Construction claims: Protect yourself with these smart strategies

In dealing with construction claims, detailed and accurate documents are a contractor’s best friend. The more thorough a job’s documentation, the better you will be armed to pursue or defend against a damage claim.

Construction projects involve complex relationships among owners, contractors, subcontractors, architects, engineers and other third parties. Consequently, projects often do not meet original targets for time, cost or quality. Even the most carefully planned and well-managed jobs can trigger claims and disputes over work delays, project scope, acceleration orders, property damage and other issues.

Good records are essential – the most important part of claims administration is keeping good records. You must be able to reconstruct what happened on a project, when it happened, who saw it happen and why it happened. Documents that you should keep include, but are not limited to, bid records, time sheets, invoices, daily job diaries, project schedules, weekly reports, cost records, canceled checks, and design and shop drawings.

Preparing effective claims is tricky because, naturally, you expect them to be challenged. To improve your chances of prevailing, it’s best to have a financial professional apply both accepted legal interpretations and construction accounting principles to estimate damages. Generally, however, there are three ways to price damages in contract disputes. Deciding which method to use is best left to your financial advisor, who will weigh the circumstances involved in the dispute and select the one most likely to support your case.

In making and supporting claims, tact and diplomacy are just as important as a solid financial presentation. Strong words, accusations and finger-pointing will cause only more acrimony among the parties in dispute and could lead to lower awards or even a negative impact on your company’s long-term reputation. When cool heads prevail, disagreements can be resolved in less time and with less expense. The success of a construction claim is directly related to the facts that support the claim and the method in which the claim is prepared and presented. You may not be able to stop disputes in their tracks, but you can prepare for them by maintaining excellent records.

For more information, please contact Glenn M. Gelman & Associates at (714) 667-2600.