This document discusses claims and variations that may occur in construction contracts. It defines a claim as a request for additional compensation or time due to occurrences beyond the contractor's control, such as differing site conditions or owner-caused delays. Claims can arise due to inaccurate owner-provided data, design changes after contract signing, or improper design. To succeed, contractors must prove entitlement and damages. The document also outlines types of claims against owners or contractors and strategies for claims prevention. It then discusses variation orders, which are written orders that change the contract scope through extra work, quantity adjustments or alterations.

1. Claims
Madawalabu
University
Procurement Management and Contract Administration
CoTM 4242
Chapter 4
College of Engineering,
Construction Technology and Management Department
Lecture by: Andualem Endris (M.Sc)
andu0117@yahoo.com
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2. COTM 4242 2
What is Claim?

3. Claim
 Claim is a request by a contractor for additional
compensation or time extension for occurrences beyond
the contractor’s control including:
• differing or unexpected site conditions
• change in scope
• delays caused by the owner
 Owner has duty to provide adequate and accurate data
to the bidders
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4. Claim
• Owner is liable to contractor when:
– inaccurate data are given
– extras develop because of improper design
– design is significantly changed after the contract is
signed (constructive change)
• Contractor must prove entitlement and the associated
damages
• Contractor must provide timely notice of claim upon
discovering impact
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5. Causes of Claims
• Contractors attempt to submit an artificially low price and
hoping to make up the difference through claims later on;
• The constraints of time, finances and other factors force
a contractor to cut corners;
• Where the form of contract transfers the risks to the
employer (esp. DBB system);
• Poor or unclear tender and/or contract documents;
• Poor or inadequate administration of responsibilities by
stake holders; and
• Unforeseen or situations during project execution.
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6. Types of Claims
 Typical claims against owner are:
• Poor project planning
• Scope changes
• Constructive change orders
• Errors and omissions
• Contract accelerations and stoppages
• Site access or availability
• Other construction interference and delays
• Strikes and acts of God.
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Types of Claims …cont’d
 Typical claims against contractor are:
• Late completion - liquidated damages
• Out of specification materials
• Defective work
• Property damage

8. Claims Prevention
• Producing comprehensive and accurate contract
documents
• Constructability review
• Clear understanding of contract requirements prior to
bidding
• Having good administrative procedures in place
• Open and honest communication
• Timely troubleshooting
 Claim prevention begins in the pre-construction phase
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9. Design Professionals should:
• Specify locally available material
• Allow substitution of the same quality material
• Avoid one-of–a-kind or non-standard items where
possibly
• Design structures with as many surplus elements as
possible
• Design should allow construction using the prevailing
methods and equipment
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10. Design Professionals should:
• Design to minimize required labor
• Specify a quality of workmanship consistent with the
quality of the project
• Do not require the contractor to assume responsibility
for information that should be furnished by the design
engineer/architect
• Produce simple, straight-forward specs - clearly state
what is expected
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11. Variation Orders
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12. Variations
• Variation is the addition, omission or substitution of
works.
• Variation management is an organized effort to eliminate
unnecessary cost and time impact as a result of
processing project work outside the scope of the
contract.
• Variation is not a Claim
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13. Variation Order
– A written order issued by the owner to the contractor
for a change to the contract within the scope of work
– Variation orders are written for:
• extra work
• increasing or decreasing the contract quantities
• alterations
– Variation orders state the basis and amount of
payment and time extensions
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14. Types of Variations
• Formal
– Via contract variation clause (Ex. See Clause 38 of
PPA, 2006)
• Constructive
– Action of owner that has the effect of directing a
change, although not initially documented as such.
• Cardinal
– Variations totally out of scope of original contract.
– Should re-negotiate entire contract.
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15. Sources of Variations
• Unanticipated site conditions
• Owner requested design modifications, additions or
deletions
• Clarification of contract documents
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16. THANK YOU!
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