Construction Claims Management Planning
This post is the second in a Subject Series Construction Claims and Disputes which are (will be) discussions regarding managerial challenges in potential and actual construction claims situations. In this series, we focus on the managerial aspects of construction claims and disputes management. This post addresses the planning, a key managerial requirement in all project work. First plan it, and then do (execute) the work. The notion is consistent with the old adage “An ounce of prevention [in this case management] is worth a pound of cure.” In that regard, litigation on a large and complex project can cost millions USD in expenses to pursue and may have tens of millions USD at issue.
Yes, construction claims and disputes can and should be managed. This is particularly true of large and complex projects.
Prospective Construction Claims Management refers to the managerial approach and planning for managing the risks (and options, opportunities, etc.) during project execution through project close-out related to claims.
Retrospective Construction Claims Management (development, presentation and defending) will be addressed in another post.
Claims Avoidance – There is a myth that construction claims can be avoided. Experience shows that this is just a myth, since it relies on controlling the activities of others. These others may be in an adversarial posture or position. Hence, control cannot be readily achieved.
There are two points in this discussion. Planning is the process for defining and maturing the approach to managing construction claims. The end product (or deliverable) is the Construction Claims Management Plan.
Elements of Construction Claims Management Plan:
- Purpose – Clear statement of why the plan has been prepared and implemented.
- Objectives – Clear statement of plan objectives. These objectives will differ for owners, contractors, subcontractors, vendors and other categories of stakeholders.
- Strategy – Framework on how to implement actions to achieve the stated objectives.
- Contract Analysis – Legal and execution/claims expert (with practioner experience) analysis of the contract(s). This analysis identifies interfaces, risks, opportunities, vulnerabilities, and other claims-relevant points. This includes dispute resolution considerations.
- Applicable Law Analysis – Legal review of key issues and related law.
- Execution Analysis – Expert analysis of the risks and opportunities that reside in intended execution [delivery] approach.
- Detection / Recognition [KPI’s and Managerial Tools] – Tools and Key Performance Indicators (KPI’s) that can be used to achieve recognition and detection of the variance or condition of interest. This must be included in the baselines for project control.
- Action Plans – Pre-established actions to be taken if and when variations or conditions are detected. The emphasis is on managing the situation.
- Reporting – Informing and communicating to correct stakeholders.
Claim Strategy has the following attributes:
- Highest level and most important consideration (some examples)
- Proactive – the timing and predisposition is forward-looking, not reactionary
- Defensive – can be defensive as a chosen posture, but established early in the project execution
- Risk Allocation or Distribute Risk – part of risk management
- Control Major Risks – a control mechanism
- Erect Barriers to Recovery – may be a plausible strategy
- Adopt “you cannot prove it” – may be a plausible strategy (remember, we are not attorneys)
- Rely on “It did not happen” – hence fact-intensive
- Resolve as events occur – resolution on a piecemeal basis, at the time of occurrence.
- Plan Attributes/Subjects/Content
- Project Execution Plan [also known as Project Plan, Project Management Plan] – the plan must be consistent with and be tailored to the PEP, PP or PMP. It is part of these higher plans.
- Data and Record procedures – establishes records, data and other fact-related information that is specific to the strategy (this gives focus and specificity/precision) (not worthless words such as “keep good records” – construction teams build things)
- Notice – what are the requirements, are they operative in all cases, how to best comply
- Choice of Resource(s) – What resource(s) will be used to implement the plan, within the strategy
- Ways of Working – how does the PMT conduct themselves to be consistent with the intended strategy
- Document Compilation – subject files for documentation organization and compilation [Chronology Files]
- Examples of Specific Issues [Weather, Delivery Delays, Free-Issue Equipment, Free Issue Materials, Free Issue Scaffolding, Engineering Deliverables, Temporary Power, Permanent Power, Owner Inspection]
Owner – Has specific business and project objectives that drive the plan, also, the interfaces may include difficult stakeholder relationships (such as regulatory)
Contractor [Prime] – Has a complex challenge – interfaces with owners, other prime contractors, subcontractors, major vendors, and other stakeholders.
Subcontractor – Relations with prime and (possibly) with owner.
What could it take?
- Commitment of stakeholders
- Project Management Team [PMT] availability and support
- Workshop for development and implementation
- Legal expertise
- Expert [execution and claims expertise][practioner]
The cost – benefit tradeoff is several tens of thousands [USD] to develop and implement the plan vs. tens of millions [USD] at issue in some dispute resolution process (although, admittedly later in time).
The best implementation approach is a workshop with key stakeholders present at appropriate times consistent with the subject. Timing should be toward to ending of the initial detailed development of the Project Execution Plan. This allows stakeholders to harmonize the Construction Claims Management Planning and Plan with established execution approaches and intentions. The PEP can be adjusted, if desired, based on the CCMP as it is developed.
We wish you happy reading and good luck in your construction claims and disputes challenges and endeavors. Enlightened management is the key to success, however you define success. Using this process and tool, you define success and take a large step toward achieving your defined success objectives.
It is important to note that McLaughlin and McLaughlin [M&M] is not a law firm and is not intending to provide legal advice. M&M is a consulting firm providing (among other services) non-legal expertise in dispute resolution and litigation support. The Resource Center is for the convenience of blog visitors and M&M does not offer this for commercial purposes. For further information on M&M services, please see www.McLaughlinandMcLaughlin.com.