Just as the businesses and economies have cycles, capital projects (particularly engineering and construction) have recurring cycles.\u00a0 The pendulum swings back and forth within the bounds of the capital project cycle.\u00a0 In capital projects, the cycle can be three to five years, depending on the economy, size and complexity of the projects and other factors.<\/p>\n
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.\u00a0 As the claims and disputes marketplace intensifies over the next several years, Construction Claims and Disputes<\/b> will become an increasingly commonplace and a relevant topic for capital project management professionals.<\/p>\n
Construction Claims and Disputes<\/b> continues to be the most popular subject on Project Professionals.\u00a0 Further, it is the most requested line of services provided by McLaughlin & McLaughlin<\/b><\/a>.\u00a0 M&M<\/b><\/a> are project management practitioners (in the field) and, yes, we practice what we preach.\u00a0 Further, our choice of topics for Project Professionals posts is driven by and reflective of practical and current issues.\u00a0 This is not esoteric, academic or hypothetical \u201cstuff\u201d.<\/p>\n 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.\u00a0 Initially, this Subject Series, Construction Claims and Disputes<\/b>, was posted during January 2011 through July 2014.\u00a0 During the past several years, greater than 25% of views by visitors have been to this Subject Series.<\/p>\n Ideally this Subject Series<\/strong><\/a> \u00a0provides a starting point to investigate best practice on many planning and execution features of construction claims and disputes.<\/p>\n Construction Claims and Disputes<\/span><\/b> <\/b>(Part 0)<\/a>\u00a0\u2013 This introduction formats the discussion with definitions, claim categories and key industry references.\u00a0 This post is consistent with M&M<\/b><\/a> experience in many years of professional services.<\/p>\n The Overview<\/span><\/b> <\/b>(Part 1)<\/a>\u00a0 \u2013Part 1 updates Part 0, the introduction.<\/p>\n Construction Claims Management Planning<\/span><\/b> <\/b>(Part 2)<\/a>\u00a0\u2013 This is the most popular<\/span> post in this (most popular) Subject Series.\u00a0 Construction claims (or the risk of claims) can and should be professionally managed.\u00a0 View this process as a piece of project (execution) planning [link].\u00a0 This post outlines elements of a Construction Claims Management Plan.\u00a0 Further, it addresses elements of defining a Claim Strategy.\u00a0 Stakeholders include Owners, Prime Contractors and Subcontractors.\u00a0 Do not miss this post.<\/p>\n Current Project Professionals Posts<\/span><\/b> <\/b>(Part 3)<\/a>\u00a0\u2013 Claims are organized into four general categories.\u00a0 These categories are consistent with the frequency of occurrence, methods of management and other key managerial considerations.\u00a0 The categories are<\/p>\n Pricing Construction Claims<\/span><\/b> (Part 4)<\/a>\u00a0 \u2013 This post addresses the pricing of claims and disputes.\u00a0 The compulsion or question is \u2013 \u201cHow much is a potential claim worth?\u201d \u00a0Do you think you know how to price your (or other\u2019s) claims?\u00a0\u00a0 Andrew (Andy) Ness, 2012-13 Chair, ABA Forum on the Construction Industry probably disagrees with your answer.\u00a0 Read this post and consider Andy\u2019s position as well as other considerations regarding claim pricing\/damages.\u00a0 The content of the recent ABA book on the subject is covered.<\/p>\n Pricing Construction Claims <\/span><\/b>(continued)<\/span> <\/a>\u00a0\u2013 Are construction claims and disputes \u201call about the money?\u201d\u00a0 Some believe this to be the case.\u00a0 This post (Part 5) expands on Part 4 by addressing pricing and citing additional references.<\/p>\n Scope of Work – Baseline<\/span><\/b> (Part 6)<\/a>\u00a0 \u2013 It is widely believed and accepted that Scope of Work and\/or Changed Work is the single largest source of claims and disputes in engineering and construction (as well as many other contracted services).