Understanding Construction Claims Management Systems

Being a construction contractor is hard work, but hopefully after a project is completed there will be a big reward after all the effort. Unfortunately, that is often not the case. Disputes can arise and this will result in, at best, delayed payments; or worse, having to sue each other in court, which is the most expensive.

While not all disputes can be prevented, having knowledge on what to include in contracts to protect your interests and to make the agreement clear for both parties will help avoid potential problems. Although you will still need the services of a lawyer to be sure a critical contract is indeed good for your interests, it is very useful to have basic knowledge on the needed provisions.

While you need not be a legal professional to study construction claims management, it is advisable that you have experience in contract administration in order to be able to relate to the concerns that may crop up in undertaking a project. It would be important for resolving an issue if you have the capacity to point out the provision in the contract that supports your position.

A big part of dispute revolves on the responsibilities of the parties involved in the project. There are usually several parties to a construction contract: the project owner, the architect, the contractor and subcontractors. At first it looks like the divisions are pretty clear, with owner putting up the capital, the architect in charge of the design and the contractor and sub-contractors doing the actual construction. Legally, however, there are certain liabilities you cannot avoid even if you are not directly responsible.

The best practice is to try to anticipate possible conflicts and to have the solutions incorporated in the contract. This is to avoid misunderstandings or forgetfulness. But it requires a lot of experience to know in advance the probable issues. Also, there will always be matters that you have not yet encountered.

When despite all your precaution a dispute still arises, it may be possible to have a provision that states that the parties concerned would first try arbitration to spare both parties the expenses of a full blown litigation. Generally, arbitration is faster and less costly. It can also be stipulated that the decision of the arbiter would be final. This is to prevent a losing party from going to the courts and so making the arbitration useless.

In case there is no other alternative but to resort to the courts, you must be aware of both the chances of gaining payment and the length of time for the matter to be resolved. Here you must make a policy decision on whether it is worth the effort. Still there are others who persist even if it is not profitable, because of the belief that if they just let it pass, other parties would abuse them.

Learning construction claims management is essential for all those professionals in the construction industry that may be affected by disputes. Many millions may be lost because of ignorance of this topic.

*Originally published by the Manila Bulletin. Written by Ruben Anlacan, Jr. (President, BusinessCoach, Inc.) All rights reserved. May not be reproduced or copied without express written permission of the copyright holders.