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Topics: Change Management, Construction, Risk Management, Work Breakdown Structures (WBS)
Claim management
Identifying and addressing issues related to claims during project execution is a serious challenge for all Project stakeholders , particularly Project Managers. The cost and time overruns in a project are generally due to unexpected or unplanned events or risks not factored in during project execution . The claims arising out of these risks affect project outcome.

Claims arise in a project mainly due to lack of clarity in scope and specifications, ambiguities in contract clauses, interface scope with other projects, site conditions and time constraints.

Effective management of claims can reduce the time and cost impact on the project.

Documentation of Inputs and feedback from Project Management professionals in Construction projects based on their experiences in claim management , the various variables and risks involved during project execution and the general factors contributing to new claims can help to build new templates for planning and monitoring claims during project execution.
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Yet another great post. Thanks for sharing Ramesh. Keep it up.
Hi Ramesh,
By Claims do you mean Change Requests? Please advise.
Ramesh,

Very Important subject. Can you elaborate more on how "Effective management of claims can reduce the time and cost impact on the project".
This is an informative and useful comment but I found a missing idea that major issues for claim might result from the different understandings of implications of scope of work, contract clauses, etc from between the both client and contractor's perspective in construction domain. Claim management might be, in general, helpful to reduce risks being claimed by an opposite party but once claim issues occur, there might be limitations to reduce time and cost until disputes have been resolved. Claims arising between contractual parties are similar to conflicts arising between stakeholders, which means they are natural and inevitable but when they can be managed effectively or efficiently, adverse impact might be tremendously reduced to both parties. However based on my experience, it is never easy.
Hi Rajan Hariramabardran

Yes it is a change request. Change request in projects is of two types . One in the form of changes occurred in quantities / quantum of work for which price schedule is in place. Another form of change is due to additional work/ or activities which are not captured in the contract but arising out of project requirement which is covered under claim for pricing .

Hi Rami Kaibni

The activities which are arising out of project requirement not captured in the contract but these activities are required for execution of work to complete the project on time. If these activities are become a dependant activity within critical path in WBS , then the claims are to be settled in a stipulated time line with cost effectiveness within the ambit of laid down procedures . In this case, if the claim management is not effectively carried out by project team then the derailment of activity will result into time and cost over run.
...
2 replies by Asim Shaukat and Rami Kaibni
Nov 05, 2016 12:36 PM
Rami Kaibni
...
Hi Manavasi, Thanks for your ellaboration. It makes sense if the claim is related to a critical activity. Good Point.
Nov 15, 2016 12:38 AM
Asim Shaukat
...
In this case, being work required for execution but not originally included in the contract, shouldn't it become a change order? And this type of discrepancy is usually found out quite ahead of its execution. Consequently, the VO w.r.t. time and cost needs to be settled and contractor and client would normally have enough advance notice to take into account the related impact. If something is added to the original time schedule, it will impact the time only if it falls on the current longest path or if it does not fall on the longest path but needs resources from other tasks on the longest path. In either case, additional work will almost definitely impact the costs. Now, if the VO (on the longest path) is settled well in time then the impact on time and costs is the least (equaling that which is directly dictated by the VO) and overruns will begin accumulating otherwise.
Nov 05, 2016 2:29 AM
Replying to Manavasi Ramesh
...
Hi Rajan Hariramabardran

Yes it is a change request. Change request in projects is of two types . One in the form of changes occurred in quantities / quantum of work for which price schedule is in place. Another form of change is due to additional work/ or activities which are not captured in the contract but arising out of project requirement which is covered under claim for pricing .

Hi Rami Kaibni

The activities which are arising out of project requirement not captured in the contract but these activities are required for execution of work to complete the project on time. If these activities are become a dependant activity within critical path in WBS , then the claims are to be settled in a stipulated time line with cost effectiveness within the ambit of laid down procedures . In this case, if the claim management is not effectively carried out by project team then the derailment of activity will result into time and cost over run.
Hi Manavasi, Thanks for your ellaboration. It makes sense if the claim is related to a critical activity. Good Point.
Nov 05, 2016 2:29 AM
Replying to Manavasi Ramesh
...
Hi Rajan Hariramabardran

Yes it is a change request. Change request in projects is of two types . One in the form of changes occurred in quantities / quantum of work for which price schedule is in place. Another form of change is due to additional work/ or activities which are not captured in the contract but arising out of project requirement which is covered under claim for pricing .

Hi Rami Kaibni

The activities which are arising out of project requirement not captured in the contract but these activities are required for execution of work to complete the project on time. If these activities are become a dependant activity within critical path in WBS , then the claims are to be settled in a stipulated time line with cost effectiveness within the ambit of laid down procedures . In this case, if the claim management is not effectively carried out by project team then the derailment of activity will result into time and cost over run.
In this case, being work required for execution but not originally included in the contract, shouldn't it become a change order? And this type of discrepancy is usually found out quite ahead of its execution. Consequently, the VO w.r.t. time and cost needs to be settled and contractor and client would normally have enough advance notice to take into account the related impact. If something is added to the original time schedule, it will impact the time only if it falls on the current longest path or if it does not fall on the longest path but needs resources from other tasks on the longest path. In either case, additional work will almost definitely impact the costs. Now, if the VO (on the longest path) is settled well in time then the impact on time and costs is the least (equaling that which is directly dictated by the VO) and overruns will begin accumulating otherwise.
...
1 reply by Sungjoon Park
Nov 15, 2016 8:13 AM
Sungjoon Park
...
Dear Asim,

Very good point to settle the issue in a timely manner !.

