Claims

CONSTRUCTION CLAIMS and DISPUTES – (Part 6)

June 25, 2013 By George T McLaughlin PMP CCM

Scope of Work – Baseline

This McLaughlin and McLaughlin (M&M) post is the sixth in a Subject Series Construction Claims and Disputes. This Subject Series contains discussions regarding potential and actual construction claims and disputes situations.

In the realm of construction claims and disputes, claims regarding scope of work are the largest or highest single category. The George Washington University publication Construction Contracting states that “Not surprisingly, specifications and plans are the focal point of most construction contract performance disputes and requests for price adjustments.” While this source pertains to US Federal government contracting, the same pattern can be seen in the private sector on a worldwide basis. Even more general, scope of work disputes extend beyond construction contracting, into engineering and procurement in the Engineering, Procurement and Construction (EPC) industry.

This series of posts will address scope of work within the overall subject of Construction Claims and Disputes. Since disputes and claims regarding scope of work are such a pervasive problem, some degree of detail will be presented. Further, the majority of the discussion will address entitlement to recovery (rather than pricing or quantum).

The source of all disputes and claims is departures from the baseline. These variances (cost, time or other) create the dispute. Therefore, understanding the baseline is essential.

In construction claims and disputes, the baseline is (almost always) the contract. The contract is the “deal” or the agreement between the parties. While it must meet several legal tests, the contract is the baseline that will be the focus of this discussion. You must have, know and understand the contract, or at least all portions and provisions that relate to scope of work.

Success in this area of claims and disputes depends almost exclusively on how well you know the contract. More specifically, how well you know and understand the scope of work.

Later in this post, the formulation of a Claims Management Plan (CMP) is discussed and related to contract scope of work. [Read more…]

Filed Under: Claims, Featured, General, Projects Tagged With: Claims Management Plan, Construction claims and disputes, construction claims damages, Construction Claims Management, Construction Claims Management Plan, construction claims pricing, Construction Claims Quantum, George T. McLaughlin PMP, McLaughlin & McLaughlin, Scope of Work Claims, www.mclaughlinandmclaughlin.com

A View from the Field Project Execution / Contracting Strategies Large and Complex Industrial Projects

May 6, 2013 By George T McLaughlin PMP CCM

This article from the Division 1 of the ABA Forum on the Construction Industry Newsletter “The Dispute Resolver” represents George T. McLaughlin’s “View from the Field” formed throughout the course of his 30+ year career in the industrial marketplace.[1] His article is broken into four parts. Part 1, below, describes the evolution of the delivery systems in large and complex industrial projects[2]. The remaining sections, which we will publish in our next three newsletters, will discuss the legal implications (Part 2), impact on claims, disputes, and resolutions (Part 3), and prevention and corrective processes (Part 4).

Part 1 of 4 – Framing the Issue

When the earth’s tectonic plates shift, unless there is a resulting earthquake, it goes unnoticed. The movement is not perceptible. Nevertheless, major changes are occurring. In large and complex projects, with three to five (or longer) year schedules, industry shifts may not be perceptible. Nevertheless, major changes and related impacts may be in progress. Trends and changes in project execution and contracting strategies are similar. These trends, however gradual and unnoticed on a daily or monthly basis, cause major impacts on existing and future projects. While industry experts cite or drive these changes, the impact on the field may be delayed or go unrecognized by many, if not all stakeholders. The business motivations driving the trends discussed below are varied and complex. Perhaps, the central theme is risk tolerance or management. The large worldwide prime contractors (typically Engineer Procure Construct) migrated toward limiting major risks by limiting scope of work, insisting on reimbursable cost (as opposed to fixed price) commercial terms, or both. Owners chose to limit or compartmentalize risks by breaking scope of work into smaller packages and seeking fixed price on these smaller packages. Construction Contractors retained a willingness to work on fixed price commercial terms; but, increased their tendency toward claims and disputes processes in order to manage their risks. Collectively, we see a myriad of fixed price scope of work packages being pieced together to form a complete project. Formerly, this mosaic of work scopes was under one Prime Contract. [Read more…]

Filed Under: Claims, Featured, General, Productivity, Project Planning, Projects, Uncategorized Tagged With: Construction Claims, Construction Contract Claims, Construction Contract Planning and Scheduling, contracting strategies, Disruption, George T. McLaughlin PMP, large and complex industrial projects, Large and Complex Projects, McLaughlin & McLaughlin, megaprojects, Productivity Management, Project Execution Plan, Time Management Strategy

CONSTRUCTION CLAIMS and DISPUTES – (Part 5)

April 1, 2013 By George T McLaughlin PMP CCM

Pricing Construction Claims – (continued)

McLaughlin and McLaughlin’s Project Professional post is the fifth in a Subject Series Construction Claims and Disputes. This Subject Series contains discussions regarding potential and actual construction claims and disputes situations. In this series, we focus on the key aspects of construction claims and disputes management (rather than mechanics). This discussion is a continuation of Part 4 regarding the pricing of claims and disputes. The compulsion or question is – “How much is a potential claim worth?” In virtually all disputes, the central issue is the money. Since it is a win-lose situation, the outcome may be that someone (one party) will pay another party. Hence, the money is the ultimate issue (sometimes time is at issue, generally presenting itself in money or damages related to the time).

