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A SURVEY OF CONSTRUCTION CLAIMS AND CLAIM MANAGEMENT PROCESS

IN THAILAND

Chapter · May 2006

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A SURVEY OF CONSTRUCTION CLAIMS AND CLAIM

MANAGEMENT PROCESS IN THAILAND

Visuth Chovichien and Kongkoon Tochaiwat

Department of Civil Engineering, Chulalongkorn University, Bangkok, Thailand.

Both employer and contractor should establish efficient claim management within

their organizations to deal with claims, by them against the other and vice versa. This

research aimed at finding necessary information related to employers’ and the

contractors’ claim management in Thailand: frequency and severity of each type of

claim-leading events, claim management efficiency, associated problems and

recommendations. The identification method of the impact of each type of claim-

leading event on a construction project was also developed. Two-hundred claim

management staff members from employers’ organizations, both public and private

sectors, and three-hundred staff members of the contractor companies participated in

the questionnaire survey. It was found that, on average, the frequency, severity and

impacts of the events entitling the contractor’s rights to claim are higher than the

employer’s while the employer has higher ability to manage his claims. The

employer’s problem most frequently informed by the respondents was about

incomplete contract documents while there were three contractor’s issues indicated:

incomplete contract documents, higher employer’s bargaining ability, and the delay of

the engineer’s responses. The outcome of the study can be used to improve the claim

management process, enhancing the project achievement.

Keywords: construction claims, construction contract, organizational analysis, project

management, statistical analysis.

Chovichien and Tochaiwat

INTRODUCTION

“Construction claim” is the seeking of consideration or change by one of the parties

involved in the construction process (Arditi and Patel, 1989). Construction claims

have significant effect on the project cost and time. A survey done by Semple (1994)

in Western Canada found that a large proportion of claims involved some delays and

in many cases the delay exceeded the original contract duration by over 100%. As to

the project cost, more than half of the claims resulted in an additional cost of at least

30% of their original contract value. Other research works done in the United States

(Callahan, 1998) and in Thailand (Khanchitvorakul, 2000) revealed the same results:

the average cost escalation caused by claims is approximately about 7% of the original

contract value.

Even though construction claims have a high level of impact on the project success,

there have been few studies about construction claims and construction claim

management, especially in Thailand. Some information about the events leading to

construction claims, such as their frequency rates and their severity levels, will be

useful in establishing an efficient claim management system while information about

the existing claim management processes such as their efficiencies, problems, and

guidelines for improving, can help both parties realize their strong points, weak

points, problems, and how to better deal with construction claims.

This research aimed at finding the necessary information related to the employers’ and

the contractors’ claim management processes in Thailand: the claim-leading event

frequency rate, severity level and impact level, the contract management efficiency,

problems and recommendations.

 Construction Claim Management

LITERATURE REVIEW

There are a number of ways to classify construction claims. Classified by the party

filing the claim, claims are of two types: the employer’s claims and the contractor’s

claims. Based on the relevant legal bases, construction claims can be further

classified several ways. For example, Chappell et al (2005) classified claims into

contractual claims, common law claims, quantum meruit claims and ex gratia claims

while some works such as those of Hughes and Barber (1992) and Alkass and Harris

(1991) classified claims into contractual claims, extra-contractual claims (or ex-

contractual claims or common law claims) and ex gratia claims. This research

adopted the classification method presented by Chappell et al (2005).

In order to deal with or control the claims in an effective way, all parties should

establish good construction claim management processes in their organizations.

Construction claim management process comprises six sub-processes (Levin, 1998;

Kululanga et al, 2001):

1. Recognition and identification of the change

Construction change recognition and identification involves “timely” and “accurate”

detection of a change. It is the first and critically important ingredient of the claim

process (Kululanga et al., 2001).

2. Notification of the change

This sub-process involves alerting the claimed party of a potential problem in a non-

adversarial manner. Time limit requirements are very crucial and critical (Kululanga

et al., 2001). Normally, the contract specifies such duties to the claimant.

3. Systematic and accurate documentation of the change

Chovichien and Tochaiwat

Records and documentation play a very important role in the settlement of

construction claims. The daily events and details of the jobs must be documented to

substantiate claim entitlements and prove damages. With a carefully prepared claim

package of facts and figures, the claimant can support his position and propel

negotiation toward a favourable settlement (Levin, 1998).

4. Analysis of the change’s impacts and pricing

The objective of this sub-process is to determine the impact of the change that occurs.

