Project Claim Management

Oleh
Mochamad Rifqi
 The Project Management Body of Knowledge
The Project Management Institute’s Body
of Knowledge – PMBOK – is perhaps the
most widely acknowledged and popular
project management standard in
existence. It is the basis for the PMI’s
coveted PMP certification examinations.

Presently in its fifth version (2012),

PMBOK offers a comprehensive and
sophisticated best practices and process-
based standard which can be applied to
different categories of projects. At the
heart of the PMBOK are the ten areas of
knowledge and five process groups which
find application over the project life-cycle.
 The 10 PMBOK Areas & 5 Process Groups

Integration Management

Initiation
Project Management Knowledge Areas (PMBOK)

Scope Management
4
7
Time Management P
R
O
Planning
Cost Management
C
ES
Quality Management SE
S Implementation
Human Resource Management

Communication Management
Closure
Risk Management

Monitoring, Evaluation
Procurement Management
& Control
Stakeholder Management
 Construction

The way in which something is built or

put together.
The Project Management Body of Knowledge
Construction Extension

While the PMBOK Guide provides a

generic foundation for managing projects,
this extension addresses the specific
practices found in construction projects.

This extension to the PMBOK describes

the generally accepted principles for
construction projects that are not common
to all project types.

Four more Knowledge Areas are added to

this Construction Extension in addition to
ten common Knowledge Areas of project
management.
The Project Management Body of Knowledge
Construction Extension

Project Safety Management

Project Environmental Management

Project Financial Management

Project Claim Management

 PMBOK Area (Construction Extension)
Project Claim Management

Claim management describes the processes required to

prevent construction claims, to mitigate the effects of those that
do occur, and to handle claims quickly and
effectively.

Processes covered under Project Claim Management are

Claim Identification, Claim Quantification, Claim Prevention &
Claim Resolution.
 PMBOK Area (Construction Extension)
Project Claim Management

2 perspective view of claim:

- Claimant :the party making the claim
- Defendant: the party defending against the claim

Claim is a demand for something due or believed to be due,

usually as a result of an action direction, change order against
the agreed terms and conditions of a Contract and that can’t be
resolved between the Parties.

Demand:
- Extension of time; and/or
- Payment compensation
 PMBOK Area (Construction Extension)
Project Claim Management

Claim vs Change
(dis-agreement)

Change
- If agreement is reached, then claim disappears & become a
change
Claim
- Resolved through negotiation, mediation, arbitration and
litigation

Party making Claim

- Contractor to Owner
- Subcontractor vs Contractor,
- Owner to Contractor
PMBOK Area (Construction Extension)
Project Claim Management
 PMBOK Area (Construction Extension)
Project Claim Management

Claim Identification

Inputs: Tools: Outputs:

- Project Scope - Contract - Statement of claim
- Contract - Expert Judgement - Pending Claim file
- Description of - Documentation
Claim
- Project Schedule
 PMBOK Area (Construction Extension)
Project Claim Management

Claim Identification
Inputs:
- Project Scope: as set forth in the contract, incl. dwg & spec.

- Contract: conditions related to the works, changes, schedule,

submittal, notice requirement

- Description of Claim: describe work outside the contract, where &

when is occurred, why not covered in the scope, contract
reference to support the claim, project schedule & additional time
to perform extra work, good documentation (communication
management)

- Project Schedule: claim for additional time

 PMBOK Area (Construction Extension)
Project Claim Management

Claim Identification

Clauses of Contractor’s opportunities for Claim

Clause Description EoT Cost Profit
1.9 Delayed Drawings or Instructions √ √ √
2.1 Right of Access to the Site √ √ √
4.7 Setting out √ √ √
4.12 Unforeseeable physical conditions √ √
4.24 Fossils √ √
7.4 Testing √ √ √
8.4 Extension of Time √
8.5 Delay caused by Authority √
8.9 Consequences of Suspension √ √
10.2 Taking over parts of the Works √ √ √
10.3 Interference with Tests on Completion √ √ √
11.8 Contractor to search √ √ √
13.7 Adjustments for Changes in Legislation √ √
14.8 Delayed Payment √
16.1 Contractor’s Entitlement to Suspend Work √ √ √
16.4 Payment on Termination √ √
17.1 Indemnities √
17.4 Consequences of Employer’s Risks √ √ √
19.4 Consequences of Force Majeure √ √
20.1 Contractor’s Claim √ √ √
 PMBOK Area (Construction Extension)
Project Claim Management

Claim Identification
Tools:
- Contract: conditions related to changes and notice provisions

- Expert Judgment: consensus among several people as to whether

claim is acceptable, or expert opinion / legal advice on expensive
claim

- Documentations: proper and supportive documentation, photos,

videos, drawings, instructions, correspondences, etc
(Communication management)
 PMBOK Area (Construction Extension)
Project Claim Management

Claim Identification
Outputs:
- Statement of claim: complete statement of claim in accordance
with the procedures in the contract

- Pending claim file: keep a potential claims and all related

documents: statement of claim, correspondence and contract
reference
 PMBOK Area (Construction Extension)
Project Claim Management

Claim Quantification

Inputs: Tools: Outputs:

- Statement of Claim - Quantity Measurement - Direct & Indirect costs
- Project Schedule - Cost Estimation - Time Extension
- Contract Law - Documentation
Precedent - Fully documented
- Schedule Analysis claim
 PMBOK Area (Construction Extension)
Project Claim Management

Claim Quantification
Inputs:
- Statement of claim: review statement of claim, particularly to
contract conditions related to claimable cost items. Jurisdiction
law regarding cost compensation

- Project shcedule: to demonstrate the claim impact

 PMBOK Area (Construction Extension)
Project Claim Management

Claim Quantification
Tools:
- Quantity Measurement: quantification of claimed work items,
including all resources involved.

