Article #160 Third-Party Funding of Construction Claims Preparation and Pursuance: The Threats they Bring to Project Owners, Opportunities for Contractors and New Business Offerings for Claims Consultants

The recent trend of third-party entities providing funding for contractors to prepare, submit and pursue their claims settlement could result in massive threats to project owners where; they can now expect a drastic increase in bullet-proof claims submissions by contractors. In addition, this trend will bring opportunities for contractors who can now have access to funds to support the costly claim submissions, which they could not afford to continue pursuing in the past. Further, for claims consultants and lawyers, this trend might come up with new business offerings to expand their claims management services, for which they can now secure the funds to pay.

In principle, every construction claim should have valid merits and must comply with the awarded contract clauses and conditions to be considered and have a chance to win. Nevertheless, it is also a requirement that for a claim to be considered and to have better options to be accepted and awarded, the claim submission must be supported with the complete documentation needed to prove what has happened. This means that in addition to the requirement for implementing the best practices in construction and contract management, entities involved in the project delivery must also ensure that all project records and documents generated from implementing those best practices are captured and documented in a comprehensive, detailed, and correct format so they can be accessed and used to either submit or defend construction claims.

Technology will enable and support capital project entities to implement construction and contract management best practices and support those entities in capturing, storing, reporting, accessing, analyzing, and viewing all project records and documents generated from implementing those best practices. Capital project owners could be the project entity that could benefit most from adopting technology to support construction and contract management best practices. They are the ones that are exposed most to the threats of construction claims because contractually, they will be the entity accountable for most, if not all, the actions taken by their appointed engineering consultant, supervision consultant, project management consultant, and other consultants who will be managing the different construction and contract management processes on behalf of the project owner. This is one of the specific particulars in capital project deliveries where contract agreements are between the project owner and the different entities; nevertheless, the management of those contracts and associated obligations are delegated to other commodities.

Project Management Information Systems (PMIS) like PMWeb help project owners reduce their threats and exposure to construction claims by digitizing the different construction and contract management processes and capturing all project records and documents generated from implementing those best practices. A PMIS like PMWeb will be used to enforce transparency in performing construction and contract management processes by all project entities, enforce accountability in performing those processes, ensure that all project documents and records are correctly captured and stored, ensure proactive early warning notifications of project issues, ensure objective real-time reporting of project’s performance and issues and enable searching and locating communications that are relevant to project problems and claims even after the departure of those involved in delivering the project.

Enforce Transparency in Performing Construction and Contract Management Processes by all Project Entities

PMWeb comes ready with most of the construction and contracts management input forms prepared to use out of the box. In addition, the PMWeb custom form builder allows the creation of all other input forms needed for other project management processes. The value of having an input form goes far beyond being able to generate the process output form and transactions register in the desired format; having this transparency in capturing trust-worthy traceable data provides the project owner with the insight to better understand the performance of each project management process and how this performance could expose the project owner for changes and maybe claims.

For example, having insight into the raw data captured in the Request for Information (RFI) process will enable the project owner to understand better the reasons and trends behind those queries, including why they were issued, what impact they had on the project, how they benchmark to other projects among many others.

Enforce Accountability in Performing Construction and Contract Management Processes by all Project Entities

Communicating construction and contract management processes via email, where the process initiator sends the communication to a pool of individuals, violates the project communication requirements set in the responsibility assignment matrix (RAM). It is as if the issuer of the process is telling those individuals, “go figure out how you want to review, approve and share what I have sent.” Each process should have a workflow detailing the steps to review, approve and share. Some processes might have conditions to incorporate approval authority levels, among many other conditions that could impact how the process will be reviewed and approved. In addition, there are rules on how to return or re-submit the process when needed. PMWeb visual workflow allows mapping those steps and conditions for each process to enforce the necessary accountability.

Ensure that all Project Documents and Records are Properly Captured and Stored

One of the requirements of any construction project site across the globe is to have what is known as the “Filing Room,” where all project communications and documents are stored in their designated cabinets and folders. Unlike generic document management systems, a project document management system like what PMWeb offers complies with this requirement. A project document management system should allow creating the folders and subfolders to match how documents and records are stored in the filing room. Access rights for those folders need to be defined to ensure secured access. Authorized individuals can subscribe to those folders to receive notifications when documents are uploaded or downloaded. Of course, PMWeb also allows maintaining document versions similar to other document management systems.