The analyst shall perform schedule analysis to calculate the time impact while

breaking down the cost into various cost components to assess the cost impact. There

are various methods used for calculating time and cost impacts. Each method has its

own pros and cons (Adrian, 1988). In monetary claim pricing process, there are two

types of claim pricing methods: forward pricing and post pricing (Levin, 1998). This

detailed cost description is necessary for negotiating, and justifying extra contract

costs.

5. Claim preparation

The claim documents should be logically built up, well organized, and factually

convincing. It can be divided into two sections: claim entitlement and claim quantum.

The former section should form the legal and factual bases that the contract or legal

requirement was breached while the latter should provide the estimated recovery of

the resulting harm (Kululanga, 2001).

6. Negotiation of the claim

This sub-process concerns the process of presenting the claim to the claimed party,

and mutual settlement of such claim. If an agreement cannot be reached and any party
 Construction Claim Management

believed his position is correct, he should request to begin the dispute resolution

process.

There are several approaches to settle construction disputes. There are a variety of

techniques available to help the parties come to some form of settlement without

resorting to arbitration or litigation, i.e. conciliation, quasi-conciliation, mediation,

private enquiry, adjudication, and mini-trial (Murdoch and Hughes, 1996). However,

if this fails, the remaining choice is to implement the more formal dispute resolution

mechanism such as arbitration or take the matter to court.

Even though construction claim management is very important to all parties

concerned in a construction project, several research works confirmed the

insufficiency of the claim processes. Lots of the insufficiencies were caused by the

negligence or ignorance of the implementation of an effective claim management.

Vidogah and Ndekugri (1998) concluded several deficiencies found in the consultant’s

claim management process such as (1) ad hoc manner implementation of claim

management, (2) poor performance in claim management functions of the existing

management information systems, (3) inadequacies in the contents of the products of

the basic good management practice (diaries, timesheets, and programmes), and (4)

impossibility to quantify claims with precision. They also discussed the claim

management deficiencies from the contractor’s points of views. Claim management is

not treated as a management function and is always poorly resourced and performed

in ad hoc manner. (Vidogah and Ndekugri, 1997)

As to claim management in Thailand, where this research was done, Thai public

organizations have to comply with the government regulations. According to the

“Prime Minister’s Office Regulations Governing Procurement 1992”, the main

regulation covering procurement procedures, claim management responsibilities

Chovichien and Tochaiwat

belong to an “employment supervisory committee” and the construction supervisor,

both consisting of government officials.

For larger projects, the public authority may employ a private consulting firm to act as

a construction supervisor. In such case, the private construction supervisor will have

the same rights and responsibilities as the public construction supervisor. Regarding

claim management, the committee also has power to determine the entitlement and the

amount of compensation the contractor deserves, in case of the contractor’s claim, and

make decision to file claims against the contractor, by using the reports and

information supplied by the construction supervisor.

On the other hand, the components of the private construction project organization,

staff, rights and responsibilities differ from one project to the other because of

different sizes, industry situation, competition, and the employer’s requirement.

However, the typical organization arrangement comprises: 1) project director, 2)

project manager, and 3) various disciplines of project engineers. The project director

is generally responsible for overlooking several projects in the big picture while the

project manager is responsible for executing a specific project to be completed on

time, within the budget, and with acceptable quality. The types and number of the

project engineer crews differ depending on the sizes and details of the projects. In

medium-sized projects, there may be structural, electrical and mechanical engineers.

The power to make decision over claims in private projects generally belongs to

project manager.

From literature, there are several topics left for studying in the claim management

field such as the characteristics of the events which entitle the employer and the

contractor to the rights to file claims against the other party, the performance,

problems, and the guidelines to improve existing claim management systems.

 Construction Claim Management

TERMINOLOGY

In this research, some terms are specifically defined as follows:

1. “Claim-leading event” is defined as the event to which either the employer

or the contractor can refer to in substantiating his right to the claim entitlement.

2. “Frequency of a claim” is defined as the average number of occurrences of a

specific event entitling the employer (both private and public) or the contractor to the

rights to claim in one construction project, no matter whether the entitled party finally

decides to file that claim.

3. “Severity of a claim” is defined as the average magnitude of negative effects

of a specific event entitling the employer or the contractor to the rights to claim in one

construction project.

4. “Impact of a claim” is defined as the average total magnitude of negative

effects occurring from all occurrences of a specific event entitling the employer or the

contractor the rights to claim in one construction project.

5. “Impact Score” is the index used for indicating the level of impact of a

specific event entitling the employers or the contractors to the rights to claim in one

construction project.

6. “Efficiency of a claim management process/ sub-process” was defined as

the ability of the employer or the contractor to perform the related construction claim

activity completely, timely, and with reasonable effort and expense.

