One out of every five projects in the construction industry has a claim or dispute. Construction claims are not only costly but are lengthy and lead to delays and damaged relationships among the parties. However, with proper planning, these are avoidable. As most of the claims are unwarranted, some best practices and early strategies can help reduce these claims.
Construction projects are highly complex, and one wrong thing can lead to its destruction. But with little planning, you can mitigate these risks and avoid construction claims altogether. A claim is a legal request made for the compensation that was not anticipated in the original contract. Construction claim can potentially hinder the success of your project.
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How to Avoid Construction Claims and Mitigate Risks?
As long as human beings manage construction projects, disputes are inevitable. What matters is how we resolve the issue in the first place. Understanding the issues that can occur during construction and taking early measures to address these issues can help avoid claims.
Here is everything you need to know about mitigating risk and averting construction claims.
Risk Identification
So, one of the foremost steps in mitigating risks and averting construction legal claims is analysis and identification of risk. By identifying all the potential risks with the help of construction claims consultants Dubai, and planning ahead of time, you can reduce the likelihood of risks and claims.
In order to mitigate the risks, you should first familiarise yourself with different types of risks associated with construction. These are as follows:
1. Scheduling and Contractual Risks
Risks like project unable to complete on time and the amount of time it takes to execute a task and possible consequences in case of a delay.
2. Monetary Risks
Risks arising due to possible economic and financial changes like rising interest rates, declining sales, supply chain fluctuations, and inflation that may occur during a project.
3. Occupational Risks
Injuries that occur due to used equipment, weather, or employee action. It also includes fatalities on site.
4. Technical Risks
Risks arising due to the technical competency of employees and their ability to meet the project deadlines.
5. Project Risks
Risks arising due to bad company policies and underestimating the time needed to complete the project.
6. Weather Risks
Risk arising due to bad weather that is not in control of the contractor. For example, floods, hurricane, earthquake, etc., that may delay or damage the project site.
Identify the Type of Construction Claims
After identifying the risk, the next step is to identify the type of claim that you are dealing with. The following are some of the most common claims in the construction industry.
1. Delay Claims
These are the most common claims in the construction industry. Delay claims are made against the owner for increased compensation due to delays in the construction of the project. Delays can be due to late approvals, bad weather, a pandemic like COVID-19, which the contractor is not at fault. In such cases, expert advice of a delay expert is crucial.
2. Construction Changes
These are made when the contractor makes changes in the plan as a result of inaction or action of the owner, even if the owner acknowledged these changes as contract changes.
3. Construction Acceleration Claims
These claims are made when the contractor asserts that an extension in completion time should have been granted. But as the extension was not granted, the contractor was forced to accelerate the work on the project to meet the deadline.
Taking Action
Once you have identified the risks you are dealing with, do your research so you can focus all your efforts on dealing with the specified risk. After you have narrowed down the risks associated with your project, then mitigation comes into play. Now it is time to take action and decrease the likelihood of the risk occurring.
While it is impossible to illuminate every risk and issue, however, many issues can be avoided by proper planning that accounts for all possible risks and provides a schedule for all parties. It is highly suggested that all contractors must get help from construction claims consultants in Dubai and have an alternate dispute resolution plan in place in case things go sideways.
The Power of Documentation in Avoiding Construction Claims
Early identification of the risks and potential setbacks not only helps you avoid risks but also avert legal construction claims. To better understand the claim, you must get familiarized with all the terms and conditions of the contract. This is where documentation comes in.
Documentation is essential when it comes to avoiding claims. Without proper documentation, you would ultimately have to face arbitration and huge monetary losses. Following is a list of documents that can give you best defense against a dispute:
- Cost reports
- Daily logs
- Photographs and Videos
- Payment invoices and financial statements
- Change order documents
- Schedules
- Correspondence
- Progress reports
- Bid documents
- Labor costs
Get Expert Help for Construction Contracts
If you do receive one of these construction claims, the first important step is to get in touch with a professional construction claim expert that can help you analyze the claim. To avoid future claims, construction lawyers and experts can help you with contracts and ensure that your contract addresses all potential risks and mitigation guidelines.
The first mitigating step in avoiding claims is to have a contract that assigns financial risks of project delay due to multiple events. It not only helps to avert claims but also builds a harmonious relationship among all the parties.
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