Whether a dispute involves a fluidized bed boiler, a school or a home-improvement project, there are some basic tenets to always keep in mind. It is not enough to think in terms of proving that your side is right and the other side is wrong or that you expended extra costs (i.e., costs not covered in your estimate) or that the other side acted in an uncooperative manner. You have to prove that you are entitled to damages under your contract and the law and the amount of damages that you are legally able to recover. You also need to defend against any claims that the other side presents.
The suggestions this article offers can be applied for the presentation of a change order or of a “claim,” and they are as useful in negotiations in the field as they are in a more formal setting. These suggestions are not difficult to apply and have no downside or risks.
Many of you are already attuned to these ideas and have used them intuitively. In that case, consider the following as a refresher course.
Know the barriers
The old expression is, “The contract is the law between the parties.” In other words, the contract represents the parties’ agreement about how their relationship should be governed. As such, it is the first document you need to refer to before you make any formal submittal of a proposed change order or claim.
Most modern contracts contain a number of paths for pursuing additional money or time. Each of these paths offers benefits and roadblocks. In any given instance, you may have a choice of paths. You should consider them all.
For example, let’s take a simple delay. The delay may be addressed under the changes clause, the force majeure clause, or the suspension of work clause. Similarly, a change in the technical scope of work may invoke the changes clause, the suspension clause, the differing conditions clause or the time extension clause. In some instances, multiple provisions will be applicable at the same time.
You need to know (and select) which provision best suits your demand and that you have satisfied the conditions specified in that provision and have the documentary support. A time extension clause, for example, will often require a written notice of the delay event. Some contracts go further and require an estimated time impact and monthly updates if there is a continuing delay. A changes clause may require a detailed estimate along with written notice. A typical suspension of work clause does not require a written order to suspend, but it excludes profit. For a simple change order, there may be a delay caused by the change order request itself (a suspension), cost and time under the changes clause, and, potentially, impact of the change on unchanged work (constructive change).
Elements of proof/order of proof
Two base line concepts—elements of proof and order of proof—are too often not fully considered.
The “elements” are the most basic: what do you need to establish as fact to support your claim? Look at a “constructive” claim; that is, something has changed in your scope of work, or sequencing, yet there is no written directive from the other party. You will need to show what was originally anticipated by using drawings, specifications, bid clarifications or your “reasonable assumptions” at bid time. The “change” then needs to be established by reference to correspondence, field reports, meeting minutes, etc.
Now that you have the plan versus actual proofs of an alteration, next comes proof of added costs through estimates or cost-tracking documents and time impact by reference to a schedule. These elements of proof will also include your ability to show that any written “notice” requirements have been met.
The order of proof is different. This concept concerns which of the elements of proof you will present first, second, third, etc. A chronological sequence may not always be the most convincing. Consider whether starting and ending your presentation with your strongest or most compelling arguments/proofs would be most persuasive, which might mean beginning with proof of your added costs, with a quote from the contract, or with a description of the event that gave rise to the claim.
Anticipate the defense
If there is a comprehensive “no damages for delay” clause in your contract, why submit a claim titled “Delay Damages”? Know this: the other party can always find contract clauses to refute your claim. Even a differing site conditions claim can be rebutted, potentially, by a site inspection clause. If you are not prepared for the other party’s contract or fact defenses, you will be put immediately on the defensive, and the force of your claim presentation will be diminished.
The idea here is not to make the other party’s defense; it is to ensure that your presentation offers facts and arguments that weakens or eliminates the other side’s defense.
For example, for a differing site conditions problem, the argument might include that a reasonable site inspection was performed or that the condition at the site could not have been detected. For a loss of productivity claim, explain why it is not a delay-related cost issue but an issue concerning job site coordination. If you are weak on written notices, emphasize how often the problem was discussed and how the other party was fully aware of the problem.
To be sure you identify the other side’s likely contractual and factual defenses, consider doing a mock presentation in-house with your project team. Encourage them to look at your case from two angles: (1) Is it clear and convincing? (2) What are the questions and challenges that the other side might raise?
Make your documents work for you
A primary defense to claims is lack of notice. Where you have fully complied with those documentation requirements, certainly you need to emphasize this fact. But what if you have not?
Most “notice” provisions are not explicit as to what the writing should look like. If you have a speed memo, email, meeting minutes, etc., that references the problem (gives “notice” to the other party), quote that information in your presentation, with an explanation of its meaning and impact. Even a cryptic note in an email, such as “Here’s that problem again” can be made to appear to be enough notice to satisfy many contracts. The same is true for handwritten notes on shop drawing submittals, schedule updates and even field reports. Don’t just attach that record to your presentation, also quote the relevant language and explain why that note was important in notifying the other party of the problem.
Information that is helpful to your proofs may be buried in lengthy letters or meeting minutes. Quote only that specific paragraph from the document in your written presentation to make the information stand out.
Other data may be in voluminous daily reports. For the affected time frame, plot your labor and/or equipment usage. For the labor component, compare plots using manpower per day or per week, and consider using man-hours versus man-days in order to achieve the most effective presentation.