Procurement Management and Contract Administration

1. Claims
Madawalabu
University
Procurement Management and Contract Administration
CoTM 4242
Chapter 4
College of Engineering,
Construction Technology and Management Department
Lecture by: Andualem Endris (M.Sc)
andu0117@yahoo.com
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2. COTM 4242 2
What is Claim?

3. Claim
 Claim is a request by a contractor for additional
compensation or time extension for occurrences beyond
the contractor’s control including:
• differing or unexpected site conditions
• change in scope
• delays caused by the owner
 Owner has duty to provide adequate and accurate data
to the bidders
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4. Claim
• Owner is liable to contractor when:
– inaccurate data are given
– extras develop because of improper design
– design is significantly changed after the contract is
signed (constructive change)
• Contractor must prove entitlement and the associated
damages
• Contractor must provide timely notice of claim upon
discovering impact
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5. Causes of Claims
• Contractors attempt to submit an artificially low price and
hoping to make up the difference through claims later on;
• The constraints of time, finances and other factors force
a contractor to cut corners;
• Where the form of contract transfers the risks to the
employer (esp. DBB system);
• Poor or unclear tender and/or contract documents;
• Poor or inadequate administration of responsibilities by
stake holders; and
• Unforeseen or situations during project execution.
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6. Types of Claims
 Typical claims against owner are:
• Poor project planning
• Scope changes
• Constructive change orders
• Errors and omissions
• Contract accelerations and stoppages
• Site access or availability
• Other construction interference and delays
• Strikes and acts of God.
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Types of Claims …cont’d
 Typical claims against contractor are:
• Late completion - liquidated damages
• Out of specification materials
• Defective work
• Property damage

8. Claims Prevention
• Producing comprehensive and accurate contract
documents
• Constructability review
• Clear understanding of contract requirements prior to
bidding
• Having good administrative procedures in place
• Open and honest communication
• Timely troubleshooting
 Claim prevention begins in the pre-construction phase
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9. Design Professionals should:
• Specify locally available material
• Allow substitution of the same quality material
• Avoid one-of–a-kind or non-standard items where
possibly
• Design structures with as many surplus elements as
possible
• Design should allow construction using the prevailing
methods and equipment
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10. Design Professionals should:
• Design to minimize required labor
• Specify a quality of workmanship consistent with the
quality of the project
• Do not require the contractor to assume responsibility
for information that should be furnished by the design
engineer/architect
• Produce simple, straight-forward specs - clearly state
what is expected
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11. Variation Orders
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12. Variations
• Variation is the addition, omission or substitution of
works.
• Variation management is an organized effort to eliminate
unnecessary cost and time impact as a result of
processing project work outside the scope of the
contract.
• Variation is not a Claim
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13. Variation Order
– A written order issued by the owner to the contractor
for a change to the contract within the scope of work
– Variation orders are written for:
• extra work
• increasing or decreasing the contract quantities
• alterations
– Variation orders state the basis and amount of
payment and time extensions
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14. Types of Variations
• Formal
– Via contract variation clause (Ex. See Clause 38 of
PPA, 2006)
• Constructive
– Action of owner that has the effect of directing a
change, although not initially documented as such.
• Cardinal
– Variations totally out of scope of original contract.
– Should re-negotiate entire contract.
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15. Sources of Variations
• Unanticipated site conditions
• Owner requested design modifications, additions or
deletions
• Clarification of contract documents
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16. THANK YOU!
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