Claims Management and Dispute Resolution Dr. Nabil M Shehadeh Dr. Nabil Shehadeh 1Section 1: Section 2: Section 3: Section 4: Section 6: Section 7: Coutse Programme Claims ~ What they are and why they occur Claims Types Claims and Contract Clauses Claims Preparation and Documentation Claims Avoidance Claims Settlement and Dispute Resolution Dr. Nabil ShehadehManaging Claims — What does it mean ? e What is a contractual claim? ¢ What are methods/means that you know ate available worldwide to resolve disputes / claims? e List three FIDIC clauses under which the contractor can claim extension of time? * Contractor claims extension of time due to variation order. Please list the information that you expect to find in a contractor claim submission? Dr. Nabil Shehadeh 3Definition of Claim Claim is a general term for the assertion of a right to money, property or a remedy. This course is concerned with claims for additional money or time which arise under the ordinary contract provisions. Dr. Nabil ShehadehWhat they are and why they occuf Claims are generally made by the Parties due to the following circumstances : ° Entitlement to an extension of time ¢ Entitlement to additional payments e Entitlement to the recovery of costs © Non fulfillment by one party of an obligation under the contract * Additional payments due to legal entitlement Dr. Nabil ShehadehOverview of Construction Claims Once they arise, claims tend to take on a life of their own * ‘They generally produce a “paper wat” that can destroy petsonal relationships on the project ° The resulting disputes may continuously escalate to the point where all involved parties are irrational ¢ They result in increased costs and loss of control over the outcome ° Involved personnel waste time preparing for and participating in litigation or ADR Dr. Nabil ShehadehConstruction Claims Process Model 2 (Gorton) ° Stagel: a Problem * Stage2: a Disagreement ° Stage 3: a Dispute ° Stage 4: a Conflict ° Stage 5: Litigation Dr. Nabil ShehadehClaims ‘Types Dr. Nabil ShehadehClaims Types 1. Constructive Changes by Owner 2. Differing Site Conditions 3. Delays 4. Defective Specifications Dr. Nabil ShehadehConstructive Changes by Owner Definition Action or inaction by the owner constitutes an order Owner has received a benefit Actual performance exceeds minimum contract standards Actually increased the cost of the work Dyes ° Extra work Disruption of work Acceleration of work Over inspection Dr. Nabil Shehadeh 10Constructive Changes by Owner Extra Work ° ‘The owner requires work that is not in the contract ° The owner misinterptets contract plans and specifications - response to an RFT - rejections (of an item) on submittals - rejection of submittals - orders of authorized representatives Dr. Nabil Shehadeh 11Constructive Changes by Owner Disruption of work * Constructor’s plan for performance is altered ° Contractor increases work hours, ctew, or equipment * Slow response to RFI’s and submittals Dr. Nabil Shehadeh 12Constructive Changes by Owner Acceleration of Work * Contractor is required to complete work faster than planned * Extra work orders are issued, but Owner does not increase contract performance period * Requests for additional time are denied Dr. Nabil Shehadeh 13Constructive Changes by Owner Over Inspection Owner exceeds the bounds of its right to inspect Tolerances ate enforced mote strictly than the contract requites Inspectors ditect performance of the work in a specific way Dr. Nabil Shehadeh 14Differing Site Conditions Policy: Best Practice * Intended to reduce bid contingencies * Allocates the tisk of site conditions to the Owner * Encourages bidders to rely on the information given Dr. Nabil Shehadeh 15Differing Site Conditions Focus is on “contract indications” Actual Conditions differ materially from those indicated, contract documents indicate subsurface ot physical conditions different from those encountered on site Examples : - presence of rock ot boulders in an excavation where none ate shown - location of underground utilities are not where shown - elevation of ground is higher than shown - existence of a sub floor requiring demolition was not shown Dr. Nabil Shehadeh 16Delays Site Access * Owner fails to obtain building permits * Owner fails to obtain a right of way * Owner fails to coordinate with utility companies during project design Approval of Submittals ° Late approval * Unreasonable rejection Adverse Weather ° The weather is adverse ¢ The weather is unusual for the location and time of year Dr. Nabil Shehadeh 17Delays Changes ° Delayed issuance of a change order * Impact of added work on the construction schedule Suspension of Work * Stop work order ° Delay in inspection * Delay in furnishing owner-furnished property * Slow RFI response Impacts ¢ Unfavourable season ° Missed manufacturing schedule * Escalation of contractor's cost Dr. Nabil Shehadeh 18Defective Specifications Errors & Omissions * The contractor requests additional information or clarification * Contract provisions are found to be incorrect ¢ Answers to the requests cannot found within the contract Defective Design * Elements of the project do not function as desired * The contractor has performed in accordance with the contract Dr. Nabil Shehadeh 19Claims and Contract Clauses Dr. Nabil Shehadeh 20Claims and Contract Clauses Legal basis of claims There are four bases on which claims may be made in law: Contractual Claims: Under the contract conditions themselves Land Law (Common Law) Claims: For breach of contract, when the contractor’s remedy will be damages calculated in accordance with Land Law principles. Negligence (Tort) Claims: For breach of a duty arising at common law in tort. This is a general liability, and in principle liability often depends on the defendant having, by act or omission, acted