7. “Efficiency Index” is the index used for indicating the level of efficiency of

the claim management process or the sub-process.

Chovichien and Tochaiwat

RESEARCH OBJECTIVE AND METHODOLOGY

This research aimed at finding necessary information related to employers’ and the

contractors’ claim management in Thailand: frequency and severity of each type of

claim-leading events, claim management efficiency, associated problems and

recommendations. The research was done by the following steps:

1. After contemplating the level of availabilities of each required data, the

questionnaire survey was then the selected method. There were two sets of

questionnaires: the questionnaires for the employers and the questionnaires for the

contractors. Both of them had four parts of questions. The first part contained the

questions related to the respondents’ data such as their positions, their working

experiences, and their experienced maximum contract values. These data were used

in identifying and screening out. The contract value of 20 million baht, which was

converted from the 500,000 dollar amount recommended by the International

Federation of Consulting Engineers (FIDIC) for separating the small-sized projects

from the medium and the big-sized projects (Booen, 1999), was used as a screening

criterion. The second part contained thirty questions for the contractors or twenty

questions for the employers, which were relevant to the frequency and severity of the

each event entitling them the rights to claim. Each respondent was asked to

approximate the number of occurrences per project for each event in each question.

On the other hand, the severity of each event was assessed by using five-leveled

Likert-Scaled questions (McIver and Carmines, 1981) The third part contained nine

five-leveled Likert-Scaled questions related to the contractors’ or the employers’

abilities to manage their claims, acquired by deliberately grouping each party’s tasks

for each sub-process considering their numbers and their similarities: (1) recognition

and identification of the change, (2) notification of the change, (3) performing
 Construction Claim Management

systematic and accurate documentation of the change, (4) performing analysis of time

and cost and then pricing the change, (5) negotiation about the claim, (6) recognition

and identification of the other party’s change, (7) performing systematic and accurate

documentation of the other party’s change, (8) performing analysis of time and cost

and pricing the other party’s change, and (9) negotiation about the other party’s claim.

Finally, the fourth part was an open-ended question asking the respondents to identify

the problems or the recommendations related to their construction claim management

processes.

2. Three-hundred contractors’ and two-hundred employers’ claim management

staff members were then selected by using the stratified sampling technique, taking

account of their locations (Bangkok, Bangkok Vicinity, Central Part, Northern Part,

North Eastern Part, and Southern Part) for the contractors, and their type of

organizations (Private, or Public) for the employers. From statistical data, there were

452 government organizations, 213 private consultant companies, and 1,018 contractor

companies in the year 2002 (Energy Policy and Planning Office, 2005; AECasia,

2002). The criterion used in classifying the contractors’ locations was adopted from

that of the National Statistical Office, which groups the Eastern Part and the Western

Part of Thailand with the Central Part (National Statistical Office, 2004).

3. The data acquired from the returned questionnaires were then analyzed. The

data acquired from the employers’ organizations were analyzed both by considering

them as a whole and as the separated private employers and public employers.

However, the contractors’ data were analyzed only by considering them entirely

because there was no significant influence from the location to the characteristics of

the contractors and the number of the each sample group will be too small. In

addition, the majority of the contractors had projects nationwide or in more than one
Chovichien and Tochaiwat

region of the country. Each claim’s frequency and severity were calculated from

arithmetic mean of all respondents’ answers. Then, the impact of each claim-leading

event was determined by using its “Impact Score” calculated by its frequency and

severity.

Because both the frequency and the severity of a claim have high levels of effect on

the project, the Impact Score, which takes account of both frequency and severity,

should be used in determining the impact of the claim on a construction project. The

Impact Score for each claim-leading event for the employers and the contractors (as

case may be) can be calculated by multiplying its frequency by its severity, which the

denominator had been changed from 4 to 10 by multiplying with 10/4, as shown in the

following formula:

Impact Score = (10/ 4) x Severity x Frequency (1)

Next, the efficiency of each claim management sub-process was calculated by finding

the arithmetic mean of all respondents’ answers for each question in Part 3. Finally,

the process problems and improvement guidelines acquired from questionnaires were

analyzed.

4. After the analysis process, all results acquired were then discussed and the

research conclusions were then drawn.

THE RETURNED QUESTIONNAIRES

The numbers of questionnaires sent and returned are shown in Table 1.

