CONSTRUCTION CLAIMS and DISPUTES – Subject Series Summary – Update 11-Nov-2014

Just as the businesses and economies have cycles, capital projects (particularly engineering and construction) have recurring cycles.  The pendulum swings back and forth within the bounds of the capital project cycle.  In capital projects, the cycle can be three to five years, depending on the economy, size and complexity of the projects and other factors.

At this time, the market seems to be transitioning from project planning and early execution into middle to later-stage execution with emergence of disputes.  As the claims and disputes marketplace intensifies over the next several years, Construction Claims and Disputes will become an increasingly commonplace and a relevant topic for capital project management professionals.

Construction Claims and Disputes continues to be the most popular subject on Project Professionals.  Further, it is the most requested line of services provided by McLaughlin & McLaughlinM&M are project management practitioners (in the field) and, yes, we practice what we preach.  Further, our choice of topics for Project Professionals posts is driven by and reflective of practical and current issues.  This is not esoteric, academic or hypothetical “stuff”.

This summary update provides readers with an overview of prior posts and provides a baseline for future posts that will follow on a timely basis.  Initially, this Subject Series, Construction Claims and Disputes, was posted during January 2011 through July 2014.  During the past several years, greater than 25% of views by visitors have been to this Subject Series.

Ideally this Subject Series  provides a starting point to investigate best practice on many planning and execution features of construction claims and disputes. [Read more…]

CONSTRUCTION CLAIMS and DISPUTES – (Part 9) Why Scope of Work?

Why Scope of Work?

This McLaughlin and McLaughlin (M&M) post is the ninth in a Subject Series  Construction Claims and Disputes.

Scope of Work is (or should be) the basis for most claims and disputes.  As we previously discussed, claims and disputes regarding scope of work are a widespread problem and represent the most common issue.  Perhaps 75 to 90% of all engineering and construction claims and disputes involve contract scope of work.  But the issue goes further.  Scope of work influences and is a foundation for delay, acceleration, disruption, payment and many other types of disputes.  Consequently, virtually all claims (should) start with scope of work.

Scope of work is a huge factor in capital investments.  In the engineering and construction market, investments total in the hundreds of billions of dollars (USD).  These investments are increasing, particularly in areas such as the US Gulf Coast.  Typical budgets for changed work are targeted for 10% which makes this market of tens of billions of dollars (USD).  However, this is merely the budget, not the reality.

Most of these investments involve contracting for goods and services.  Each of these transactions must consider scope of work (services, facilities, supply) as primary to the transaction.  Consequently, each transaction has risk of claims and disputes regarding the related scope of work.  Stakeholders include: owners, prime contractors, subcontractors, engineers, architects, lawyers, consultants, investors, lenders, sureties, governments and others.

Recognition, entitlement, pricing and proving (if necessary) claims for additional compensation related to scope of work is a huge challenge with large amounts of money at risk.  Largely, this is not legal work.  However, it requires expertise.  If the project team lacks this expertise, a subject matter expert (SME) is needed.  The SME must possess the expertise in recognition, entitlement, pricing, evidence and related impacts to the project’s performance (time, cost, and other considerations).

[Read more…]