Ensure Proactive Early Warning Notifications of Project Issues

The FIDIC 2017 Red Book introduced warning provisions (sub-clause 8.4), which require each Party to advise the other “in advance of any known or probable future events which may (a) adversely affect the work of the Contractor’s Personnel; (b) adversely affect the performance of the Works when completed; (c) increase the Contract Price; and/or (d) delay the execution of the Works or a Section (if any).”

Although the FIDIC sub-clause 8.4 has no time limit for giving a warning, nor is there any explicit sanction for failing, project owners are highly advised to add sanctions for non-compliance with the early warning process similar to what the NEC contract contains.

PMWeb will be used to formalize the process for managing Early Warning Notifications (EWN) by creating the EWN form, which will include a Description of Early Warning, details if the Early Warning is likely to (a) adversely affect the work of the Contractor’s Personnel; (b) adversely affect the performance of the Works when completed; (c) increase the Contract Price; and/or (d) delay the execution of the Works or a Section (detail the work will be affected), and advise if an Early Warning Meeting is Required. The form will also include a field with the name of the project entity to which the EWN is issued. The information in the EWN process will be used to generate and maintain an active register of all submitted EWNs, along with their details and status. The report will include visuals highlighting EWNs that could impact the project.

Ensure Meaningful and Objective Real-Time Reporting of the Project’s Performance and Issues

Project owners should be careful not to fall for the “Watermelon Syndrome” when it comes to reporting their project’s performance and status. Using MS Excel as the data source for the project’s performance dashboard will disconnect the project owner from knowing the facts that lead to the reported project performance. What project owners will receive is what the entity or the individuals who prepared the MS Excel file wants to project owner to know, whether it was true or not. Project owners need real-time or near-real-time dashboards based on trustworthy, auditable, traceable, and verifiable project information. The project owner must be able to drill down to the source of the reported information should they need to verify or better understand what is being reported.

Since a PMIS like PMWeb is used to capture the details of all construction and contract management processes, PMWeb business intelligence reporting allows creating the dashboards and reports that will display the captured data in the desired form and format. In addition, it allows designing those dashboards and reports to enable drilling down from the project dashboard level to the specific transaction of each construction and contract management process. PMWeb business intelligence reporting will also be used to create the key performance indicators (KPIs), measures, and metrics to be reported on and generate the needed alerts when unfavorable performance occurs.

Enable Searching and Locating Communications that are Relevant to Project Issues and Claims even after the departure of those Involved in Delivering the Project

One of the critical challenges project owners face when analyzing and responding to submitted construction claims is understanding what led to the claim and whether what is presented provides complete facts about the instance. What makes this even more challenging is that many of the individuals involved in the project delivery at that time are no more accessible. Therefore, when project owners enforce the adoption of technology in implementing the construction and contract management best practices, access to the records and documents generated from those processes is possible.

PMWeb search command allows searching and locating all project records associated with specific keywords. Those records will provide the project owner with the formal project records that will be crucial in responding to the submitted claims. Those records can then be linked to an electronic issue file where they can be reviewed and analyzed.

About the Authorfounder

Bassam Samman, PMP, PSP, EVP, GPM, is a Senior Project Management Consultant with over 35-year service record providing project management and controls services to over 100 projects with a total value of over US $5 Billion. Those projects included Commercial, Residential, Education, and Healthcare Buildings and Infrastructure, Entertainment and Shopping Malls, Oil and Gas Plants and Refineries, Telecommunication, and Information Technology projects. He is thoroughly experienced in project management, including project management control systems, computerized project control software, claims analysis/prevention, risk analysis/management (contingency planning), design, supervision, training, and business development.

Bassam is a frequent speaker on Project Management, Strategic Project Management, and Project Management Personal Skills. Over the past 35 years, he has lectured at more than 350 events and courses at different locations in the Middle East, North Africa, Europe, and South America. He has written more than 250 articles on project management and project management information systems that were featured in international and regional magazines and newspapers. He is a co-founder of the Project Management Institute- Arabian Gulf Chapter (PMI-AGC) and has served on its board of directors for over six years. He is a certified Project Management Professional (PMP) from the Project Management Institute (PMI), an accredited Planning and Scheduling Professional (PSP), an Earned Value Professional (EVP) from the American Association of Cost Engineers (AACE), and a Green Project Management (GPM).

Bassam holds a Master’s in Engineering Administration (Construction Management) with Faculty Commendation from George Washington University, Washington, DC, USA, Bachelor in Civil Engineering – from Kuwait University, Kuwait, and has attended many executive management programs at Harvard Business School, Boston, USA, and London Business School, London, UK.


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