 Construction Claim Management

Table 1 The numbers of questionnaires sent and returned

No. Description Sent Returned
Number % Number %
1. Employer
1.1 Private 64 32.00 11 29.73
1.2 Public 136 68.00 26 70.27
Total 200 100.00 37 100.00
2. Contractor
2.1 Bangkok 84 28.00 15 46.88
2.2 Bangkok Vicinity 30 10.00 2 6.25
2.3 Central 45 15.00 4 12.50
2.4 Northern 48 16.00 4 12.50
2.5 North Eastern 61 20.33 7 21.88
2.6 Southern 32 10.67 0 0.00
Total 300 100 32 100.00

From Table 1, it can be seen that the compositions of the responsive respondents both

from the employers and the contractors had the proximate compositions of the

questionnaires sent. In the contractor set, the composition of the questionnaires

returned from the contractors in Bangkok Vicinity, Central Part, Northern Part, and

North Eastern were close to that of the contractors nationwide (NSO, 2004).

However, the composition of the Bangkok and the Southern Part were clearly

different from those of the population.

As to the maximum contract value and number of years in handling construction

claims, the respondents’ average maximum contract values and the average number of

years managing claims are shown in Table 2.

Table 2 Average maximum contract values and number of years managing claims
No. Description Experience Max. Contract Value
(Year) Million Baht Million Dollar*
1. Employer
1.1 Private 14.55 2,765.45 70.62
1.2 Public 12.90 733.52 18.73
Overall 13.46 1,432.00 36.57
2. Contractor
Overall 12.94 1,147.65 29.31
Remark: * converted by 39.16, the rate at the time conducting the survey (Bank of Thailand, 2004).
Chovichien and Tochaiwat

The average maximum contract values and the average years managing claims

showed that the respondents, in average, had high experiences and qualifications. The

results of statistical tests showed that respondents who work in the employers’ and the

contractors’ organizations were, on average, not significantly different in the numbers

of years managing claims but were different in the maximum experienced contract

values. The average maximum experienced contract value of the private employers

was significantly higher than those of the public employers and the contractors.

Details of these statistical analyses are shown in Table 3. Note that non-parametric

statistical tests were selected because of their advantage in being free from the

distributions of the variable values.

Table3 Statistical comparison of the employers’ and contractors’ experiences

No. Comparison of Test Significance Meaning
1. The Average Years of Working
1.1 Overall Employers and Mann-Whitney 0.159 No significant
Overall Contractors difference
1.2 Private Employers, Public Kruskal-Wallis 0.081 No significant
Employers, and Contractors difference
2. The Average Maximum
Experienced Contract Value
2.1 Overall Employers and Mann-Whitney 0.038 Significant difference
Overall Contractors
2.2 Private Employers, Public Kruskal-Wallis 0.000 At least one group is
Employers, and Contractors different.
2.3 Private Employers and Mann-Whitney 0.000 Significant difference
Public Employers
2.4 Private Employers and Mann-Whitney 0.000 Significant difference
Contractors
2.5 Public Employers and Mann-Whitney 0.416 No significant
Contractors difference
Remark: All Tests performed at 95% confidence level (α = 0.05)

As to the reliability of the questionnaires, all parts of the questions in questionnaires

had high levels of reliability, as seen from their Cronbach’s Alpha in Table 4. Note

that the Cronbach’s Alpha of close to 1 shows the questionnaires are highly reliable.
 Construction Claim Management

Table4 Reliability of the questionnaires

Cronbach’s Alpha No. of Items
1. Frequency of Claim Event
1.1 Employer 0.969 20
1.2 Contractor 0.782 30
2. Severity of Claim Event
2.1 Employer 0.962 20
2.2 Contractor 0.952 30
3. Efficiency
3.1 Employer 0.942 10
3.2 Contractor 0.948 10

FREQUENCY, SEVERITY, AND IMPACTS OF CLAIM-

LEADING EVENTS

From Table 5, the average frequency of each claim-leading event assessed by the

respondents is shown. The contractors were found to have more chances to claim

against their employers while both types of employers seem to have equal chances, as

seen from the numbers of overall claims (40.06, 36.46, and 94.19). This trend also

applied to contractual claims and ex gratia claims. All parties seemed to have equal

chances to claim against the other party under common law claim basis. Finally, the

rights to claim under quantum meruit basis occurred to contractors more often than

both types of employers. The contractor had the rights to claim under quantum meruit

basis more frequently by the common law basis while both types of the employers had

the opposite trends.

