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…]