in breach of a legal duty imposed on him by Jaw, so infringing a legal right vested in the claimant and causing him foreseeable damage. Again, the remedy is normally an awatd of money damages as compensation for the damage done Quantum Meruit Claims: On a quasi-contractual or restitutionary basis. Claims without Legal Basis are called Ex Gratia Claims Dr. Nabil Shehadeh 21The basis of contractual claims Work cattied out as described in, or as reasonably to be infected from, the contract documents provides no basis for a claim. The contractor is deemed in law to be experienced and hence to be able to foresee, at the time of making the contract, what the average experienced contractor could foresee as being likely to be required in the performance of that contract, Thus it follows that in order to establish a contractual claim the contractor must be able to show that the work he was required to do, or the conditions under which he was required to do it, differed in some way from what he expected, or should have expected, at the making the contract. Dr. Nabil Shehadeh 22- Contractual Claims Contract Clauses _ Clause 5.2 Documents mutually explanatory “The Several documents forming the Contract are to be taken as mutually explanatory of one another, but in case of anabiguities or discrepancies the same shall be explained and adjusted by the Engineer who shall thereupon issue to the Contractor instructions thereon and is such event, unless othernase provided in the Contract, the priority of the documents forming the Contract shall be as follows: (1) The Contract Agreement; (2) The Letter of Acceptance; (3) The Tender (4) Part II of these Conditions; (5) Part I of these Conditions; and (6) Any other document forming part of the Contract.” Dr. Nabil Shehadeh 23Contractual Claims Contract Clauses - Clause 6.3 Late issue of further drawings and instructions “Th by reason of any failure or inability of the Exngineer to issue, within a time reasonable in all the circumstances, any drawings, specification or instruction for which notice has been given by the Contractor in accordance with Sub-Clause 6.3, the Contractor suffers delay and/or incurs costs then the Engineer shall, afier due consultation with the Employer and the Contractor, determine: (4) any extension of time to which the Contractor is entitled under Clause 44, and (2) the amount of such costs, whith shall be added to the Contract Price, and shall notify the Contractor accordingly, with a copy to the Employer.” Dr. Nabil Shehadeh 24Contractual Claims Contract Clauses - Clause 11.1 Inspection of Site ‘The Employer shall have made available to the Contractor, before the submission by the Contractor of the Tender, such data on hydrological and sub-surface conditions as have been obtained by or on behalf of the Employer from investigations undertaken relevant to the Works but the Contractor shall be responsible for his own interpretation thereof.” - Clause 12.2 Adverse physical conditions and artificial obstructions “Tf, however, during the execution of the works the Contractor encounters physical obstructions or physical conditions, other than climatic conditions on the Site, which obstruction or conditions were, in his opinion, not foreseeable by an experienced Contractor, the Contractor shall forthwith give notice “ Dr. Nabil Shehadeh 25Contractual Claims Contract Clauses - Clause 13.1 Satisfaction of the engineer “Untess it is legally or physically impossible, the Contractor shall execute and complete the Works and remedy any defects therein in strict accordance with the Contract to the satisfaction of the Engineer. The Contractor shall comply with and adhere strictly to the Engineer ‘s instructions on any matter, whether mentioned in the Contract or not, touching or concerning the Works. The Contractor shall take instructions only from the Engineer “ Dr. Nabil Shehadeh 26Contractual Claims Contract Clauses - Clause 14.1 Construction programme bs “Prior to the signing of the Contract, but in any case not later than 28 days after the date of Letter of Acceptance, the Contractor shall submit to the Eingineer for his consent, with a copy to the Employer, a programme, in such form and detail as the Engineer shall reasonably prescribe, which shall contain, inter alia: The order in which the Contractor proposes to carry out the Works; The time limits within which submission and approval of any drawings and any Specifications as the case may be are required; A general description of the arrangements and methods which the Contractor proposes to adopt Jor carrying out the Works; and Details of the resources required to achieve the proposed programme. “ Dr. Nabil Shehadeh 27Contractual Claims Contract Clauses - Clause 40.1 Suspension of work ‘The Contractor shall, on the instructions of the Engineer, suspend the progress of the Works or any part thereof for such time and in such manner as the Engineer may consider necessary.” ‘Unless such suspension is otherwise provided for in the Contract, or necessary by reason of some default of or breach of Contract by the Contractor or for which he is responsible, or necessary by reason of climatic conditions on the Site, or necessary for the proper execution of the Works or Jor the safety of the Works or any part thereof (save to the extent that such necessity arises from any act or default by the Engineer or the Exeployer or from any of the risks defined in Sub-Clause 20.4), Sub-Clause 40.2 shall apply” (for EoT and Costs). Dr. Nabil Shehadeh 28Contractual Claims Contract Clauses - Clause 42.1 Possession of site ‘Save insofar as the Contract may prescribe: a. The extent of portions of the Site of which the Contractor is to be given possession from time to time, and b. The order in which such portions shall be made available to the Contractor and subject