Table 5 Frequency of the events entitling the rights to claim

No. Type of Claims Frequency (Times per Project)
Private Public Contractor
Employer Employer
1. Contractual Claim 21.22 22.53 69.08
2. Common Law Claim 9.70 7.95 9.01
3. Quantum Meruit Claim 8.07 4.96 12.00
4. Ex-gratia Claim 1.07 1.02 4.10
Overall Claims 40.06 36.46 94.19
Chovichien and Tochaiwat

As to the severity of each claim-leading event, Table 6 shows that the claims filed by

the contractor and the employers have different trends. For both types of employers,

common law claim had the highest effect, followed by contractual claim, quantum

meruit claim, and ex gratia claim, respectively. The contractor were effected by ex

gratia claim the most, followed by contractual claim, common law claim and quantum

meruit claim, respectively (common law claim and quantum meruit claim had the

same rank). It should be noted that severity of overall claim was calculated by their

weighted averages, using their frequencies as the weighted.

Table 6 Severity of the events entitling rights to claim

No. Type of Claims Severity (0 to 4)
Private Public Contractor
Employer Employer
1. Contractual Claim 2.30 2.62 2.91
2. Common Law Claim 2.58 2.82 2.57
3. Quantum Meruit Claim 1.90 2.25 2.57
4. Ex-gratia Claim 1.38 2.21 3.14
Overall Claims* 2.26 2.60 2.84
Remark: 1. Data acquired from questionnaire survey
2. * Average from all types of claims, weighted by their frequency rates.

According to Table 7, the impact of each type of claim can be calculated from its

frequency and its severity, according to equation (1). For example, the impact score

of the event entitling the contractor to the rights to claim for the contractual claim is

equaled to (10 / 4) x 2.91 x 69.08 = 502.56. The impact of claim on the project has

the similar trend to the claim frequency. The contractor’s claim-leading events had

higher impact than those of both types of employers for almost all types of claims.

However, their impacts were lower than those of private employers’ and public

employers’ events for common law claims.

 Construction Claim Management

Table 7 Impacts of Claims

No. Type of Claims Impact Score
Private Public Contractor
Employer Employer
1. Contractual Claim 122.02 147.57 502.56
2. Common Law Claim 62.61 56.12 57.91
3. Quantum Meruit Claim 38.42 27.96 77.23
4. Ex-gratia Claim 3.69 5.64 32.19
Overall Claims 226.60 237.15 669.73

Events leading to employers’ claims and contractors’ claims

It can be clearly seen that contractors in the construction projects have to cope with

events impacting his performance more often and with higher average severity than

employers. For this reason, the Impact Scores of contractors are much higher than

those of private and public employers. There are no significant differences in the

frequencies, and the severities of private and public employers’ rights to claim, as

seen from the significance values from Mann-Whitney tests of 0.357 and 0.204

respectively.

Contractual Claim

Compared with other types of claims, the events justifying the rights to claim on

contractual claim basis got the highest frequency and impact. This emphasizes the

importance of good preparation of construction contract documents at the beginning

of the project. The well-prepared construction contract documents can help both the

project employer and the contractor settle the changes that occur before they become

claims or disputes, which consume much more time and costs from both parties to.

Common Law Claim

On the other hand, the common law claims also have high level of effects on the

projects, which can be seen from their frequencies and impacts. This implied that

both parties need not only the deliberate scrutiny of contract documents, but also the
Chovichien and Tochaiwat

familiarity with related laws, regulations, and other standards of works. This helps

them avoid or more efficiently settle the changes that have occurred.

Quantum Meruit Claim

Quantum meruit claims have important effects on the project performance, especially

from the contractor’s point of view. This implied that the contractors always have to

perform the works not clearly specified in the contract documents. An appropriate

way to handle this situation is to establish an efficient claim documentation process,

which will be discussed in the following section.

Ex gratia Claim

The ex gratia claims are the least frequent claims among all four types. They seem to

have low impact to the employers but they play important roles to the contractors.

The highest severity rank among all types of claims assessed by respondents from

contractors’ organizations showed that even though ex gratia claims occur not very

often in the projects, the contractors felt that they have a high level of impact to their

performances. This finding was supported by the fact that there were some

respondents who notified that their project employers sometimes asked them to do

some work out of the original scope of the contracts. These contractors also informed

that they have to follow these requests because of their expectation for prospective

work in the future.