There is an old saying “win the battle, lose the war” which applies to damages in construction claims and disputes. With facts, logic and analyses on their side, one party (Party A) can prepare and present a very compelling argument regarding the claim (against Party B). However, winning the argument on the cause (or as it is called, entitlement) is relatively useless without winning the argument on the money related to the effect (or sometimes called damages, quantum, compensation, pricing).

Even more compelling, the decision to proceed with a claim (and potentially spend millions of dollars on expenses such as legal and expert fees) should be heavily driven by the potential recovery (the money). Consequently, parties must have a reasonable assessment of the true value of the dispute and the ability to successfully demonstrate or prove these damages in the resolution process. Without the ability to prevail on a suitable and acceptable level of damages, pursuing a construction claim through a costly dispute resolution process could be an unwise managerial decision.

McLaughlin and McLaughlin has extensive experience and expertise in the strategy and pricing of major construction claims and disputes. This experience includes work for both owners and contractors. Further, the experience includes testimony on this topic.

In this discussion, we are guided by another highly useful and well written book. This reference is Calculating Construction Damages, Second Edition, by William Schwartzkopf and John J. McNamara. [Read more…]

Filed Under: Claims, Featured, General, Projects Tagged With: construction claims damages, Construction Claims Management, Construction Claims Management Plan, Construction Claims Quantum, Construction Clams Pricing, Construction Contract Claims, Construction Project Management, EPC Project Management, George T. McLaughlin PMP, McLaughlin & McLaughlin, PMP, Project Management, Project Planning, www.mclaughlinandmclaughlin.com

CONSTRUCTION CLAIMS and DISPUTES – (Part 4)

March 17, 2013 By George T McLaughlin PMP CCM

Pricing Construction Claims

This post is the fourth in McLaughlin & McLaughlin’s Project Professionals Subject Series Construction Claims and Disputes which are (will be) discussions regarding challenges in potential and actual construction claims and disputes situations. In this series, we focus on the key aspects of construction claims and disputes management. This discussion addresses the pricing of claims and disputes. The compulsion or question is – “How much is a potential claim worth?” In virtually all disputes, the central issue is the money. Since it is a win-lose situation, the outcome may be that someone (one party) will pay another party. Hence, the money is the ultimate issue (sometimes time is at issue, generally presenting itself in money or damages related to the time).

Even more compelling, the decision to proceed with a claim (and potentially spend millions of dollars on expenses such as legal fees) should be heavily driven by the potential recovery (the money). Consequently, parties must have a reasonable assessment of the true value of the dispute and the ability to successfully demonstrate or prove these damages in the resolution process. Without the ability to prevail on a suitable and acceptable level of damages, pursuing a construction claim through a costly dispute resolution process could be an unwise decision.

In this discussion, we are guided by a highly useful and well grounded newly published book. It is published by the American Bar Association (ABA) and has been recently (2013) been updated. This publication is Construction Damages and Remedies, second edition, by Forum on the Construction Industry, American Bar Association. It is edited by W. Alexander Moseley of the law firm Hand Arendall LLC. There are nine authors. [Read more…]

Filed Under: Claims, Featured, General, Projects Tagged With: Construction claims and disputes, construction claims damages, Construction Claims Management, construction claims pricing, Construction Project Management, constructions claims quantum, EPC Project Management, George T. McLaughlin PMP, McLaughlin & McLaughlin, Project Management, Project Management Institute (PMI), Project Management Plan, www.mclaughlinandmclaughlin.com

CONSTRUCTION CLAIMS and DISPUTES – (Part 3)

March 4, 2013 By George T McLaughlin PMP CCM

Current Project Professionals Posts

McLaughlin & McLaughlin’s Project Professionals post is the third 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 summary discussion addresses the many posts that have been presented in the past and are at the Subject Series tab of Project Professionals.

In the engineering and construction industry, claims and disputes take many forms and focus on many topics. For simplicity of discussion, we will use the follow the following categories:

Scope of Work, Changed Work or Variations
Delay and Acceleration, Time-Related
Disruption / Productivity (usually labor/labour)
Terms and Conditions (and other subjects).

McLaughlin & McLaughlin’s Project Professionals has posted (or published) greater than 60 posts regarding one or more aspects of Construction Claims and Disputes.