to any requirement in the Contract as to the order in which the Works shall be executed, the Employer will, with the Engineer ‘s notice to commence the Works, give to the Contractor possession of a. so much of the Site, and b. such access as, in accordance with the contract, ts to be provided by the Employer as may be required to enable the Contractor to commence and proceed with the programme referred to in Clause 14” Contractor shall not be entitled to any additional payment for taking such steps.” Dr. Nabil Shehadeh 29Contractual Claims Contract Clauses Clause 46.1 Rate of progress “Tf for any reason, which does not entitle the Contractor to an extension of time, the rate to progress of the Works or any Section is at any time, in the opinion of the Engineer, too slow to comply with the Time for Conapletion, whether by reference to the Programme submitted pursuant Clause 14 or otherwise, the Engineer shall so notify the Contractor who shall thereupon take such steps as are necessary, Subject to the consent of the Engineer, to expedite progress so as to comply with the Time for Completion. The Contractor shall not be entitled to any additional payment for taking such steps.” Dr. Nabil ShehadehContractual Claims Contract Clauses 7 Clause 49.2 Period of maintenance: works of repair etc. “To the extend that the Works shall, at or as soon as practicable after the expiration of the Defects Liability Period, be delivered to the Employer in the condition required by the Contract, fair wear and tear excepted, to the satisfaction of the Engineer, the Contractor shall: complete the work, if any, outstanding on the date stated in the Taking Over Certificate as soon as practicable after such date and execute all such work of amendment, reconstruction, and remedying defects, shrinkage or other faults as the Engineer may, during the Defects Liability Period or within 14 days after its expiration, as a result of an inspection made by or on behalf of the Engineer prior to its expiration, instruct the Contractor to executit. Nabil Shehadeh 31Contractual Claims Contract Clauses Clause 52.1 Valuation of Variations All variations referred to in Clause 51 and any additions to or deductions from the Contract Price which are required to be determined in accordance with Clause 52 (for the purposes of this Clause referred to as “varied work”) shall be valued by the Engineer as follows: 1. at the rates and prices set out in the Contract if, in the opinion of the Engineer, the same shall be applicable, 2. if the Contract does not contain any rates or prices applicable to the varied work, the rates and prices in the Contract shall be used as the basis for valuation so far as may be reasonable, 3. failing which, after due consultation by the Engineer with the Employer and the Contractor, suitable rates or prices shall be agreed upon between the Engineer and the Contractor, 4. in the event of disagreement the Engineer shall fixe such rates or prices as are, in his opinion, appropriate and shall notify the Contractor accordingly, with a copy to the Employer. Dr. Nabil Shehadeh 32Contractual Claims Contract Clauses - Clause 58.2 Provisional sums and nominated subcontractors “In respect of every Provisional Sum the Engineer shall have authority to issue instructions for the executions of work or for the supply of goods, materials, Plant or services by: a). the Contractor, in which case the Contractor shall be entitled to an amount equal to the value thereof determined in accordance with Clause 52, b) a nominated Subcontractor, as hereinafter defined, in which case the sum to be paid to the Contractor therefor shall be determined and paid in accordance with Sub-Clause 59.4” Dr. Nabil Shehadeh 33Contractual Claims Contract Clauses - Clause 59. 2 Nominated sub-contractors: objections to nomination “The Contractor shall not be required by the Employer or the Engineer, or be deemed to be under any obligation, to employ any nominated Subcontractor against whom the Contractor may raise reasonable objection, or who declines to enter into a subcontract with the Contractor” Dr. Nabil Shehadeh 34Contractual Claims Contract Clauses Clause 53.1 Notice of Claims “Uf the Contractor intends to claim any additional payment pursuant to any clause of these conditions or otherwise, he shall give notice of his intention to the Engineer, with a copy to the Employer, within 28 days after the event giving rise to the claim has first arisen.” Dr. Nabil Shehadeh 35Contractual Claims Contract Clauses - Clause 53.2 Contemporary Records “the Contractor shall Reep such contemporary records as may reasonably be necessary to support any claina he may subsequently wish to make. Without necessarily admitting the Employer's liability, the Engineer shall, on receipt of a notice under Sub-Clause 53.1, inspect such contemporary records as are reasonable and may be material to the claive of which notice has been given. The Contractor shall permit the Engineer to inspect all records Rept pursuant to this Sub-Clause and shall supply hime with copies thereof as and when the Engineer so instructs.” Dr. Nabil Shehadeh 36Contractual Claims Contract Clauses - Clause 53.3 Substantiation of Claims “the Contractor shall send to the Engineer an account giving detailed particulars of the amount claimed and the grounds upon which the claim is based. Where the event giving rise to the claim has a continuing effect, such account shall be considered to be an interim account and the Contractor shall, at such intervals as the Engineer may reasonably require, send further interim accounts giving the accumulated amount of the claim and any Jurther grounds upon which it is based.” Dr. Nabil Shehadeh 37Contractual Claims Contract | Clauses - Clause 53.4 Failure to Comply “Tf the Contractor fails to comply with any of the