You're right regarding various impacts on time and cost from the Variation Order or Change Order. A Change Oder is considered as a approved form of Change Request which was originally initiated by the Contractor or Client and subject to Engineer's(Consultants') review and approval when the Engineer represents the Client. Or as you commented, Change Order might be issued by the Client when Client's discretions to make changes are stipulated in the Contract.

Increasing time in the critical path doesn't necessarily give the Contractor its eligibility to obtain the Extension of time and Cost compensation if the changes result from Contractor's failures of its responsibilities, if changes are made within boundaries of the scope to be completed by the Contractor even though the specific works from changes are not clearly stipulated in the Contract Documents and/ or if changes might be from the foreseeable events as the experienced Contractor in general.

Effective claim management might be very helpful from beginning of the project to avoid many unclear understandings on SOW, Contract Clauses and/or any contents in relevant Documents between the both Parties. Claims or disputes arising from changes during the execution of the project, if once occur, are not easy to be resolved in a timely manner due to different understandings and interpretations on the inherent characteristics of changes even though claim management has been in place from the very beginning of the project.

Regards,
Nov 15, 2016 12:38 AM
Replying to Asim Shaukat
...
In this case, being work required for execution but not originally included in the contract, shouldn't it become a change order? And this type of discrepancy is usually found out quite ahead of its execution. Consequently, the VO w.r.t. time and cost needs to be settled and contractor and client would normally have enough advance notice to take into account the related impact. If something is added to the original time schedule, it will impact the time only if it falls on the current longest path or if it does not fall on the longest path but needs resources from other tasks on the longest path. In either case, additional work will almost definitely impact the costs. Now, if the VO (on the longest path) is settled well in time then the impact on time and costs is the least (equaling that which is directly dictated by the VO) and overruns will begin accumulating otherwise.
Dear Asim,

Very good point to settle the issue in a timely manner !.

You're right regarding various impacts on time and cost from the Variation Order or Change Order. A Change Oder is considered as a approved form of Change Request which was originally initiated by the Contractor or Client and subject to Engineer's(Consultants') review and approval when the Engineer represents the Client. Or as you commented, Change Order might be issued by the Client when Client's discretions to make changes are stipulated in the Contract.

Increasing time in the critical path doesn't necessarily give the Contractor its eligibility to obtain the Extension of time and Cost compensation if the changes result from Contractor's failures of its responsibilities, if changes are made within boundaries of the scope to be completed by the Contractor even though the specific works from changes are not clearly stipulated in the Contract Documents and/ or if changes might be from the foreseeable events as the experienced Contractor in general.

Effective claim management might be very helpful from beginning of the project to avoid many unclear understandings on SOW, Contract Clauses and/or any contents in relevant Documents between the both Parties. Claims or disputes arising from changes during the execution of the project, if once occur, are not easy to be resolved in a timely manner due to different understandings and interpretations on the inherent characteristics of changes even though claim management has been in place from the very beginning of the project.

Regards,
...
1 reply by Asim Shaukat
Nov 15, 2016 8:31 AM
Asim Shaukat
...
Hi Sungjoon,

Very nicely summarized scenarios. This topic has so many provisos that to include all would be to write a good sized book. I especially agree with the disputes part owing to different interpretations and conflicts of interest and their impact in spite of claim management.
Nov 15, 2016 8:13 AM
Replying to Sungjoon Park
...
Dear Asim,

Very good point to settle the issue in a timely manner !.

You're right regarding various impacts on time and cost from the Variation Order or Change Order. A Change Oder is considered as a approved form of Change Request which was originally initiated by the Contractor or Client and subject to Engineer's(Consultants') review and approval when the Engineer represents the Client. Or as you commented, Change Order might be issued by the Client when Client's discretions to make changes are stipulated in the Contract.

Increasing time in the critical path doesn't necessarily give the Contractor its eligibility to obtain the Extension of time and Cost compensation if the changes result from Contractor's failures of its responsibilities, if changes are made within boundaries of the scope to be completed by the Contractor even though the specific works from changes are not clearly stipulated in the Contract Documents and/ or if changes might be from the foreseeable events as the experienced Contractor in general.

Effective claim management might be very helpful from beginning of the project to avoid many unclear understandings on SOW, Contract Clauses and/or any contents in relevant Documents between the both Parties. Claims or disputes arising from changes during the execution of the project, if once occur, are not easy to be resolved in a timely manner due to different understandings and interpretations on the inherent characteristics of changes even though claim management has been in place from the very beginning of the project.

Regards,
Hi Sungjoon,

Very nicely summarized scenarios. This topic has so many provisos that to include all would be to write a good sized book. I especially agree with the disputes part owing to different interpretations and conflicts of interest and their impact in spite of claim management.

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