scheduler's skill level and familiarity with the project.

 

Several methods of analysis in ascending order of preference include "Impacted plan", "Collapsed As-built", "Windows analysis" and "Time impact analysis". "Time impact analysis" is considered the most rigorous method of analysis and as a result is generally the most costly and schedule intensive method of analysis. There are several variations to the "Time impact analysis" method including the "As-built critical path analysis" which offers a practical acceptable approach at reduced cost and effort.

 

The type of analysis methodology selected depends on several factors such as is the analysis being performed during or after the project, was the schedule well maintained during the course of the project, are there any contractual requirements for performing a delay/ impact analysis, etc.? Regardless of the analysis method selected it is important to be able to demonstrate when and how delays were reduced (mitigated) and the potential knock-on effect on subsequent activities (such as pushing work into a less productive season). Mitigation steps may have reduced or eliminated critical path delays, and the cost to institute the mitigating factor is recoverable (e.g. overtime, out of sequence work activity costs, air freighting, weather protection, etc.).

 

Claim Summary- Development of a Claim Summary document is useful to influence the Client, but more importantly is required to prepare a claim for arbitration or litigation. A Claim Summary Document summarizes the claim and entitlements, states our contractual and legal arguments and refutes the Clients arguments and counterclaims. An example case summary outline is as follows:

 

• Executive summary including specific remedies requested

• Summary of issues

• Legal issues and entitlement

• Groupings of change notice issues

• Rebuttals to Client positions

• Attachment of reference documents

 

 

3.5. Claim Management Team

 

Proactive management may require addition of a Contracts Manager to the Project Team to focus Client Change Order development and processing. In any major Lump Sum environment, Company would normally already have a Contracts Manager assigned to the project.

 

When it becomes apparent that normal project procedures are likely to be unsuccessful, a Claim Management Team should be formed which may include experienced representatives from Company Project Management, Project Team, Legal or the Contracts Management Group and Project Controls. The Claim Management Team may be supplemented by specialists to prepare the claim documentation including a claim consultant (potentially from outside Company), cost specialists, schedule specialists, administrative assistants, legal counsel and key project team members.

 

The Claim Management Team's purpose is to develop and implement the overall claim strategy, to consider the inherent risks in our strategies and to produce the documentation for the claim. The team should develop a strategy for pursuing and reaching resolution of each outstanding claim on the project. In order for the Claims Management Team to be successful the team must have ready access to project records, documentation, and personnel knowledgeable about the project.

 

Development of the claim may take several months or more depending on the complexity of the claim. Critical Path schedule delay/ impact studies take several months to assemble and analyze project data. Client Change Orders which contribute to schedule delays may need to be revised based on critical path schedule analysis results. The Claim Summary documentation requires that the final change order submittals are complete and that all legal research is concluded to validate our legal entitlements.

 

 

Link to section 1. Introduction

Link to section 2. Expectations

Link to section 3. Claim Development Process

Link to section 4. Claim Strategy Development

Project Claims and Change Orders Procedure - Claim Development Process

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