What’s in a change? The small things that can lead to big construction claims
The thing with big building projects is that stuff happens.
That doesn’t have to be a bad thing, but nothing is ever exactly as it seems on the nicely planned pages of a floor plan and building schedule. With high costs and tight time frames usually part of the picture, as well as lots of moving parts (literally) and people involved, it’s not difficult to see why claims arise.
However, it is possible to help prevent them or at least resolve them peacefully. Part of that is knowing the most common causes of a construction claim. The reason they’re common? With the best will in the world, these are things that can happen easily, often through no one’s fault. So the best you can do is have procedures in place for them…
Choosing to making changes to the plans
If you’ve ever built your own home, or even done small renovations, you will know that things change. Never say that you won’t change anything – you will. People change their minds on seemingly small details as a project takes shape and proves a little different to the way it seemed on the page. Equally, time moves on from when the original plans were made and styles change. So people change their minds.
The point is that sometimes when you make these changes, it may change the original agreement – perhaps the agreed costs or timeframes for example. So unless appropriate arrangements are made and in good faith, this can put contractors at risk of making a loss, or project owners at risk of not getting what they think they’ve asked for. The key is good communications and good record keeping. Easier said than done in our experience, which is why we have put a lot of resource into the development of our cloud document management system.
When you are forced to make changes to plans
Sometimes changes are necessary that are nobody’s fault. Maybe there was a problem getting out of the ground that you couldn’t have foreseen. Maybe someone made a mistake with faulty specifications or a misinterpretation of the existing contract. Or maybe one of the stakeholders put pressure on the project to accelerate, which ultimately meant something wasn’t done as well as it should have been. In short, this is a change to the plan caused by activity or inactivity.
The thing is that while it may still be a communications issue, it goes right back to the very start of a project. So it’s a good reason to have someone experienced in construction claims involved at the beginning of a project. They will have insight into the potential problem areas and be able to identify them before they happen. It may seem counterintuitive, but a little consultancy at the start can save a lot of time, money and heartache in the future.
When you cancel a contract
Terminating a contract can happen even before works have begun. It can then result in either of the key stakeholders (most commonly the project owner or the contractor) making a claim. A contractor might be in a position to claim loss of profit for example. When a contract is terminated during the project, it’s a little more complicated as both sides are likely to make claims.
In short, this is an indicator that either relationships have broken down or something unexpected happened in the planning that changed the plans. Again, having someone experienced in construction claims as part of your team from the start, will help to ensure processes, documents and communications don’t reach crisis point. At the very least, they can ensure issues are handled as soon as possible, and resolved by mediation rather than getting nasty. Importantly, this may help to salvage important relationships for everyone involved.
Delays, defective contracts and differing site conditions
Other things that can lead to serious problems down the line include schedule delays, suspension of works, defective or deficient contracts, or if a site is different to what a contractor was expecting. These can all cause serious problems for individuals involved, and ultimately lead to anger, heightened anxieties and claims.
A schedule delay is when a project, for one reason or another, is delayed in starting. This can have big financial implications for all parties. Suspension of works can be caused by either party, but will inevitably add costs to a project. A well-written contract will really help to mitigate these claims by having processes in place.
A defective or deficient contract may render a contractor’s original pricing inaccurate as they were based on incomplete or incorrect information. That either leaves the project owner open to unexpected costs or the contractor vulnerable to lost profit or even putting the project at a cost to him/her. This really highlights the need for careful planning and communications at the start of a project, not to mention an experienced and objective eye.
Site conditions can be a really tricky one, but if there is a lack of communication it only makes the problem worse. However it occurred, if the site has different conditions to those indicated during a pre-site inspection or in documentation, it could be disputed for additional payments to cover the additional costs. It might not be entirely possible to stop this kind of thing from happening. However, to limit the chances of it ending in a claim a positive line of clear and well documented communications is imperative and for the party discovering the issue to mention it as soon as they are aware of it.
Talk to Tungsten Capital to get advice that will help your construction project run smoothly