The balance of this post identifies the Subject Series and posts that are at Project Professionals and are relevant to construction claims and disputes. [Read more…]

Filed Under: Claims, Featured, General, Projects Tagged With: Best Practice, Best Practices, Construction claims and disputes, Construction Claims Management, Construction Claims Management Plan, Construction Contract Claims, Construction Project Management, Delay, Disruption/productivity, EPC Project Management, Free Issue Equipment, Free Issue Materials, George T. McLaughlin PMP, McLaughlin & McLaughlin, Project Execution Plan, Project Execution Planning, Project Management, Project Planning, www.mclaughlinandmclaughlin.com

PROJECT PLANNING (Part 4)

February 15, 2013 By George T McLaughlin PMP CCM

Summary of Posts

This summary update provides readers with an overview of prior posts regarding Project Planning and provides a baseline for future posts that will follow on a timely basis.

There are two applicable Subject Series. One Subject Series, PROJECT MANAGEMENT CHALLENGES was posted during June through September 2011. Since that time, blog readership has increased very significantly.

The other Subject Series, PROJECT PLANNING was started in late 2012. This Subject Series is ongoing and new posts will occur in the upcoming weeks and months. Readers are encouraged to subscribe to automatic update notification.

This summary is very brief and simply serves as an index for readers to follow. Of course, detailed descriptions are contained in the individual posts.

Ideally these Subject Series provide a starting point to investigate best practice on many planning and execution features of project management. [Read more…]

Filed Under: Claims, Featured, General, Productivity, Project Planning, Projects Tagged With: Best Practice, Best Practices, Construction Contract Planning and Scheduling, Earned Value Management, Forecasting, George T. McLaughlin PMP, GSA Construction Claims, McLaughlin & McLaughlin, Notice of Recognition, PMBOK, Productivity Management, Progress, Progress Assessment, Project Execution Plan, Project Execution Planning, Project Management Institute (PMI), Project Management Plan, Project Planning, Recognition, Schedule Specifications, Stakeholder Management, Stakeholders Management, www.mclaughlinandmclaughlin.com

CONSTRUCTION CLAIMS and DISPUTES – (Part 2)

February 6, 2013 By George T McLaughlin PMP CCM

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. [Read more…]

Filed Under: Claims, Featured, Productivity, Projects Tagged With: Best Practice, Best Practices, Construction claims and disputes, Construction Claims Management, Construction Claims Management Plan, Construction Contract Claims, Construction Project Management, Delay, Disruption, EPC Project Management, Free Issue Equipment, Free Issue Materials, Free Issue Scaffolding, George T. McLaughlin PMP, GSA Construction Claims, McLaughlin & McLaughlin, Project Execution Planning, Project Management, Project Planning, Temporary Power, www.mclaughlinandmclaughlin.com

Site Content

January 30, 2013 By George F McLaughlin

Project Professionals is interested in determining the topics that readers would like to see discussed going forward. Please assist us by completing the poll below:

Filed Under: Claims, Featured, General, Projects

CONSTRUCTION CLAIMS AND DISPUTES – (Part 1)

January 22, 2013 By George T McLaughlin PMP CCM

This McLaughlin & McLaughlin post is an introduction to an ongoing Subject Series regarding Construction Claims and Disputes in engineering, procurement and construction industry.

OVERVIEW

In relation to construction claims and disputes it is important for all readers, contributors, participants and others regarding the general subject of claims and disputes to be equally informed. This discussion is directed toward engineering and construction claims and disputes.

In the engineering and construction industry, contract claims and disputes are common issues. They occur between: owners and contractors (prime), contractors and their subcontractors, contractors and (their) vendors, and at other contractual interfaces. Resolution of the claims and disputes can be a costly, disruptive and aggravating process for all parties.

PROJECT PLANNING – Managerial Challenges (Part 3)

January 8, 2013 By George T McLaughlin PMP CCM

PROJECT PLANNING – Managerial Challenges(Part 3)

Project Initiation – Contractor

This post is the third in a series of discussions regarding managerial challenges in project management situations. In this series, we focus heavily on the managerial aspects of program / project planning and management. This post addresses the starting point or initiation of the project. Part 2 discussed Project Initiation in general. This post [Part 3] addresses considerations that are unique to contractors.

Owners often view contractors as a homogenous group or homogenous within the contractor’s own organization. This perception is not correct, at least for contractors of any size or diversity.

Why does the same contractor behave differently on one job relative to another? Why does a contractor bid differently relative to past practices or experiences? Why is the contractor’s price so high on this bid when it was so low on another bid? We expected the contractor to be competitive and they are not. Another scenario, we expected the contractor to not be competitive; but, they have the best proposal and bid. There are many potential reasons. The answer may reside in the project initiation process.

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