EFFICIENCY OF CLAIM MANAGEMENT PROCESS

The Efficiency Indexes of both employers’ and contractors’ claim management sub-

processes and of the overall process are shown in Table 8. The Efficiency Indexes of

overall active sub-processes and overall defensive sub-processes were derived by

averaging all relevant sub-processes. To find the efficiency index of overall process,
 Construction Claim Management

the index of overall active sub-processes and the index of overall defensive sub-

processes were averaged, using the overall frequency rates of the private employer’s,

public employer’s, and contractor’s claim-leading events from Table 5. Moreover, the

frequency of the events leading the overall employer to the rights to claim can be

assessed by using the ratio of 32.27: 67.73, which is the ratio of Gross Domestic

Product (GDP) originating from construction of private sector and public sector in

2000, respectively (NESDB, 2004). Thus, the frequency of overall employer’s claim-

leading events was (40.06 x 32.27 + 36.46 x 67.73) / 100 = 37.62 and the Efficiency

Index of the contractor’s overall processes was (2.78 x 94.19 + 2.56 x 37.62) / (94.19

+ 37.62) = 2.72

Table 8 Efficiency of the Claim Management Processes

No. Process Private Public Contractor
Employer Employer
1. Active Sub-processes
1.1 Claim Identification 2.73 3.22 2.89
1.2 Claim Notification 3.00 3.18 2.75
1.3 Claim Documentation 3.00 3.09 2.96
1.4 Claim Analysis and Pricing 2.78 3.03 2.82
1.5 Claim Negotiation 2.73 2.90 2.50
Overall Active Processes 2.85 3.08 2.78
2. Defensive Sub-processes
2.1 Claim Identification 2.73 2.95 2.41
2.2 Claim Notification - - -
2.3 Claim Documentation 3.27 3.23 2.57
2.4 Claim Analysis and Pricing 3.09 2.95 2.68
2.5 Claim Negotiation 2.91 2.81 2.57
Overall Defensive Processes 3.00 2.99 2.56
Overall Processes* 2.96 3.02 2.72
Remark: * weighted average using the average numbers of occurrences in one project

Since there is no clear activity that both the employer and the contractor have to

perform in “Claim Notification” defensive sub-process, the efficiencies to perform

defensive claim notification of both of them were not assessed.

Chovichien and Tochaiwat

The Employers’ and Contractors’ Efficiency Index

Among all parties, public employers have the highest Efficiency Index while the

contractors have the lowest. Thai employers, especially public employers, normally

have an advantage over the contractors. The government standard contract gives the

employers dominating power and is silent on the contractors’ rights to claim against

the employers in various circumstances (Chovichien and Tochaiwat, 2003). In

addition, the expectation of the future work is also an important reason that makes

contractors reluctant to claim against the employers.

The public employers and the contractors can well identify changes occurring to their

works, which entitle them to the rights to claim against the other contracting party.

The reason of these contractors’ abilities is that they are so close to project progress

that they can notice the changes happening, while public employers have more power

to access the information of their contractors than private employers. The contractors

also have high ability to analyze and price the changes that occur to them, signified by

the higher relevant Efficiency Indexes than those of the overall active and defensive

processes respectively. While public employers have high efficiency in

documentation of the contractors’ changes, they are not good at analyzing and pricing

the changes because they have less experience with claims and employing claim

consulting services in the public works is uncommon. On the other hand, private

employers have lower ability to collect data, analyze, and price the contractors’

changes than that of their own ones.

Tasks That All Parties Can Perform Well

From Table 8, the active tasks that all parties can perform well (better than the overall

Efficiency Index) comprise (1) notification of change, and (2) systematic and accurate

documentation of claim, while all contractors’ defensive sub-processes have lower

 Construction Claim Management

efficiency than their overall average. The probable reason of this finding is that

contractors are able to become aware of active claims sooner and easier to access the

data required in managing these active claims. However, the respondents rated their

abilities to negotiate the employers’ claims against them better than those against the

employers. This was in accordance with the problem notified by some respondents in

Part 3 of the questionnaire which was about their low bargaining abilities to negotiate

with their employers.

Tasks That All Parties Can Not Perform Well

The activities that all parties can not perform well (worse than their overall average)

and should be improved are: (1) claim negotiation (both active and defensive), and

(2) defensive identification of the change happening to the other party. Moreover,

private employers should develop their abilities to identify, analyze and price the

changes entitling them to the rights to claim against their contractors and public

employers should improve their skills of analyzing and pricing the changes that cause

claim liabilities.

PROBLEMS OF CLAIM MANAGEMENT PROCESS AND

RECOMMENDATIONS

Employers’ Claim Management Process

There were 22 issues identified by the respondents as the problems in employers’

claim management process, as shown in Table 9.

