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Project claims

Project claims

Tips for public sector owners

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Many owners across the country find themselves dealing with significant legal and financial risk associated to project claims and disputes brought forward by contractors.

Claims on megaprojects are almost always inevitable, particular in urban projects. The top 100 projects under development in Canada are valued at $199 billion, with 23 transit projects valued at $46 billion, an average of approximately $2 billion per project.1

Most of these are light rail projects (LRTs) running through densely populated urban areas. In many of these projects third party consultations are increasingly complex, the number of stakeholders and interfaces require more careful coordination, design approvals require more staff, and contractors resort to carry high risk premiums in their bids on many DBF (Design Build Finance) and P3 projects.

In this environment, delay claims, disputes and litigation are increasing faster than ever before. Based on our experience reviewing urban transit contract claims, it is not unusual for claims values to range between 10-20% of the contract value. Considering this impact on tax payer dollars, many owners are increasing their focus on strengthening their in-house claims management functions.

In helping to avoid, identify, and settle claims efficiently we have compiled some tips and leading practices for public sector owners. But let’s start with six typical root causes for claims.

Some typical root causes for project claims include:

  1. Additional consultations with stakeholders (city departments, transportagencies, utility companies, real estate developers) causing delay to the project.
  2. Third party infrastructure requiring additional repair/maintenance work causingdelays to construction activities.
  3. City stakeholders adding additional features to project designs they areresponsible for maintaining, such as improved access or maintenanceeasements to drainage or electrical infrastructure.
  4. Utility company interventions delayed by procurement causing a backlog in theutility resources that are able to deal with the inflow of relocation requests.
  5. Changes to geotechnical or ground conditions beyond what could have beenenvisaged at bid stage.
  6. New (more costly or slower) methods of work proposed by owner to protect local traffic conditions or to ease project impact on third party businesses.

Every owner organization is different. In house capacity and experience in devising commercial strategies to avoid or settle claims varies. There are no hard and fast rules that apply to every organization, but the following are some claims leadership considerations for project owners.

1 Renew Canada, Top 100 Projects

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