provisions of this Clause in respect of any claim which be seeks to make, other than a claim under clause 12, bis entitlement to payment in respect thereof shall not exceed such amount as the Engineer or any arbitrator or arbitrators appointed pursuant to Sub-Clause 67.3 assessing the claim considers to be verified by contemporary records (whether or not such records were brought to the Engineer's notice as required under Sub- Clause 53.2 and 53.3). In the case of claims under Clause 12, failure by the Contractor to comply with any of the provisions of this clause shall invalidate such claims.” Dr. Nabil Shehadeh 38Table 5.1 — Grounds for extension of time GROUND FOR EXTENSION OF TIME CLAUSE Variations ordered under clause 51(1) Increased quantities teferred to in clause 51) Exceptional adverse weather conditions 44(1) Other special citcumstances of any kind whatsoever 44(1) Engineer’s failure to issue any necessary drawings or instruction 73) Adverse physical conditions or artificial obstruction 128) Instructions under clauses 5 or 13(1) 13) Engineer’s delay in giving consent to contractor’s proposed 14(6) methods of construction etc. Facilities for other contractors 31(2) Suspension of progress of the works 40(1) Failure to give sufficient possession of site 42(1) Delay consequent upon forfeiture of a nominated sub-contract 59B(4)(b) Dr. Nabil Shehadeh 39Claims Preparation and Documentation Dr. Nabil ShehadehClaims Preparation and Documentation Most of the submissions lack a lot of documents, programmes, and professional analysis Substandard format and structure of such submissions makes it difficult to follow Logically organized claim, with sufficient accompanying details and explanation as to the legal and factual basis of the claim and of the calculation of the alleged damages so as to permit proper review and evaluation. ‘The standard and volume of details required will largely depend on a number of factors, including the contractor and consultant’s standards, project nature and details and the nature and complexity of the claim Dr. Nabil Shehadeh 41Evidence Although the contracts provide for the making of financial claims by the contractor and for their settlement under the contract provisions, it is for the contractor to substantiate his claim by means of proper evidence so as to demonstrate and prove to the satisfaction of the engineer his entitlement to the amount claimed. “He who asserts must prove’ is a basic legal maxim, and the standard of proof is that on the balance of probabilities. Dr. Nabil Shehadeh 42Facts The actual facts on site must be considered to determine whether the occurrence affected any operation critical to the contractot’s completion time. It is not enough for the contractor to show that, according to his plans as set out in a progress which is relevant.’ Dr. Nabil Shehadeh 43Claims Preparation and Documentation The following are guidelines for improving the structure and format of the claims reports. These guidelines are split into 2 main sections: CONTENTS and FORMAT. 1. CONTENT 1.1 Tender Details "Copies of the following documents related to each claims heading =Cost breakdown for tender rates. Clarifications and Addenda. ™Details of any Discounts 1.2 Contract Documents *Copies of parts/pages of contract documents related to each claim heading = Drawings (showing number and revision) 3 Specification (showing reference number and page number) Dr. Nabil Shehadeh 44Claims Preparation and Documentation 1.3 Programme ® Contractual Programme (tendet stage). ® Detailed Base Programme-Clause 14 (post contract award). = Programme Revisions = Conditions on Programme, listed by Contractor " Consultant's Report on the Detailed Base programme = Minutes of meeting and correspondences telated to the base programme and any revisions. ® Schedule of Dates (relevant to the contract or claims) ® Progress of Work - Planned and Actual (S-Curve) = As-built CPM Programme. Dr. Nabil Shehadeh 45Claims Preparation and Documentation 1.4 Resources . Site Overhead - Planned and Actual: identification of site resources associated with a particular event (monthly and cumulative S-Curve) . Project Direct Resources (equipment, labour, material) - Planned and Actual (monthly and cumulative S-Curve) " Contract Cash Flow - Planned and Actual (monthly and cumulative S-Curve) . Records of any delays in the receipt of materials, equipment and labours. a Production Rates Comparison: between planned production rates and actual production rates. 1.5 Contractual Background . List of all Contract Clauses that relates to each claims headings. " Exxtracts of all relevant Conditions of Contract clauses. This to include clauses that both the contractor and consultant referred to in their argument. . Details of any non-standard contract clauses. " Cause and Exffect Analysis ® Well-defined Claims Heading. e.g. Disruption, Delay, Acceleration, etc. 2 Compliance with the Claims Notice. » Compliance with all Government Regulations. Dr. Nabil Shehadeh 46Claims Preparation and Documentation 1.6 Documentation = Chronological Record of Correspondence: including date issued and date received. = Copies of Relevant Correspondence in a Chronological Order = Drawings Registration Log: to include title of drawings, revisions etc 8 Technical Submittals Log: to include the description of each submittal, date of submission, date of approvals. = Details of all Nowices to Claim and Verbal! Written Instructions. Dr. Nabil Shehadeh 47Claims Preparation and Documentation 1.6 Documentation (cont) " Copies of any of the following records that is relevant to the case: “Sep ao op — re Resources (labour and plant) Allocation . Site diaries Time sheets . Cost records Photographs Project Organisation Structures (for contractor and consultant), key personnel details e.g. positions, contacts