The problems informed by the respondents can be divided into three main categories,

e.g. problems arising from: contracts, employers and employers’ personnel, and

contractors.
Chovichien and Tochaiwat

Table 9 Problems of the employers’ claim management processes

Code Description Private Public Overall
Employer Employer Employer
1. Difference in Contract Interpretation 1 1 2
2. Incomplete Contract Documents 4 2 6
3. Incomplete Variation Order 4 0 4
4. Employer’s Lack of Construction Knowledge 1 1 2
5. Contractor’s Lack of Contract Knowledge 0 3 3
6. Incompetent Contractor 1 0 1
7. Contractor’s Lack of Claim Management Skill 2 0 2
8. Contractor’s Avoidance of Complying the
Warranty Conditions 0 2 2
9. Contractor’s Refusal of Responsibility 0 1 1
10. Impractical Design 0 1 1
11. Engineer’s Delay in Response to Claim 0 1 1
12. Contractor’s Delay in Response to Claim 0 1 1
13. Insufficient Time Allowable for Claim 1 1 2
14. Different Claim Amounts Calculated by Parties 3 1 4
15. Ignorance of Some Contract Provisions by the
Contractor 1 0 1
16. Contractor’s Ignorance of Professional Ethics 0 1 1
17. Bureaucratic Regulations Related to Manage
Claims 0 1 1
18. Lack of Necessary Data 1 1 2
19. Oral or Multi-persons Variation Order 1 0 1
20. Lack of Clear Regulation 0 1 1
21. Corruption 0 2 2
22. Unclear Engineer’s Responsibility 1 0 1
Total Frequency 21 21 42

1. Problems arising from the contracts

The contracts are sometimes incomplete, unclear in specifying each party’s rights and

duties, and lead to different interpretations by different parties. Some contracts allow

insufficient times for both parties to handle their claims.

2. Problems arising from employers and employers’ personnel

Employers themselves seem to be the problem in some situations. They sometimes

intervene or impede the construction process by their lack of construction knowledge,

too much bureaucratic procedure, lack of necessary data, and lack of clear regulations.

Some respondents revealed that they decided to quit claim filing process because of

experiencing repeated instructions to revise their claim reports or requests.

 Construction Claim Management

Furthermore, some respondents suggested the corruption problems in some public

projects.

Not only the employers, but also their personnel can cause problems to the project.

Sometimes designers issue impractical designs which can cause delay or cost overrun

in the construction phase. The engineers may issue an incomplete or oral variation

and delay in response to claim. Because Thai government standard contract is a

contract specifying the rights and duties only of the contracting parties: the employer

and contractor, there is no clear engineer’s rights and responsibilities specified in such

contract. Thus, the engineers in Thai public contracts presumably act as employers’

personnel.

3. Problems arising from contractors

The last group of problems is from contractors. They sometimes cause problems to

the employers’ claim management processes by their lack of contract knowledge,

incompetence, lack of management skills, refusal to comply with the defects liability

warranty or other obligations, delay in response to claims, and ignorance of some

contract provisions and professional ethics.

The recommendations collected from the respondents were related to the improvement

of employers’ claim management process, as shown in Table 10.

There were 15 recommendations collected, which can be grouped into 4 categories:

management, contract and contract management, project procurement, and

professional ethics.

1. Management

Employers should enhance effective project management in their organizations by

establishing competent data management, avoiding unnecessary claims, deliberately

Chovichien and Tochaiwat

controlling payments, establishing potential coordination, complying with related laws

and regulations, and enhancing project flexibility.

Table 10 Recommendations to improve the employers’ claim management process

Code Description Private Public Overall
Employer Employer Employer
1. Establishing Effective Data Management System 4 1 5
2. Avoidance of Unnecessary Claim 2 0 2
3. Preparing Complete Contract Documents 6 3 9
4. Deliberate Controlling of Payment 0 1 1
5. Maintaining Professional Ethics 1 2 3
6. Establishing Effective Coordination 0 2 2
7. Specifying Appropriate Defects Liability Period 1 0 1
8. Ordering the Clear Variation 1 0 1
9. Complying with the Related Regulations 0 1 1
10. Demanding the Contractor to Propose Details of the
Construction Method before Performing his Work 1 0 1
11. Analyzing the Outcome before Issuing a Variation Order 1 0 1
12. Selecting the Competent Contractor 2 0 2
13. Selecting the Competent Engineer 1 0 1
14. Enhancing the Project Flexibility 1 0 1
15. Specifying the Reasonable Reference Price 1 0 1
Total Frequency 22 10 32

2. Contract and Contract Management

Good contracts and contract management also have great roles in the improvement.

Project contract documents should be complete and appropriate specifying all

provisions concerned. Employers should demand contractors to propose construction

method and technique, which he will be adopted in executing works, before allowing

contractors to begin works. Before issuing variation orders, the employers or the

engineers should analyze their consequences. Variation orders should be clear and

complete with all necessary information.

3. Project Procurement

As to the project procurement process, employers should select qualified persons to be

project parties: contractors and engineers. This strategy will help reducing several
 Construction Claim Management

consequential problems to the projects. The reference price, especially which used in

the public procurement procedure, should be correct and reasonable.

