Let’s face it, both construction companies and construction contracting businesses have unfortunately the second-highest bankruptcy rate of any kind of private companies present.
Things can be going great but due to an unpaid change order, a delayed payment, an expensive remodeling, a task needing to be done again, or an unanticipated legal claim, this has the potential to derail progress and leave many grasping for what remains of the construction company.
Construction claims are indeed a problem of a major scale. The only worthwhile construction dispute is one that can be avoided. Yet, construction companies should avoid spending precious time and money on arbitrators. They also should avoid a lengthy litigation process, else they could go bankrupt in less than a year.
Construction companies cannot afford to make mistakes in this regard. Construction claims are not a joke unfortunately. Legal litigations resulting in contractors or construction companies to pay hefty amounts in the form of construction claims can result in disaster. This can also result in construction companies going bankrupt
In this post, we will briefly examine various kinds of construction claims and how to keep them at bay. Industry experts will also be sharing their thoughts on negotiating disputes when they come up, and how a fair resolution for both involved parties can be reached, without spending many resources on lawyers.
Common kinds of construction claims
To begin with, let us look at the kinds of construction claims that people are most likely to encounter. The list is by no means a long list, but it can and should help people see the major sources of disagreements between construction companies, contractors and their clientele. Let us examine some of them:
In this case, a client can file a claim due to the project taking more time than what was agreed in the contract. This is resulting in a loss in both financial or productivity terms on the client’s part.
Claims for price acceleration
In this case, contractors at certain intervals may need to exceed project budgets for completing a project on time. Sometimes it is done to complete the project ahead of an already agreed schedule. Price acceleration claims can rise due to disagreements between contractors and clients who are legally required to bear the expenses of accelerating work.
Claims for work order change
These claims are made in relation to the work’s scope. Also, whether or not a needed change is within the scope’s limit or not, claims can be made in this regard too. Another reason for making a claim is whether or not a needed change was within the already existing scope of work. All of them will be examined.
Claims for differing site conditions
These kinds of claims can arise due to differences between actual job site conditions and the way clients presented them in the contract.
For instance: the construction site mentioned is a grass field. But what the contractor found is a gravel pit. It is hence more expensive to dig a foundation in a gravel pit. The contractor can hence file a claim for differing conditions of the proposed construction site.
Key steps for preventing construction claims
Preventing construction claims is a hard task. It is not like an easy mathematical sum because even the slightest things may lead to incidents which would lead this to happen. The sad part is that construction companies are always exposed to litigation but there are things they can do to avoid facing such claims. Each construction company should always be ready for the worst to happen.
Let us now look at the best advice dispute avoidance professionals have to offer:
Being on friendly terms with clientele
Business is a sober practice. Then again, a strong relationship with clientele takes organizations towards the path of seamless sustainability. Each human is prone to making mistakes and things can go wrong.
A construction company having strong relations with clients can reach a better resolution and work out the differences based on a worthwhile relationship.
Writing top-notch contracts
A top-notch contract with a well-defined work scope will help construction companies reduce construction claims related to either incomplete or extra work. No construction company should think of acting smart and swindling clients in terms of contract negotiations. Transparency is key when it comes to formulation and execution of contracts.
Effectively managing expectations is the company’s first defense line against Change of Work Order Claims.
Obtaining top-notch insurance
Frugal business owners may not spend much cash when it comes to signing up for insurance policies against property damages on job sites. But the prospect of businesses going under due to a simple mistake can be a problem.
Those who are insured for property damage liability can avoid completely negative consequences for damages caused accidentally. Their premium can be quite small based on their track record. Hence, construction companies should check in with a trusted insurance dealer to check and review the best available options.
Litigation is something that everyone hates. A lot of claims are a result of a slight misunderstanding which could have been resolved with crystal clear communication, discussion and talks. Project management software options today make it much easier to bring together all stakeholders for a well documented discussion avoiding any future disagreements in the future.
Averting construction claims is like averting lawsuits, albeit with slight differences. It comes to the point of effective communication between all parties and stakeholders involved, managing expectations properly and working in the best interests of everyone involved.
In case if any party has any concern or grievances, they should be able to put it forward so that each of them are addressed properly. Moreover, construction companies need to ensure worker safety is top priority and all workplace hazards are managed and removed properly from construction sites.
It is wise for construction companies to ensure their clients are trustworthy and they can trust those who they carry out business with. Maintaining good working relationships, preparing detailed contracts, and ensuring the business will thrive in the long run. All this should be done in applicable areas helping the company safe from claims and litigations in the future.