How to Ensure that your Construction Variation Claims are Successful
Have you had a variation claim rejected even though you believed it was totally legitimate? You probably blamed the client for being unfair? But is this the full story?
Construction projects invariably have some changes and variations. These may be due to the client changing the scope, altering specifications, delaying the contractor in some way or not fulfilling their contractual obligations. Sometimes the project site conditions aren’t as per the Contract document. These changes invariably increase the construction company’s costs, so it’s vital to submit a claim to recover them.
On some of my projects, the variations have exceeded the value of the original contract. In 99% of the cases I have recovered close to the full value for which I claimed. Unfortunately, many construction companies aren’t as fortunate as I have been, and this is often because their claims haven’t been prepared properly. Often claims are rejected because they don’t include all the correct and required information. In some cases, these claims end up in expensive legal disputes.
Put the Effort In
I have seen many poorly put together claims. Some for millions of pounds, yet construction companies seem to think that they can apply minimal time and effort to formulating their claims. That it will be easy money! The client will pay their claim – they just have to! No they don’t.
Some even delegate their claim preparation to junior, inexperienced quantity surveyors or contract administrators. Sometimes the construction project manager isn’t even aware that a claim has been submitted, and is blind-sided when their client takes offence to a spurious or unsupported claim.
Some of these claims are poorly thought out and poorly presented. I’ve seen claims with arithmetic errors, spelling mistakes (even spelling the client’s name incorrectly), factual errors, contradictory information, confusing language and unsupported evidence.
Consider how hard a contractor has to work to earn a million pounds, or even ten thousand pounds, so why then do some construction companies expect to spend minutes, or an hour, preparing a claim for the same amount.
Construction companies should ensure that a knowledgeable and experienced person is allocated to draft the claim (familiar with the contract, the client and the work that’s been done) and that it is reviewed and checked by the project manager before it’s submitted.
What to Include
A properly drafted and well thought out claim will be hard for your client to refute, and it’s likely to be successful.
To increase your chances of a successful claim, here are some points to consider. Claims should have:
1. A description of the event
2. The cause of the event
3. The date of the event (where relevant)
4. The impact of the event
5. Steps taken to mitigate the impact
6. The cost and time impacts of the event
7. All supporting documentation attached (or should refer to supporting documentation correctly referencing the relevant Contract clause numbers, construction drawing numbers, schedule or programme item numbers, correspondence, Bill of Quantity items or Contract specifications as required)
It’s essential that this supporting documentation is relevant to the claim, supports the claim and is not contradictory (any contradictions must be explained as part of the claim).
As part of formulating the impact of the event all calculations and schedules should be included. The claim schedule should reference the approved contract schedule. Calculations should reference where the facts and figures came from and how they were put together. The calculations should be checked for arithmetical errors (which can occur all too frequently).
Remember to include all of your legitimate and claimable costs. It’s usually difficult to add in extra forgotten costs after you have submitted your claim. It’s unprofessional and will annoy your client. It may even cast doubts on the legitimacy of your original claim.
Notifying your Client
The client must be notified of variations as soon as the contractor becomes aware of them, and certainly within the time specified in the contract. Failure to do so may mean the contractor loses their right to claim.
The claim must be:
- Lodged within the time-frame specified in the contract
- Addressed to the correct person
- Delivered to the correct address
It’s often a good idea to discuss large or contentious claims with the client before submitting them. This not only forewarns the client the claim is coming, but also provides an opportunity to discuss the reasons and the merits of the variation.
Also ensure that the client is aware that you are willing to discuss the claim and answer any questions that they may have. I use the word ‘discuss’ and not ‘negotiate’. To indicate that you are willing to ‘negotiate’ gives the idea that you have built fat into your claim and that not all the costs are legitimate, which will immediately put your client on their guard and they will already doubt that your claim is legitimate or accurate.
Claims that are clear and concise, and which have facts which are supported and can easily be justified are often agreed and settled with clients with little effort. Once contractors get a reputation of submitting inflated or bogus claims, it can become difficult to convince the client when a reasonable and just claim is submitted.
Of course a claim can be more easily supported if the contractor has maintained accurate documentation during the course of the construction works, has communicated regularly with the client, and has taken all reasonable steps to prevent the claim from arising. (Read: “A Guide to change management” for more on this topic).(Written by Paul Netscher the author of the acclaimed books ‘Successful Construction Project Management: The Practical Guide’ and ‘Building a Successful Construction Company: The Practical Guide’. Both books are available in paperback and e-book from Amazon and other retail outlets. This article is adapted from information included in these books. To read more visit www.pn-projectmanagement.com) © 2015 This article is not to be reproduced for commercial purposes without written permission from the author.