4. Professional Ethics

Finally, every party involved in the project should maintain professional ethics. The

employer and the contractor should be fair to each other. In addition, the engineers

should be impartial in performing certain professional obligations, i.e. making

determination.

Contractors’ Claim Management Processes

There are 10 problems and 7 recommendations related to contractors’ claim

management processes collected from the questionnaires, as shown in Table 11 and

Table 12, respectively.

Table 11 Problems of the contractors’ claim management processes

Code Description Frequency

1. Incomplete Contract Documents 3

2. Much Higher Bargaining Power of the Employers 3
3. Delay of the Engineer Response 3
4. Employers’ Lack of Construction Knowledge 2
5. Partiality of the Engineer 2
6. Contractors’ Lack of Contract Management Skill 1
7. Insufficient Contractual Compensation 1
8. Change Order without Clear Agreement 1
9. Bureaucratic Regulations Related to Manage 1
Claims of the Employer’s Organization
10. Corruption 1
Total Frequency 18

Table 12 Recommendations to improve the contractors’ claim management processes

Code Description Frequency

1. Deliberately Scrutinize the Contract Documents 2

2. Enhance the Cooperative Atmosphere 2
3. Well Collect the Required Data 2
4. Promptly Notify the Employer the Entitlement to Claim 1
5. Sign Separate Contract for the Large-Amounted Variation Order 1
6. Improve the Related Law, Regulation, and Standard 1
7. Establish the Claim Settlement Organization 1
Total Frequency 10
Chovichien and Tochaiwat

From analyzing the collected problems, it was found that there are three important

causes of the problems: engineers, employers and contract documents.

1. Problems Arising from Engineers

The engineer plays key roles in a construction project. He is the employer’s

representative while at the same time he is regarded as the independent professional

(Jervis, 1988). The problem of the engineer’s partiality always occurs when the

engineer’s impartial performance will damage his employer, who pays the

remuneration to him. Engineers have the power to make determination and to issue

variation orders. Sometimes, contractors face difficulties because of engineers’ late or

unilateral exercise of these powers.

2. The Problems Arising from Employers

Between the parties, employers seem to be prevailing over contractors. The

contractors in Thailand are likely to follow employers’ or engineers’ instructions, even

if they are incorrect or unfair, because of their concern regarding future contract

acquisition. Employers who lack the construction knowledge or possess too much

bureaucratic contract management process, especially the government authorities, can

put contractors in hard situations. Furthermore, a respondent referred to the

corruption as a serious problem of Thailand construction industry.

3. The Problem Arising from the Contract Documents

Again, the construction contracts have great contribution to the contractors’

performance in construction. Incomplete contract documents lead to claims and

disputes. Some contracts can not fairly allocate risks between employers and the

contractors. In addition, some contractors accepted that they do not have enough

contract management skill.

 Construction Claim Management

4. Recommendation

As to the recommendations, contractors can increase claim management efficiency by

scrutinizing the contract provisions, enhancing the cooperative atmosphere among all

parties, establishing good claim management data collection and documentation,

issuing prompt notification to employers to the events that change contractors’ status,

and signing another contract whenever the variation orders contains high value items.

Some contractors suggest that the government help them by improving relevant laws,

regulations and standards and establishing the claim settlement organization.

CONCLUSION

The highest frequency and impact of events justifying the rights to claim on

contractual claim basis emphasized the importance of good preparation of the

construction contract at the beginning of the project. Common law claim also has

high level of effects on the project, which can be seen from its frequency and impact.

This implied that both parties need not only the deliberate scrutiny of contract

documents, but also the familiarity with laws, regulations, and other standards of

works related to the work. Ex gratia claims seem to have low impact on the

employers but they play important role to contractors. Even though ex gratia claims

occurred not very often in the project, contractors felt that it has a high level of impact

to their performances. Among all parties, public employers have the highest ability to

manage claims while contractors have the lowest ability. Three main groups of the

problems: problems related to employers, engineers, and contract documents were

studied in the research. In addition, the recommendations were also addressed.

The frequency, severity, and impact of each type of claims can help both employers

and contractors realize the priorities of claims they should pay attention to. The
Chovichien and Tochaiwat

contractor’s claim management Efficiency Index of each sub-process can inform

contractors which sub-processes are their strong points, which should be maintained,

and weak points, which should be improved. Employers and contractors can use the

problems and recommendations presented as a checklist to analyze and develop their

performances. An efficient claim management process established within their

organizations can enhance the achievement of their projects.

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