How to Mitigate Risks and Avert Construction Legal Claims
Construction projects are a complex machine and without careful planning, they can break down very quickly. But with a little preparation and forward thinking, you can mitigate risks and avoid construction claims that could potentially hinder your project’s success.
Risk Identification and Mitigation
Risk identification and analysis is the first step in mitigating risks and avoiding construction claims. By planning ahead and identifying possible risks that may arise during your project, you reduce the likelihood and severity of risks within a project. This process doesn’t stop once the project begins though. It is essential that risk management is an ongoing process and that you constantly reevaluate the different risks within your project if you want to avoid monetary losses.
In order to effectively mitigate risks within your project, it is important that you first understand the different types of risks.
Monetary Risks: Possible economic changes, rising interest rates, inflation, declining sales, and supply price fluctuations that may occur during a project.
Scheduling and Contractual Risks: Determining the amount of time a task will take to execute and the possible consequences that may occur if these tasks take longer than expected, i.e. a project not being completed on time.
Weather Risks: Bad weather such as floods, earthquakes, and rain that may delay projects or damage construction sites.
Occupational Risks: Injuries or fatalities that may occur due to employee actions, equipment used, weather, etc.
Technical Risks: The technical competency of workers and their ability to complete tasks and meet deadlines.
Project Risks: Inadequate or bad company policies, underestimating the amount of time and resources needed for the project, and more.
Bringing Knowledge to Action
Once you understand these different types of risks, it is important to identify which ones you should focus your attention on. Depending on the type of project, where it’s located, and various other factors, certain risks will be more likely than others. Do your research so that you can determine what risks have the highest probability of occurring within your project and focus your efforts on those risks.
After you have zeroed in on the risks most pertinent to your project, mitigation comes into play. Most risks are impossible to completely eliminate, but proper preparation and utilization of specialized tools can significantly decrease the likelihood of risks occurring. Construction software is one resource that can drastically reduce risk within a project. Designed to help subcontractors mitigate risks, eSUB has specialized features that make tasks more manageable and quicker to process. Some of the features include resource management, scheduling, daily reports, and submittals, all of which help to mitigate risk. The software does the hard work and organization for you, saving clients thousands of dollars and ensuring project deadlines are met.
Avoiding Construction Legal Claims
Identifying and preparing for setbacks not only helps you avoid risks, but also helps you avoid construction legal claims.
To better understand what the claims process is like today, it is important to first take a look at its history. In the 1980’s, the courts established a new path for claims made by contractors based on the impact of changes and delays on unchanged work. This resulted in two conflicting positions, the first being the owner’s right to issue unilateral change orders under the terms of a contract, and the second being the contractor’s right under the impact cost theory to reserve his/her rights for delay and impact costs. The amount of construction claims has continued to rise in the last 40 years causing many debates and arguments amongst all people involved in the construction process.
Because of this litigious attitude, it is more important than ever to understand the terms and conditions of your contract. If and when something differs from your contract, it is essential that you notify and document these differences.
Documentation is extremely important if you want to avoid claims. Without it, you could face unwanted litigation, arbitration, and huge monetary losses.
Some simple documentation that can give you the best defense against unwanted disputes include, which are easily managed in one place by eSUB:
- Daily logs
- Cost reports
- Payment records
- Change order documents
- Labor and productivity costs
- Email correspondence
- Telephone conversation logs
- Requests for information
- Status and progress reports
- Bid worksheets
These documents can help to ensure that if a claim comes up, you have the proof to tell your side of the story.
Having proper documentation is only one-half of the equation though. When additional time, money, or resources are needed due to changes, owners need to be notified promptly. The timely response gives contractors and owners the time to discuss requests for payments and change orders in order to resolve things as quickly and efficiently as possible. It is also important to continuously monitor and discuss schedule deadlines during the course of the project so that progress and delays can be managed as they are happening.
Having the Right Subcontractor Construction Management Software
eSUB Construction Software is an extremely useful tool for both documentation and timely notification. eSUB has a myriad of features specifically designed to help avoid claims by making documentation and communication easier and faster. These features include daily logs, cost reports, and instant communication threads that can easily be accessed from any mobile tablet or device at any time. This means no more lost paperwork and missed office phone calls.
Instead, you have instant communication and all of your documentation organized in a secure cloud. For instance, if a contractual deadline isn’t going to be met, the subcontractor can notify the GC or owner with complete documentation directly through eSUB Software, which helps eliminate claim submittals. eSUB is exactly the tool that you need to avoid dealing with any more unnecessary money loss and litigation battles.
Construction Software with Built-in Best Practices Helps Companies Optimize Manual Processes
In addition to software, there are other practices that can help you to prevent claims throughout the construction project.
During Design and Bidding
- Carefully read and make sure you understand the contract. Be aware of all aspects of the contract and consult with a lawyer if necessary.
- Prepare scheduling specifications and communicate exactly what you want. Clarify uncertainties!
- Assign responsibility for various tasks including schedule and coordination, payments, approvals, etc.
- Ensure that both parties review and approve of contractor schedules.
- Meet monthly for schedule updating. This helps keep both parties on the same page.
- Reevaluate your record keeping occasionally to ensure that documents are being properly preserved.
- Record weather conditions and any effects they have on progress and costs.
- Establish a procedure for control of RFI’s
Unfortunately, preparation, documentation, and notification are not always enough to avoid disputes, so it is imperative that you understand some of the most common types of claims that are likely to arise in construction projects.
Delay claims against owners for increased compensation due to delay are very common. Reasons behind this can include late approvals, permit problems, and bad weather, which the contractor can claim is not their fault.
Construction Acceleration Claims
A construction acceleration claim is when a contractor asserts that a time extension should have been granted, but was not, so the contractor was forced to accelerate the work in order to meet a deadline. This often includes reasoning that the owner failed or refused to grant a time extension request.
Construction changes are claims where contractors allege that a change had to be made as the result of action or inaction by the owner even though the owner did acknowledge these as contract changes.
If you do receive one of these claims, there are a few important first steps you can take when analyzing the claim.
- Review the claim and determine the factual and legal basis for it.
- Identify the elements of proof and compare both parties’ records.
- Review correspondence, reports, memos, and similar documents to determine if the documents can be confirmed or refuted.
- Review schedule information and identify variances.
- Conduct interviews with appropriate personnel and obtain written statements.
- Construct a chronological timeline of events over the course of the project.
- Review performance records.
- Conduct productivity analyses.
- Review cost estimates and claimed actual costs.
- Identify questions that need to be answered by opposing party.
- Summarize the strengths and weaknesses of the claim issued from both viewpoints.
- Prepare a plan of action in order to resolve dispute!
Although there is no way to avoid all risks or claims, preparation and diligence go a long way. If you put in the extra effort, stay persistent, and think ahead, you are on the track to smooth and successful project. Also, having the right mobile and cloud-based project management and document control software is imperative for your company to mitigate risks and avert construction legal claims.