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Claims is a term that can arouse various emotions even in the most reasonable and practical project managers and clients. In order to keep aggression and frustration at bay as far as possible it is necessary to remove features that lead to such emotions from all claims notifications and submissions.
It is not uncommon for contractors to worry that claims cause irreparable damage to the employer, contractor, project manager, and the relations between them, to the extent that current and even future workload may be threatened.
Many project managers and engineers have limited authority under a contract and need to seek approval from their employers for any changes to the contract in terms of time and/or money. It is not unusual for an employer’s representatives to reject contractors’ claims submissions in the first instance, as these can poorly reflect the performance of the representative in terms of managing the contract or providing suitable documentation prior to commencement of the work. In such a scenario, there can be a disincentive for employer representatives to accept notices, and they can even discourage contractors from submitting claims.
However, contractors must recognise that by failing to submit notices they leave themselves open to the possibility of being time-barred from pursuing their claims at a later date.
Where the timelines for submitting notices and subsequent supporting documentation are clearly identified and stated in the contract, the contractor should not be dissuaded from complying on the basis of the employer representative’s directions to cease submitting claims or be penalised otherwise. The contractor should, in these instances, seek the representative’s formal confirmation that the employer wishes to amend the contract and revise the terms of notification. Failing an agreement, the contractor must continue to submit notices as required in order to protect its interests.
To avoid unnecessary confrontation, contractors need to do away with subjective language in their notices so they are less contentious in the event of a claims submission.
For example, the notice requirements of a quasi-government entity in Saudi Arabia provide the following in respect of notice provisions where the contractor wishes to claim additional payment.
1. If a company proposes a change or the contractor claims the company has directed a change, the latter shall submit a description of the impact of the proposed change, including details of any variations in costs or time, to the company within 14 days of the receipt of the change order, at its cost and expense.
2. Notwithstanding anything to the contrary, if the contractor commences or carries out any work relating to a change prior to the company issuing a change order, or fails to comply strictly with foregoing notice provisions, it shall not be entitled to any payment or extension of time with respect to the change and shall be deemed to have conclusively waived any such entitlements.
3. In the event of disputes, the contractor shall inform the company promptly (within ten days) following the occurrence or discovery of any item or event which it knows, or reasonably should know, may result in additional payment under the contract. Failure to do so or supply the company with sufficient information to evaluate the contractor’s position, or notify the company of its claim, shall be deemed a waiver of all the contractor’s rights to any additional payment in the matter.
It is clear that failure to provide the required notices can severely compromise a con-tractor’s chances of recovering costs or guarding itself against the risk of the future imposition of liquidated damages. Moreover, the employer places the obligation to provide notices so that appropriate action can be taken where possible to mitigate potential delays and additional costs to a project. It is therefore in the employer’s best interests to receive prompt notification so that claims for change can be resolved promptly, thereby avoiding prolonged disputes at a later date.
In order to ensure no misunderstandings occur, the contents of a notice must relate directly to the requirements of the contract. It is not meant to allocate blame for a situation but be clinically objective in terms of contract reference and details.
Responses to notices from the employer should be handled in the same manner, addressing requests for further information objectively, thus removing the chance of arguments and reducing potential confrontation between parties.
In conclusion, trouble can be avoided through the objective use of a contract identifying the causes and effects without emotive rhetoric, and making it clear that contractual compliance requires the submission of notices to benefit all parties.
Source: David Stapleton, Special to Property Weekly