etc. Monthly Progress Reports (Summaty/Executive Level). Minutes of Meeting (regular and special) Partial/ Substantial Completion Certificates. Variation Orders Record: with backup computations, correspondence, etc. . Payment Records: advances, requisitioned, paid, retention. Procurement and Delivery Notes: delivery schedule, delivery tickets, invoices. . Laboratory Test Results: that was carried out at pre-tender stage and at construction stage. . Site Safety Record NOC Record: at design stage and at construction stage. Dr, Nabil Shehadeh 48Claims Preparation and Documentation I. Documents Reference : each record should be: linked to each individual claim’s heading; properly referenced and dated; marked with consultants/Liaison Engineer agreement/| disagreement on the record. Documents Classification: a typical classification for the documents coding is the following: a. Sender/receiver Reference Date Type of document z Pe ao Contents ® By subject >» By issue (factual/legal) » By VO, Dispute or Claim No y >» By Keywords Programme activity number. Claim Heading. og Dr. Nabil Shehadeh 49Claims Preparation and Documentation 2. FORMAT 2.1 Executive Summary 2.2 Table of Contents 23 List of Exhibits (charts, graphs, drawings, photographs, etc) 24 List of Documents/ Records Index (refer to documents coding under documentation above) 2.5 Introduction 2.6 Factual Narratives/ Statement of Claim: in this part reference is to be made to any and all pieces of documents, exhibits and relevant contract documents. Cause and Effect Analysis is to be included in this part.. 2.7 Cost Analysis. details of specific areas of damage and items of cost. Summary sheets supported by the factual information. 2.8 Time Analysis: in this part planned and as-built programme to be included. Defining the approach in applying the CPM is also required. 2.9 Conclusions 2.10 Recommendations 2.11 Index 2.12 Appendices Dr. Nabil Shehadeh 50Claim Avoidance Dr. Nabil ShehadehOverview ° Acclaim avoidance program can preserve Owner- Contractor relations & save time and money * Ownets, contractors, engineers, and architects should establish claim avoidance strategies for before, during, and after construction ° Asa minimum, claim avoidance strategies should include training of personnel and development of procedures to handle disputes as they arise ¢ Claim avoidance means that disputes don’t atise or they ate settled at the earliest time and at the lowest level Dr. Nabil Shehadeh 52Implement a “Claim Avoidance” Program Ultimate Goal is to eliminate all potential for claims to arise ° Contract documents must be thoroughly detailed, complete, coordinated, and understandable * Contractor must be wholly competent, capable, and honest ° Contractor’s understanding for the project requirements must exactly match the ownet’s expectations * Construction must go exactly as planned * Admirable though untealistic goal Dr. Nabil Shehadeh 53Implement a “Claim Avoidance Program” A good claim avoidance program can approach this goal through the implementation of proper strategies during the following stages: *Design Phase Procurement Phase *Construction Phase Dr. Nabil Shehadeh 54Design Phase Pocus is on providing detailed, complete, coordinated, and understandable contract documents Carefully screen A/E consultants ° Short list at least six consultants with recent relevant experience Require detailed information about each to be submitted for evaluation ~ specific project information ~ project participant information - financial capability - description of organization - capacity to engage in new work ~ key staff & point of contact for your project - quality control measures Dr. Nabil Shehadeh 55Design Phase Carefully screen A/E consultants (cont.) Obtain at least five recent references and contact them Convene a team to evaluate every candidate Evaluate all submitted information and select the best qualified candidate Negotiate an acceptable contract for the design services Know your contract Obtain a design and cost schedule and monitor it rigorously Timely provide information and support to the designer Carefully review and critique design progress at several stages Obtain periodic estimates of construction costs and time Dr. Nabil Shehadeh 56Design Phase Obtain an accurate cost estimate When the documents ate teady for procurement, enlist an independent estimator to prepare a detailed construction estimate Obtain.an independent review of the contract documents ~ completeness - coordination - constructability Dr. Nabil Shehadeh 57Procurement Phase Focus is to obtain competent contactors who understand the full scope of work Procurement Types * Sealed bidding ° Best value selection Pre-qualify bidders to the maximum extent possible * Request details of previous experience * Determine labour, equipment and supervisory resources ° Determine capacity to assume new work Encourage and arrange for pre-bid site visits * Contractors have a different viewpoint from owners & A/E’s * Many potential problems can be identified and resolved before receiving bids Dr. Nabil Shehadeh 58Procurement Phase Conduct a pre-bid conference Prominently display the place and time in the procurement documents Allow sufficient time for contractors to identify questions Draw the bidders’ attention to any special contract provisions - site restrictions - access limitations - noise restrictions - utility relocation requirements Encourage and answer contractors’ questions during the meeting and at any time before bid due date - provide timely answers in a tender addendum - extend the time for submission of bids, if appropriate Dr. Nabil Shehadeh 59Procurement Phase Respond completely to bidder inquities * Take time to thoroughly investigate the questions * Carefully integrate the response into the design—utilize