Topic 10.9: Managing contractual claims
A claim is a demand for something due or believed to be due, usually as a result of an action, direction, or change to the agreed terms and conditions of a contract.
In projects, the demand is usually made for additional compensation for work claimed to be outside the contract, or an extension of time (EoT) for completion, or both.
Claims can be viewed from two perspectives: the party making the claim and the one defending against it.
The distinction between a claim and a change is the element of disagreement between the parties as to what is due (and whether or not anything is due).
If agreement is reached, then the claim disappears and becomes a change request.
If not, unresolved issues can escalate into a formal claim and become a fierce contractual dispute among the stakeholders.
Formal claims may proceed to negotiation, mediation, arbitration or litigation before they are ultimately resolved.
Although agreed-upon changes to the contract documents occur frequently, disputes among the stakeholders of a project are almost as common.
The emphasis should therefore be on how to keep issues from arising that could develop into claims.
The well scoped, risk-allocated, and diligently executed project plan is far less likely to result in any claims.
Nevertheless, project activities are often carried out in complex, highly sensitive and rapidly changing environments.
Perfect conditions and control are nearly impossible to obtain.
Factors that can negatively affect the project and give rise to potential claims include:
Lack of follow-through
Random changes to performance or schedule
Resource problems, and
Most stakeholders are aware that the project will be challenged by such factors, but how one reacts to these conditions can either lead to or help prevent the claim.
Early recognition of potential problems and open communication regarding possible alternatives or changes to the plan create a collaborative environment in which claims are less likely to occur.
Most claims are the result of an unresolved request for a change, or are a result of a contract document interpretation.
Sometimes, a contract is not administered in a timely manner, causing time and/or cost impacts on the project.
Project performance is another area where claims may arise due to either the quality of work performed or the progress of the work not being obtained.
Regardless of the origin of the potential claim, detailed identification and articulation of the claim is necessarily the first step in the process.