Closing Out Your Construction Project - Handling Claims and Disputes

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September 17, 2009

Closing out construction projects often involves the handling of claims and disputes from the contractors.  Contractor claims that have been submitted during construction have not been resolved or contractor claims are just being submitted because the construction is complete and the contractors are just getting around to closing out the project and tabulating costs.  Regardless of the reason, contractor claims and disputes can be a challenge to resolve.

The purpose of this article is to discuss some ways that you may be able to resolve claims and disputes and successfully close out your construction project.

CLAIMS

Construction claims are simply unresolved change orders.  If they had been resolved before they became claims, the contract mechanism would have been a change order.  Therefore, claims should be handled the same way change orders are.  Read the contract and comply with what is specified.  This presumes of course that the contract is well written.

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Unfortunately, when an issue becomes a claim the parties become less cooperative and less willing to share information that is necessary to resolve their differences.  If it is at all possible, this should be avoided.  To do this the manager must exercise unusual self-discipline and avoid the temptation to draw a line in the sand and dare the other party to step across.  When a situation develops that the parties cannot agree on, it is common for one or both parties to internalize the problem as a personal one.

Step back from the fray.  The potential dispute is business, not personal. Use neutral language to avoid igniting the conflagration.  For example, call the item in question an "unresolved change," a "request for equitable an adjustment," a "proposal for extra work," or another non-threatening term.  Try to understand the other party's perspective.  That way you can best thing creatively and develop an approach that you can sell to the other side.  Effectively you want to devise a method that results in a "win-win" outcome to the potential claim situation.

SCHEDULE

The construction schedule may have worked well as a tool for completing your project so far.  Now is the time to review the construction schedule with your construction manager and contractors to be sure that the activities of the Owner and other parties associated with occupancy of the building have been considered and are coordinated.  For example:

  1. Are activities included in the schedule for inspections by local and municipal agencies?
  2. Have the terms for partial or temporary certificates of occupancy been established?
  3. Has adequate time been included for testing and balancing of the HVAC system?
  4. Has adequate time been included for testing of the fire alarm and security systems?
  5. Has adequate time been included for training of maintenance staff on new security, fire alarm, electrical and HVAC systems?
  6. How will the Owner access and interface with contractors on the new facility to deliver Owner-furnished equipment during the final stages of construction?

The increased in activity at the close out of your project will also require consideration of:

  1. Material handling and storage for contractors
  2. Parking for the additional workforce
  3. Project safety and security
  4. Protection of completed work
  5. Clean-up

DOCUMENTATION

The level of activity on your project will increase, as all the contractors will be rushing to get done.  Because of this, the possibility of disputes and delay claims will increase. Closely monitor and document contractor manpower levels, work activities, problems, and solutions on a daily basis.  Take progress photographs daily and document any problem areas.  If the Owner has to take occupancy of areas that are not totally complete or inspected, photograph any incomplete work items or defects to avoid disagreements later.

REQUESTS FOR INFORMATION AND CHANGES

Resolve any open requests for information, unpaid change orders, or pending changes.  Open questions and unresolved changes can slow or even stop progress.  Now is not the time to give the contractors a reason to send their forces to another project or to claim delay due to lack of information.

If additional or changed work is necessary during the later stages of the project, consult with your construction manager or architect to identify the time involved to accomplish the work and whether it will affect the critical path of work.  If a time extension is warranted, include it in as part of the change.

CLOSE OUT DOCUMENTATION

Consult with your construction manager and architect to identify any missing submittals, warranties, manuals, certified payrolls, or certifications.  Push to get the paperwork cleared up early so that the project can be closed out smoothly.  Make sure that any training requirements, such as those that familiarize your maintenance staff with new equipment, are met.  Make sure the contractors provide attic stock of floor coverings or ceiling tiles, if called for in the specifications.

Follow the steps listed above and you and the close out of your project will be a lot smoother.

Rocco R. Vespe, P.E. is a Director of the Philadelphia office of Trauner Consulting Services, Inc., a construction consulting firm with offices in San Diego, Orlando, and Philadelphia. He has over 35 years of construction experience including 15 years as a successful contractor and 20 years in construction consulting including owner’s representation, project management, construction management, estimating, schedule analysis, dispute resolution, claims evaluation, partnering, and expert testimony. He co-authored Construction Estimates from Take- off to Bid for McGraw-Hill. Mr. Vespe has a degree in Civil Engineering from Drexel University and is a registered Professional Engineer in Pennsylvania, New Jersey, Maryland, Maine, Louisiana, Florida, and Connecticut. Mr. Vespe has been active in the CMAA for over 15 years and is currently the Vice President, formerly President, and is a Board Member of the Mid Atlantic Chapter of the CMAA. Mr. Vespe is on the CMAA National Standards of Practice Committee as a member of the Risk Management team. Mr. Vespe has conducted numerous workshops at CMAA conferences and is currently presenting a seven part series of CMAA Webinars titled “Keys to Project Success – Avoiding Disputes”.

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