Comprehensive Preparation Documentation for Construction Contract Disputes
| Publication year | 1986 |
| Pages | 30 |
| Citation | Vol. 15 No. 1 Pg. 30 |
1986, January, Pg. 30. Comprehensive Preparation Documentation For Construction Contract Disputes
Owners, contractors, subcontractors, construction managers and architect/engineers ("A/Es") involved in today's construction projects all must be adequately prepared for the increasing trend toward contract disputes and litigation.(fn1) In this litigious construction environment, such preparation requires a comprehensive documentation system to defend against or prove the entitlement to and the amount of damages resulting from a compensable claim. Adequate documentation also may satisfy a requirement for a logical and supportable demonstration of cause and effect.
Documenting the many complicated problems which may develop during a construction project is burdensome. Nevertheless, since documentation is essential to the success of a claim, the importance of creating a paper trail cannot be overemphasized. Because disputes often are not settled until after a project is completed, which may be several years or more, management policy should recognize that committing anything to memory is only as good as the longevity of the people involved---both physically and corporately. Documentation usually lasts longer than people and their jobs.
This article presents guidelines for a comprehensive documentation system which could provide valuable resources to ensure success in most types of construction contract disputes.
There are three common types of claims made by contractors: (1) changes in the scope of work; (2) changes in the site conditions; and (3) changes in the schedule.
Most construction contracts require a written change order, supplemental agreement or other contract modification for changed or added work and its corresponding cost impact. A claim that the contract has been constructively changed by the owner may arise in the absence of a written order.
The owner normally is responsible for issuance and final approval of change orders. Problems are often encountered when the owner relies on the A/Es to review and recommend approval or rejection of change orders based on an unanticipated condition or some area not adequately covered in the plans and specifications. This may cause a conflict of interest for the A/Es who, by approving such change orders in a timely manner, may be inappropriately admitting their own negligence or faulty omission.
To prove entitlement to additional compensation for a change in the scope of work, a contractor must:
1) show the original scope of work contained in the bid documents and confirmed in the contractor's bid estimate;
2) show that the owner actually ordered a change or took action which resulted in a change; and
3) support the claim by reference to detailed records in which the actual costs of changed or extra work should be separately recorded on a daily basis.
Many construction contracts contain a differing site conditions clause that allows an equitable contract price adjustment if physical site or subsurface conditions are either (1) different from those represented in the contract or (2) materially different from conditions that are normally inherent in the type of work being performed. Prompt notice to the owner is required if these differing conditions are found.
Proof of anticipated conditions may be established by the following:
1) bid specifications and plans;
2) bid estimate worksheets;
3) owner's boring logs or soil reports;
4) pre-bid site investigation report; and
5) pre-bid or pre-construction conference minutes.
Delays, interferences or disruptions in work and suspension or acceleration of work are changes in the project schedule. These changes may affect either planned work sequences or planned duration times.
The contract usually contains the overall project starting date, planned duration time and anticipated completion date. Milestones or work sequences are normally found in accompanying special conditions or in schedules which accompany the bid documents.
Confirmation of the contractor's as-planned schedule may be obtained from bid worksheets showing durations of equipment usage or expected overhead requirements. Proof of the cause, nature and extent of a schedule change often depends upon circumstantial evidence.
Adequate documentation is vitally important to the contractor interested in survival. First, it provides, the information needed effectively to bid, plan and construct the work. Second, it provides the hard data needed to analyze and successfully resolve the construction claim. Contractors and owners who are able to monitor the job in such a way as to anticipate potential claims as they occur are in the best position to prove these claims successfully after litigation begins.
More important, fair settlement of the claim outside the courtroom is often possible because of specific data provided by document management, cost accounting and monitoring procedures that support a detailed damage analysis. In the courtroom, a presumption of reasonableness arises in favor of such records, which satisfies the claimant's burden and shifts it to the other party, who...
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