December 15, 2023
Tips to Owners for Avoiding Construction Claims and Disputes
This is the first post in a two-part series that discusses best practices for avoiding claims and disputes on construction projects. This post provides recommendations for owners, while the second post offers guidance for contractors. Both posts are summarized from Why Construction Claims Occur and How to Prevent Them by Richard J. Long, P.E., P.Eng.1
While a construction project should ideally be viewed as a partnership between the owner and the contractor and treated as a mutually beneficial endeavor based on trust and the desire of both parties to execute a successful project, adversarial relationships often develop that can lead to disputes.2 The best way for the parties involved to handle a dispute (other than avoiding it altogether) is to equitably settle a change order or claim request in a timely manner when it arises.
The following tips are recommendations to owners for avoiding disputes and construction claims.
1. Do not rush the design, but instead allow the engineers adequate time to complete, check, and coordinate the design documents (including drawings and specifications) because leaving the checking and/or coordination of design documents to the contractor will lead to increased costs.
2. Do not rush the preparation of the design documents because a complete set of plans and specifications that adequately define the project scope reduces the chance of disputes and extra work claims.
3. Create design documents specific to the project rather than using “off-the-shelf” specifications that can be ambiguous.
4. Include clearly defined change order, time extension request, and scheduling procedures in the contract documents.
5. Perform sufficient subsurface exploration to properly inform the bidders of existing conditions to avoid paying a premium if conditions are better than expected or to avoid a claim for a “differing site condition” if conditions are worse than expected.
6. The field engineer must know the requirements of the contract and what is planned as to quality, quantity, method, sequence, technique, and procedure in order to catch faulty work or materials before they result in failure and extra costs.
7. Communicate and do not create an adversarial environment, but instead promote a cooperative attitude and interpret the contract equitably, while requesting more information if needed to adequately evaluate the contractor’s change order requests or claims.
8. Be timely when responding to the contractor’s requests for information, design clarification, and approvals of submittals or shop drawings.
9. Require that the contractor submit native, executable schedule files for the baseline schedule, any re-baseline schedules, and all schedule updates and require that any time extension requests from the contractor be accompanied by time impact schedules in native form to facilitate evaluation of the requests.
10. Understand the implication of denying valid extension of time requests with respect to constructive acceleration and increased project costs.
11. Fairly evaluate change order requests, and if the project scope and specifications are ambiguous, equitably evaluate the impacts to the contractor’s schedule and costs.
12. Be event oriented, address problems when they arise, and work cooperatively with the contractor to solve problems.
13. Assist but do not direct the contractor, because if the owner manages the work, it becomes responsible for any delay or disruption to the contractor’s plan.
14. Contemporaneously document all aspects of the project history to facilitate the evaluation of project events, with the information documented being sufficient such that a third party unfamiliar with the project can become fully familiar with the project events by reading the project documentation.
An owner who follows the above recommendations will hopefully not only avoid disputes but also facilitate a smoother project and improve cooperation between the parties, resulting in easier resolution of claims.
1 See Richard J. Long, Why Construction Claims Occur and How to Prevent Them (Virtualbookworm.com Publishing, Inc., 2021), Chapter 18: Owner and Contractor Guidelines, pp. 275–280 of 303.
2 See Richard J. Long, Why Construction Claims Occur and How to Prevent Them (Virtualbookworm.com Publishing, Inc., 2021), Preface, p. xvii of xxvii.
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