you're A/E * Identify all required changes to the procurement - documents * Clearly describe changes ° Notify all bidders of the procurement documents Dr. Nabil Shehadeh 60.Construction Phase Focus ts on identifying ¢> resolving potential claim events romptly Obtain all permits, right-of-ways, easements, and utility commitments before issuing a notice to proceed Know your contract * Know what your responsibilities are - coordinate utility relocations - obtain building permits - obtain right-of-way or easements - furnish materials or equipment Dr. Nabil Shehadeh 61Construction Phase ° Know the conttractor’s responsibilities and enforce them - project scheduling - submittals - daily reports ° Understand the scope of work - elements tequited by law or code - elements tequited by function, purpose, or design - elements that may be altered or deleted - elements that must be added by contract modification Dr. Nabil Shehadeh 62Construction Phase Know when your action or inaction may constitute a change to the contract * Responses to RFI’s may constitute a change - understand the question - understand what the contractor believes is in the contract - request & evaluate the contractot’s proposed solution - determine if the contractor’s solution is a change in scope - obtain the A/E’s response - give direction to the contractor-— if it is a change, then issue a change order Dr. Nabil Shehadeh 63Construction Phase * Note and comments for revisions on submittals may constitute changes - Presumably a submittal represents the conttactor’s interpretation of the minimum contract requirements - Review you’re A/E’s comments to detect potential changes ° Issuing extra work orders without an allowance for additional contract time may result in acceleration * Slow response to RFI’s and submittals may result in delay or disruption Dr. Nabil Shehadeh 64Construction Phase “Buzz” words that indicate the emergence of a claim * Acceleration * Constructive Changes - overtime - unwritten requests - extta shift - additional work - slow down - over inspection - speed up - incorrect interpretation - eatly completion - defective specifications * Differing Site Conditions * Delays - subsurface - late approvals - different soils - late deliveries - excessive groundwater - no access - higher elevations - interference - hidden/concealed ~ disruption - Butied - bad weather Dr. Nabil Shehadeh 65Construction Phase Manage potential claim issues proactively Talk with the contractor as soon as any potential claim issue is detected If the contractor’s position has some metit, then recognize the change and negotiate a settlement If you disagree, then try to resolve the issue promptly Dr. Nabil Shehadeh 66Construction Phase Be prepared Train your staff - basic construction management skills - basic contract principles and application to construction events - planning, scheduling, and schedule monitoring - cost estimating and cost control ~ negotiation - partnering - claim avoidance and claim management Anticipate contractor claims and watch for the signs Dr. Nabil Shehadeh 67Construction Phase Keep accurate records ¢ Despite all the precautions, there may still be claims ° In addition, many claims are not identified until the project is nearing completion, and the contractor finds that it is over budget ° Complete and accurate records can quash many claim or at least facilitate settlement Dr. Nabil Shehadeh 68Claims Settlement and Dispute Resolution (Alternative Dispute Resolution-ADR) Dr. Nabil Shehadeh 69Definition ° Alternative Dispute Resolution ADR: is a term that refers to a variety of techniques for resolving disputes without litigation. ¢ Many specialized rules and procedures have been developed in cooperation with interested organizations and industties to facilitate these dispute resolution processes. Dr. Nabil Shehadeh 70Contractual Stipulation Amicable Settlement “ Where notice of intention to commence arbitration as to a dispute has been given in accordance with Sub-Clause [ _ ], arbitration of such dispute shall not be commenced unless an attempt has first been made by the parties to settle such dispute amicably. Provided that, unless the parties otherwise agree, arbitration may be commenced on or after the fifty-sixth day after the day on which notice of intention to commence arbitration of such dispute was given, whether or not any atternpt at amicable settlement thereof has been made. Dr. Nabil Shehadeh 71Advantages of ADR * SPEED ° CHOICE AND EXPERTISE OF IMPARTIAL NEUTRALS ° INFORMALITY * FLEXIBILITY ° PRIVACY « ECONOMY * GIVES PARTIES CONTROL OF THE PROCESS Dr. Nabil Shehadeh 72Percetved Disadvantages of ADR * ‘Iwill disclose my hand’ : disclose some important aspect of argument which will then aid the other side in the event that the mediation is not successful ° ‘There is pressure to settle’: as the mediations process goes on the pressure to settle builds * ‘I will give the impression of weakness or liability’: ADR or mediation demonstrates a weakness in the case Dr. Nabil Shehadeh 73Types of ADR ¢ Negotiation * Conciliation ° Fact-Finding ° Adjudication ° Mediation e Arbitration * Med/Artb ° Mini-Trial ° Summary Jury Trial Dr. Nabil Shehadeh 74Dispute Resolution Processes elec No mn Negotiation i ea lieiets i Mediation remain with the parties (eel Ma yet third party =| usec) Galella Umpiring Dr. Nabil Shehadeh 75Negotiation Definition: A process by which disputants communicate their differences to one another through conference. discussion and compromise, in order to resolve them. Most frequently used dispute resolution technique. Requires a strategy of communication and commitment Duting negotiations the contractor should be prepared to provide all written evidence to establish the validity of the claim and to arrange for the relevant personnel to attend a