\u00a0 In order to establish departures from the baseline scope of work, you must be able to define the applicable baseline. \u00a0This post cites various sources for baseline definition,<\/p>\n Scope of Work <\/span><\/b>\u2013<\/span><\/b> Plans and Specifications<\/span><\/b> (Part 7)<\/a>\u00a0\u00a0 \u2013 Several industry sources (publications) are used to elaborate on execution and contracting strategies that rely on plans and specifications as a major component of scope or work definition.\u00a0 This discussion includes typical contract documents and contract provisions wherein scope of work, services, supply and \/ or facilities is \/ are defined.\u00a0 Suggestions for configuration and change management in the field are included.<\/p>\n Scope of Work <\/span><\/b>\u2013<\/span><\/b> Impacts<\/span><\/b> (Part 8)<\/a>\u00a0 \u2013 Claims and disputes regarding scope of work are a widespread problem and represent the most common issue.\u00a0 Perhaps 75 to 90% of all engineering and construction claims and disputes involve contract scope of work<\/span>.\u00a0 Direct compensation for a scope of work change may merely be the proverbial \u201ctip of the iceberg.\u201d\u00a0 What about the rest of the story?\u00a0 Is the contractor missing many other costs or schedule impacts?\u00a0 Often, this is the case.\u00a0 This issue may be broader that an added piece of equipment, redesign to avoid a conflict or similar events.<\/p>\n Why Scope of Work<\/span><\/b> (Part 9)<\/a>\u00a0 \u2013 Scope of work influences and is a foundation for delay, acceleration, disruption, payment and many other types of disputes.\u00a0 Consequently, virtually all claims (should) start with scope of work<\/span>.\u00a0 Scope of work is a huge factor in capital investments.\u00a0 In the engineering and construction market, investments total in the hundreds of billions of dollars (USD).\u00a0 These investments are increasing, particularly in areas such as the US Gulf Coast.\u00a0 Typical budgets for changed work are targeted for 10% which makes this market of tens of billions of dollars (USD).\u00a0 However, this is merely the budget, not the reality.<\/p>\n Turnkey Contract Scope of Work<\/span><\/b> – (Case Study 01)<\/a>\u00a0 \u2013 M&M<\/strong> <\/a>developed this Case Study for the American Association of Cost Engineers (AACE) International annual meeting (June 15, 2014) in New Orleans.\u00a0 The specific presentation was Claims Avoidance through Effective Cost Engineering.<\/i>\u00a0 This panel discussion was part of the Energy Industry Track<\/span>.\u00a0 This particular Case Study in Construction Claims and Disputes focuses on claims in (lump sum) Turnkey contracts.\u00a0 Further, it focuses on Scope of Work.\u00a0 The vast majority of construction claims and disputes<\/b> have their origins in Scope of Work.<\/p>\n Hence, this is a logical starting point and has the widest application.\u00a0 The Case Study 01 is presented in a video using PowerPoint with animation and voice over.\u00a0 This format is used for ease of review and presentation.<\/p>\n Other Subject Series that are both relevant and popular include:<\/p>\n Going forward, we will post other features of CONSTRUCTION CLAIMS and DISPUTES<\/span><\/b>.<\/p>\n My we wish you the best of luck and let us all attempt to confront and deal with these and other project management challenges.\u00a0 It is crucial that recognition and anticipation of these issues occur during initiation and planning.\u00a0 However, the recognition and management should continue through execution, controlling and closeout.<\/p>\n Please note that McLaughlin and McLaughlin [M&M]<\/b><\/a> is not a law firm and is not intending to provide legal advice.\u00a0 M&M<\/b><\/a> is a consulting firm providing (among other services) non-legal expertise in dispute resolution and litigation support.\u00a0 The Resource Center is for the convenience of blog visitors and M&M <\/b><\/a>does not offer this for commercial purposes.\u00a0 For further information on M&M<\/b><\/a> services, please see<\/i> <\/i>www.McLaughlinandMcLaughlin.com<\/i><\/b><\/a>.<\/i><\/p>\n Just as the businesses and economies have cycles, capital projects (particularly engineering and construction) have recurring cycles.\u00a0 The pendulum swings back and forth within the bounds of the capital project cycle.\u00a0 In capital projects, the cycle can be three to five years, depending on the economy, size and complexity of the projects and other factors. 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