Editor's Note: CSI is pleased to publish this blog from Kevin O’Beirne, PE, FCSI, CCS, CCCA, CDT. If you have an idea or opinion you would like to share with your colleagues in the construction industry, please contact CSI Content Strategist Peter Kray at pkray@csinet.org. He would love to help publish your thoughts.
In construction, change proposals and claims are written demands from one party to the other seeking an adjustment in contract price, contract times, or other relief under the contract. While many people tend to think of claims as assertions by contractors, in fact, both the owner and the contractor may assert a claim against the other party.
Procedures for claims are set forth in AIA A201—2017, Standard General Conditions of the Contract for Construction. Both change proposals and claims are addressed in EJCDC C-700—2018, Standard General Conditions of the Construction Contract. For brevity, the balance of this brief essay largely refers only to claims, although similar logic applies to change proposals. Both AIA A201 and EJCDC C-700 expressly place on the party asserting the claim the responsibility to substantiate and support the claim. That’s a very significant, but often-neglected, obligation.
This writer has reviewed numerous construction claims over the years and found many to be poorly written, insufficient in detail, and often lacking essential documentation. Such claims serve no one’s interest, especially the party asserting them.
Claims need to be clearly written, the relief sought (compensation, time, and other) must be expressly articulated, with citations to specific, relevant contractual provisions and project events that support and substantiate the claim. Supporting documentation should be submitted with the claim, clearly labeled, indexed on an attachments title page, and expressly referenced in the text of the claim.
Adequate supporting documentation should be furnished with each claim, regardless of whether the claimant believes the receiving party, design professional, and initial decision maker (if other than the design professional) already possess the documentation. Documentation submitted with the claim should be relevant; submittal of extraneous documents should be avoided.
An incomplete, unsupported, or poorly written claim is akin to an attorney in litigation failing to present a good case. If a lawyer puts forth a disorganized case, presents few or non-compelling witnesses or insufficient evidence, or wastes time presenting extraneous or irrelevant information, the court is likely to find in the opposing party’s favor. No attorney preparing for litigation would reasonably expect the court to perform independent research to support its client’s case, but that is essentially what many construction claimants do.
Perhaps the best approach for a construction claim or change proposal is to prepare the associated documents as if they were a preliminary step to a court case, which may well be the outcome. Assume that the receiving party, design professional, and others who read the submitted documents are unfamiliar with the entire situation and need everything presented in a cogent, coherent, well-organized manner, clearly tied to specific contract provisions and the events as they unfolded during project implementation.
Much is often at stake in construction claims. The claimant should devote the necessary time and effort to preparing an adequate claim with supporting documentation. Claim letters one- or two pages long with a modest extent of supporting documents—often not indexed and without relevant references in the claim letter—are unlikely to put forth a compelling case to the entity determining entitlement. In other words, do it right or don’t do it at all. To do otherwise—in other words, taking shortcuts in preparing the change proposal or claim—probably wastes the time and money of all involved, including the claimant.
When a single claim addresses multiple issues, it is usually necessary that the claimant expressly apportion its claimed relief among the various separate claim items and make a case for each, so that each can be evaluated based on its own merits.
Almost all construction claims reviewed by this writer were, in some way, substantively unclear, ill-documented, and/or lacked citations to specific, relevant contractual provisions and project events. When necessary, the claimant should promptly retain external assistance to prepare a strong case to support its claim.
What should the initial decision maker (IDM), design professional, or receiving party do upon receiving a claim? AIA A201 establishes a time limit for the IDM’s claim decision, and EJCDC C-700 establishes time limits for the engineer’s decisions on change proposals and for the receiving party’s written response to claims. The clock starts running when the claim is received. No written decision issued within the stipulated time frame equates to a full denial.
While neither AIA A201 nor EJCDC C-700 obligates the IDM, engineer, or receiving party to do so, it is often wise for the recipient to promptly read the entire claim and contact the claimant to orally discuss the matter, so that the relief sought and rationale for the claim are understood, regardless of whether it is well-articulated in writing. This writer advocates that the IDM, design professional, or receiving party (as appropriate) promptly issue an interim, written response to the claimant indicating:
- The receiving entity’s basic understanding of the relief sought, extent of the claim, and rationale for the claim;
- expressly indicating what additional information, if any, should be furnished by the claimant; and,
- a specific, reasonable time for the claimant to deliver the additional information.
While some owners and design professionals may view this as “assisting the contractor in presenting a better claim,” the reality is, claims are usually substantive disagreements where failure to resolve the matter as a claim will lead to the more-stressful and more-expensive processes of mediation and final dispute resolution. A claim is the last chance to resolve the matter without the parties hiring lawyers, expert witnesses, and other high-priced professionals, and incurring mediator fees, arbitrator fees, and court costs.
To reject the claim simply because it was apparently incomplete on the first try may be a quick path to lawyering up and hiring a mediator. Rather than shoving the claim out of the way, temporarily, with a denial, it is usually better to objectively reach the truth of the matter before “lawyering up” is necessary. Of course, the claims process will be successfully completed more swiftly and with less rancor when the claim is well-prepared in the first place.
An army that goes into battle without its weapons and a plan of battle is likely to lose, which is an apt analogy for ill-prepared claims and change proposals. The claimant has only a limited number of opportunities to present its case and it is optimal to put the best foot forward as soon as possible to reduce the potential for escalating the matter into a dispute.