meeting The contractor should consider carefully and determine an acceptable ‘settlement figure’ for the claim Ifa claim s rejected by the engineer, his reasons for the rejection should be considered Dr. Nabil Shehadeh 76Negotiation Negotiation is basically a developmental process with eight distinct, but often overlapping phases: * Phase 1: agreeing where to meet ° Phase 2: setting the agenda * Phase 3: exploring the differences * Phase 4: narrowing the differences ¢ Phase 5: outlining the Final bargain * Phase 6: detailing the Final bargain ° Phase 7: titualizing the outcome ° Phase 8: executing the outcome Dr. Nabil Shehadeh 7Fact-Finding ° Definition: An investigation of a dispute by an impartial third person who examines the issues and facts in the case, and may issue a report and recommended settlement. * This effort might be undertaken in connection with a dispute resolution process administered by a coutt, by a private corporation for internal investigation. ° Oral or recorded testimony, documents and physical evidence may be obtained and reviewed to determine the facts. * ‘The outcome is reported back to the party of entity that commissioned the fact finding. Dr. Nabil Shehadeh 78Adjudication Definition: A statutory tool to solve disputes. An adjudicator is either mentioned in the contract or appointed by both parties. Deals with all manner of disputes Provides a very tight timetable. Adjudicator appointed within seven days of referral. Reach a decision within 28 days of referral Decision is binding. Reference may be made to court / arbitration, but in the meantime, the parties must comply with it and make any payments directed. Dr. Nabil Shehadeh 79Mediation * Definition: An intervention in dispute negotiations by an impartial third person, with the purpose of helping the parties to reach their own solution. ° The mediator's role is advisory ° Mediator may offer suggestions but resolution of the dispute rests with the parties themselves ° Mediation proceedings ate confidential and private Dr. Nabil Shehadeh 80Conciliation ° Definition: : Often used interchangeably with Mediation as a method of dispute settlement whereby parties clarify issues and narrow differences through the aid of a neutral facilitator. e The parties may agree to exclude or vary any of these Rules at any time by agreement with the Conciliator * The Conciliator will be guided by principles of objectivity fairness and justice * Mediation usually refers to a facilitative process while conciliation is evaluative Dr. Nabil Shehadeh 81Arbitration ° Definition: The submission of a dispute to one ot more impartial persons for a final and binding decision. ° The arbitrators may be attorneys or business persons with expertise in a particular field ° The parties control the range of issues to be resolved and many of the procedural aspects of the process. ° Less formal than a court trial. Hearing is ptivate. ° Parties agree to be bound by the decision of their arbitrator Dr. Nabil Shehadeh 82Arbitration ‘THE PROCESS (RULES) OF ARBITRATION SECTION 1: Rule 1: Rule 2: Rule 3: Rule 4: SECTION 2: Rule 5: Rule 6: Rule 7: Rule 8: Reference to Arbitration and Appointment of Arbitral Tribunal Notice to Refer Appointment of Arbitral Tribunal Terms of Reference Notice of Futther Disputes or Differences Powers of the Arbitral Tribunal Powers to Control the Proceedings Power to Order Concurrent Hearings Power at the Hearing Power to Appoint Assessors or to seek outside advice Dr. Nabil Shehadeh 83Arbitration THE PROCESS (RULES) OF ARBITRATION SECTION 3: Procedure Before the Hearing Rule 9 : The Preliminary Meeting Rule 10 :Pleadings and Discovery Rule 11 :Procedural Meetings Rule 12 :Preparation for the Hearing Rule 13 :Conduct of the Arbitration SECTION 4 : Procedure at the Hearing Rule 14 :The Hearing Rule 15 :Evidence Dr. Nabil Shehadeh 84Arbitration THE PROCESS (RULES) OF ARBITRATION SECTION 5: After the Hearing Rule 16 : The Award Rule 17 : Appeals SECTION 6: The Place of Arbitration Rule 18 : Place of Arbitration SECTION 7: Procedural Matters Rule 19 : Language Dr. Nabil Shehadeh 85Arbitration in UAE Arbitration: Law, Language and Place “The law governing the procedure and administration of any arbitration instituted pursuant to Clause (X) shall be the law of the United Arab Emirates and of Dubai. The language of the arbitration shall be English (Arabic -subject to mutual agreement) and the place of arbitration shall be Dubai” Dr. Nabil ShehadehArbitration in UAE UAE Code of Civil Procedute Challenge and Nullification - Article 216 It is possible to Challenge and/or nullify an arbitral award on specific procedural grounds only Time Frame for Issuing an Awatd- Article 210 The time limit for issuing an arbitral award is six months. This can be extended up to another six months or mote by mutual agreement. Dr. Nabil Shehadeh 87Arbitration in UAE UAE Code of Civil Procedure Enforcement - Article 217 An award need authentication of the court of First Instance for it to be equivalent to a Court Judgment and to be enforceable. During the authentication, UAE courts cannot consider the merits of the arbitrators’ findings (Article 217) Dr. Nabil Shehadeh 88Arbitration in UAE Foreign Arbitration Clauses with Dubai Government Bodies This is set out in Articles 36 of Law No. 6 of 1997 which states: No contract where Dubai Government or any of its departments is a patty shall contain a provision for atbitration outside Dubai courts, or that any dispute regarding arbitration or its procedures shall be the subject to any laws ot tules other than the laws, rules and regulations prevailing in Dubai Emirates Dr. Nabil Shehadeh 89Arbitration in UAE Foreign Arbitration Clauses with Dubai Government Bodies = 1958 New York Convention on the Enforcement of Foreign Arbitral Awards provides for arbitration