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Chapter 4 [compatibility mode]

Procurement Management and Contract Administration

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Chapter 4 [compatibility mode]

  1. 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) COTM 4242 1
  2. 2. COTM 4242 2 What is Claim?
  3. 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 COTM 4242 3
  4. 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 COTM 4242 4
  5. 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. COTM 4242 5
  6. 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. COTM 4242 6
  7. 7. COTM 4242 7 Types of Claims …cont’d  Typical claims against contractor are: • Late completion - liquidated damages • Out of specification materials • Defective work • Property damage
  8. 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 COTM 4242 8
  9. 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 COTM 4242 9
  10. 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 COTM 4242 10
  11. 11. Variation Orders COTM 4242 11
  12. 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 COTM 4242 12
  13. 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 COTM 4242 13
  14. 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. COTM 4242 14
  15. 15. Sources of Variations • Unanticipated site conditions • Owner requested design modifications, additions or deletions • Clarification of contract documents COTM 4242 15
  16. 16. THANK YOU! COTM 4242 16