Due to the nature of construction contracts, some variances can be expected and should be accounted for the in scope of the project. The scope of a project may need to change due to site conditions or the timeline may need adjusting to accommodate requested changes by the owner or unexpected events. Construction claims arise when one of the contracted parties believes the conduct of the other entity entitles them to receive damages. Smolin has years of experience both preparing and defending construction claims. Our qualified professionals include forensic accountants, auditors and investigators that work tirelessly to provide clients with the specific support they need.
Types of Construction Claims
Delay of Construction
Delay of construction claims are among the most common types of construction claims. Although the idea that construction was delayed is simple at first glance, delayed construction claims can be the most complicated to navigate. While some delay should be accounted for in the scope and timeline of the project, there are many issues that may result in a project not being completed in a timely manner including:
- Undisclosed conditions.
- Poor management or a poor allocation of resources.
- Difficulty accessing the construction site or poor conditions at the construction site.
- Delays or issues receiving the necessary permits.
- Lack of adequate funding or slow payment for services rendered.
- Construction plans that are poor or do not match the scope of the project.
- Revision requests that are outside the scope of the project or require additional work to achieve.
- Poor weather conditions.
- Labor issues.
The first step in all delay of construction claims is to analyze the contract and the issue to determine both the scope and if the claim has merit based on the specifics of the contract. A part of this analysis is determining the root cause of the delay which may be vastly different than it appears at first glance. If a claim is verified to have merit, the next step is to determine the financial or time adjustment the claimant is entitled to. Often enough, Eichleary formula is used to calculate delay damages.
Often, there are multiple parties associated with construction projects. It is common for design to be done by one entity while construction is done by another. Additional third parties may include architects, attorneys, vendors, contractors, insurance companies and financial institutions who might have been involved with outlining and designing the project. Despite the best efforts of all involved, defects in design or in the construction of those designs do occur. These types of construction claims require that investigators identify the root cause of the design or construction issue, quantify costs and determine damages when they are applicable. Common design issues can be attributed to:
- Materials that are furnished by the owner or a vendor not chosen by the contractor that are below standard or not adequate for its intended use.
- Designs that provide inaccurate materials information or that do not specify key items.
- Poor quality of construction or materials used by the contractor who ignores the contract specifications.
- Guidelines outlined in design plans that were not correctly followed by the construction team.
- Use of materials that are defective or not up to code.
The issues above can result in design issues that are structural or cosmetic and can significantly impact both the cost and timeline of a project. When quantifying costs, a qualified construction claim professional will need to evaluate both the damages associated with the defect and the additional cost of resolving the problem.
Labor is a key component of any construction project. During the planning phase, productivity standards are generally set based on industry standards and professional knowledge. When laborers fail to meet those productivity standards, a project may run behind schedule and above budget. Common causes of productivity claims include:
- Contractor issues.
- Poor site management.
- Low availability of quality laborers or difficulty maintaining a workforce.
- Changes in the scope of work.
- Weather delays.
- Changes in the schedule due to outside issues, such as permit delays or delays by other contractors.
Productivity claims require professional expertise and investigational skills. In order to support or defend a productivity claim, a construction claim consultant must:
- Understand and analyze the direct cause of the productivity issue.
- Outline the requirements as stated in the contract to determine if damages are warranted.
- Calculate the financial loss associated with the productivity issue if applicable.
Site Condition Claims
Site condition construction claims address the fact that the condition of the work site was not as expected. This issue may be the result of a material difference between the state of the site at the time of contract execution and the start of construction. Site issues may either be foreseeable due to inaccurate information or unforeseeable, such as unknown underground conditions. Common types of site condition claims include:
- Issues that were preexisting at the site but were undisclosed.
- Site conditions that were significantly different than what was outlined in the contract.
- Unforeseen issues that were unable to be anticipated and will require substantial resources to accommodate.
- Damages to laborers or contractors due to site conditions that were not as described.
The first step in site condition claims is to understand how the contract specifies site condition issues will be addressed. In many cases, one or both parties assume the risk of unknown site conditions.
Risk of Self Managing Construction Claims
Failing to consult a construction claim professional can have a significant financial impact for your company. Construction claims, particularly those that have moved to litigation, require expertise, a thorough understanding of contract law and professional forensic support in order to protect your organization and achieve the best outcome. Choosing to pursue or defend a claim without professional assistance will likely place your company in a poor negotiating position.