- Cost estimations: direct and indirect costs, loss opportunity costs

- Contract law precedence: relevant case law for reference to claim

and evaluation; & legal advice

- Schedule Analysis : compare as planned schedule vs as built

schedule
 PMBOK Area (Construction Extension)
Project Claim Management

Claim Quantification
Outputs:
- Direct and indirect costs: report of the costs or damages resulting
from the claimed activity

- Time extension: result from schedule analysis

- Documentation: proper data to support quantity calculation and

cost estimation\

- Fully documented claim: a complete documents that presents

quantification of cost impact, time extension request and all
supporting documentation, to be submitted according to the
procedure stated in the conditions of contract.
 PMBOK Area (Construction Extension)
Project Claim Management

Claim Prevention

Inputs: Tools: Outputs:

- Project Management Plan - Clarity of language - Changes
- Contract - Schedule - Stakeholders respect and
- Risk management - Constructability Review acknowledgement
- Request For Information
Plan
- Integrated Procedure
Change
- Partnering
Control
- Prequalification process
- Claim prevention techniques
- Joint recognition of changes
- Documentation
 PMBOK Area (Construction Extension)
Project Claim Management

Claim Prevention
Inputs:
- Project Management Plan: clear scope of work, reasonable
schedule, appropriate construction method, acceptable risk

- Contract: fairly drawn contract terms

- Risk management Plan: allocate the risk between the Parties to

minimize claims

- Integrated change control: managing changes.

 PMBOK Area (Construction Extension)
Project Claim Management

Claim Prevention
Tools:
- Clarity of Language: Tender/Contract document should be written in clear
and unambiguous. Pre-tender meeting to clarify document

- Schedule: requirement for cost, schedule, scope, and spec should be

clearly stated, reasonable and agreed.

- Constructability review: this review can avoid errors and unnecessary

changes in construction method

- Request for Information (RFI) Procedure: Clause/procedure stating a

reasonable time for owner approval, RFI, etc. Reasonable time for
submittal, etc

- Partnering: commitment of the parties to make the project a success

 PMBOK Area (Construction Extension)
Project Claim Management

Claim Prevention
Tools (cont’d):
- Prequalification process: to find a qualified contractors

- Claim Prevention Techniques: during the project & prior claim process;
DRB, Independent neutral, Intervention partnering/facilitator, mediation.

- Joint recognition of claim: a clear change order process has to be

incorporated in the contract to manage the changes.

- Documentation: good documentation (see Performance reporting) is

essential to timely and successful claim resolution.
 PMBOK Area (Construction Extension)
Project Claim Management

Claim Prevention
Outputs:
- Changes: potential claims that are agreed upon, are turned into
changes, then eliminating the claim.

- Stakeholder respect and akcnowledment: stakeholder who have

successfully prevent potential claims generally appreciate and
respect each other. This can lead to subsequent collaborative
working relationship in the future project.
 PMBOK Area (Construction Extension)
Project Claim Management

Claim Resolution

Inputs: Tools: Outputs:

- Statement of Claim - Negotiation - Claim resolved
- Claim Quantification - ADR - Contract closed
- Contract - Litigation - Equitable Contract
- Fully documented - Estimated cost of Adjustment
certified claim resolution
- Expert Knowledge - Claim assessments; or
- Expert reports
 PMBOK Area (Construction Extension)
Project Claim Management

Claim Resolution
Inputs:
- Statement of claim: see 16.1

- Claim Quantification: see 16.2

- Contract: provision for resolution

- Expert Knowledge: advice from expert in construction claims.

 PMBOK Area (Construction Extension)
Project Claim Management

Claim Resolution
Tools and Techniques:
- Negotiation: first step trying to find an equitable solution

- ADR (mediation, arbitration): non litigation resolution.

- Litigation: last resort, when earliest attempts at settlement have failed

- Estimated Cost of resolution: estimate of this cost can help in deciding

just how important it is to keep pursuing a claim

- Claim Assessments or Expert Reports: report of cost, time and business

impact of the potential claim. Consequential impact on other activities as a
result of the extra and delayed work
 PMBOK Area (Construction Extension)
Project Claim Management

Claim Resolution
Outputs:
- Claim resolved: claim is finally settled.

- Contract Closed: the resolution of dispute enables the contract to

be closed

- Equitable contract adjustment: adjustment to the contract amount

is made as a result of the monetary settlement
 PMBOK Area (Construction Extension)
Project Claim Management

Claim management:
-to prevent construction claims;
-to mitigate the effects of claims; and
-to handle claims quickly and effectively.

Processes:
- Claim Identification;
- Claim Quantification;
- Claim Prevention; &
- Claim Resolution.
THANK YOU!