agreements to prevail over actions in the Court and for atbitral awards to be enfotced in over one hundred countries throughout the world, including the major trading nations. = Although the UAE Cabinet approved entry into the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards in 2003, the UAE Government has not implemented the legislation. Dr. Nabil Shehadeh 90Arbitration in UAE “Dubai International Arbitration Centre (DIAC) ° First created in 1994, as the “Centre for Commercial Conciliation & Arbitration” by the Dubai Chamber of Commetce & Industry (OCCP and on July 2002 a decree was issued changing its name. * Was set up in order to supply facilities for conducting commercial arbitration, promoting the settlement of disputes by arbitration, as well as developing a pool of arbitrators in the law of practice of international arbitration 4 Dr. Nabil Shehadeh a1Arbitration in UAE Dubai International Arbitration Centre (DIAC) The services it offers include * Overseeing the arbitral proceedings of commercial disputes ° Appointing arbitrators * Choosing the venue for the arbitration ° Fixing the fees of arbitrators and conciliators * Provide information in relation to arbitrators and mediators. ° Keeps a directory of experts Dr. Nabil Shehadeh 92Med/Arb ° Definition: Employs a neutral selected to serve as both arbitrator and mediator in a dispute. It combines the voluntary techniques of persuasion and discussion, as in mediation with an arbitrator's authority to issue a final and binding decision, when necessary. * Combines informal and formal procedures * Dispute is first submitted to mediation. If, after mediation, the parties are unable to reach an agreement, the neutral renders a decision on the merits of the case, applying the pertinent law to the facts developed during mediation Dr. Nabil Shehadeh 93Mini- Trial Definition: A structured settlement process in which senior executives of the companies involved meet in the presence of an impartial third person (panel) and, after hearing presentations of the merits of each side of the dispute, attempt to formulate a voluntary settlement. Suitable for large cases. Each side has the opportunity of a formal presentation. ‘The presentations ate typically guillotined to halfa day or one day per patty, sometimes with a further opportunity of reply. The panel form a realistic view as to the strength of each parties legal case, with a view to negotiating a settlement. 3 Dr. Nabil Shehadeh 94Summary Jury ‘Trial ° Definition: Summary presentations by counsel in complex cases before a jury impaneled to make findings which are advisory, absent the agreement of the parties otherwise. e Each party presents their case to a limited panel or jutors. The presentations shall be abbreviated so as to allow for a shortened trial. Dr. Nabil Shehadeh 95Summary ° Arbitration: The submission of a dispute to one ot more impartial persons for a final and binding decision. * Conciliation: Often used interchangeably with Mediation as a method of dispute settlement whereby patties clarify issues and narrow differences through the aid of a neutral facilitator. ° Fact-Finding: An investigation of a dispute by an impartial third person who examines the issues and facts in the case, and may issue a report and recommended settlement. * Mediation An intervention in dispute negotiations by an impartial third person, with the purpose of helping the patties to reach their own solution. Dr. Nabil Shehadeh 96Summaty * Med/Arb Employs a neutral selected to serve as both arbitrator and mediator in a dispute. It combines the voluntary techniques of persuasion and discussion, as in mediation, with an arbitrator's authority to issue a final and binding decision, when necessary. ° Mini-Trial A structured settlement process in which senior executives of the companies involved meet in the presence of an impartial third person and, after hearing presentations of the merits of each side of the dispute, attempt to formulate a voluntary settlement. * Negotiation: A process by which disputants communicate their differences to one another through conference, discussion and compromise, in order to resolve them. ¢ Summary Jury Trial Summary presentations by counsel in complex cases before a jury impaneled to make findings which are advisory, absent the agreement of the parties otherwise. Dr. Nabil Shehadeh 97ADR - Comparison Table NEGOTIATI | MEDIATIO | ARBITRATI | LITIGATIO ON N ON N Definition An attempt to | A neutral A formal The court reach third party procedure in | system agreement assists the which renders a through give- | negotiations, | arbitrators judgment or and-take in but does not | render a decision informal render a decision (can | based on discussion binding be binding or | relevant law decision nonbinding) and the facts Cost Lowest cost Low cost Moderate cost | High cost method method method method Time High degree | Moderate Time control} Time control of control of | degree of time | depends on depends time factors | control third parties | on court system Privacy and | Highly private | Moderately Relatively Open to confidentialit | and privateand | privateand | public and y confidential | confidential | confidential | press exposure Control Greatest Good control | Third-party | Judicial control and and flexibility | control and system flexibility of | of reduced control and proceedings | proceedings | flexibility of | reduced proceedings | flexibility of proceedings Decisions Parties reach | Objective Experts Judge and decisions third-party decide jury render based on facts | opinion is technical decision ~ | introduced to | issues and based on the the decision- | evaluate facts and the making evidence law process Dr, Nabil Shehadeh 98Claims Management Question & Answers (Tel: Mobile- 7723626) Dr. Nabil Shehadeh 99