Reducing Construction Costs Uses of Best Dispute Resolution Practices by Project Owners: Proceedings Report (2007) / Chapter Skim
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8 Methods for Reducing Claims
8 Methods for Reducing Claims
Pages 37-42
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From page 37... ...
Claims also include owner requests for compensation for the contractor's failure to meet contractual terms. IPA obtained data for the claims study using a 100-question survey that covered claims drivers, contractor practices, owner practices and contract clauses, and claim and settlement value.
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From page 38... ...
IPA's findings are based on 122 projects in more than 21 companies and span diverse industries including energy, chemical, pharmaceuticals, steel, consumer products, and other specialty chemical manufacturers. The average cost of projects in the database is $163 million and ranges from $4 million to approximately $1.4 billion.
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From page 39... ...
This finding is qualified because the result is only significant to about a ten percent confidence level, meaning there is a ten percent chance that the aggressive cost projects and the conservatively scheduled projects have the same frequency of claims. The data support the finding that competitive contractor bids are more likely to result in a claim (Figure 8.3)
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From page 40... ...
Contracting alliancing does not reduce claims. Contract alliances are established to incentivize groups of contractors to meet a single project cost target by sharing project profits and losses and managing interfaces effectively.
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From page 41... ...
Functionally integrated teams⎯those that include not only engineers but also people with expertise in business, operations, maintenance, construction management, and project controls⎯give owners the resources they need to better monitor contractors' performance to prevent problems and, when problems do arise, to avoid escalation to disputes and litigation. Only 15 percent of projects using functionally integrated teams had claims compared to 35 percent of the projects using non-integrated teams.
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From page 42... ...
Seventy percent of projects with arbitration clauses had claims, and claim-tosettlement value ratios were much higher than normal. The use of arbitration encourages inflated claim values and presents minimal risk for opportunistic claimants.
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