CONSTRUCTION (CLAIMS) | Marc Cunningham LLC

Construction (Claims)

A construction claim may be either a claim against the contractor (or the contractor’s bond) by the owner, or a claim against the owner by the contractor, requesting some form of relief (generally money or time) as compensation for some extraordinary situation (whether through some fault or some unforeseen circumstance) that occurred during construction.

Experience with the basic phases of claims management, such as: claim avoidance (through various pre-emptive measures such as: accurate drawings and specifications; active participation in bidding process; adequate insurance of all relevant types and limits; assuring that financing is in place to complete the project; creation of an accounting code matrix with specific accounting codes for specific types of claims and related activities and tasks; establishing a dedicated claims-management team in advance of the project, comprised of relevant claims-familiar subject matter experts – SMEs; extensive pre-bid site inspections; frequent inspections by a quality assurance/quality control – QA/QC – team, which should have attributes such as, at a minimum, a team attitude of promoting quality, documenting all issues accurately and objectively and then verifying that corrections have been resolved, experienced inspectors, peer review processes and protocols; hiring competent contractors, experts, management, professionals and subcontractors; intense and timely document management and organization; use of technology – various hardware and software solutions, such as drones or claims management software – to the fullest extent possible when documenting contract and project conditions); claim mitigation (identifying and resolving issues that occur during the project expeditiously and fairly); claim prosecution (in the event that direct discussion and perhaps subsequent alternative dispute resolution – ADR – does not resolve an issue, then initiating the claim through the proper legal channels specified in the contract as expeditiously as possible, to preserve all applicable legal rights); claim resolution (using the protocol specified in the contract to achieve a negotiated or adjudicated resolution of the claim).

Experience with the basic elements required to present a claim (and supporting documentation therefore), such as: a statement of the claim presented; cost calculations comparing the original work to the work required as a result of the claim presented; critical path scheduling impacted by the subject matter of the claim presented; exhibit containing the certificate of merit (in states requiring such a certificate when presenting a claim against a licensed professional); exhibits containing all the contract drawings and details of any type relating in any way to the claim presented, with those portions of such construction drawings and details relating in any way to such claim clearly marked; exhibits containing all the contract specifications of any type relating in any way to the claim presented, with those portions of such construction specifications relating in any way to such claim clearly marked; exhibits containing all the correspondence related in any way to the claim presented; exhibits containing all the digital media and hard-copy images related in any way to the claim presented, with detailed descriptions and explanations of what such digital media and images portray and why they have been included in such exhibits – including the actual dates and times of such digital media and images (as an optional exhibit, building information management – BIM – software can be used to create a presentation addressing the various claims components in 3D); itemized written scope of the work required to substantiate the claim presented; legal justification through the contract (such as the provisions regarding changes and ) for the claim presented; legal precedents (both by statute and common law court-generated) for presenting a claim similar to the claim presented; loss of anticipated return on the resources allocated for the original work, that have been impacted by the subject matter of the claim presented; loss of opportunity for the use of resources (materials and personnel) allocated for other projects, that have been impacted by the subject matter of the claim presented; loss of profit for the use of resources (materials and personnel) allocated for other projects, that have been impacted by the subject matter of the claim presented; other non-critical-path work within the original scope of the project that is impacted by the subject matter of the claim presented; quantity calculations and measurements comparing the original work to the work required as a result of the claim presented; requests for specific remedies (generally for specific extra compensation and specific time extension) for the work itemized in the claim presented; statement and timeline of all non-litigation ADR steps taken prior to presenting the claim presented, and the outcomes of each such step; statement establishing the lack of grounds for any counter-argument that any delay element in the claim presented was concurrent or excusable; statement regarding the timeliness of the claim; statement that any applicable statute of limitations (SOL) period for making a claim is still in effect and that any applicable statute of repose (SOR) period barring the presentation of a claim is not in effect; timeline for the incidents leading up to the perceived necessity for the claim presented.

Experience establishing entitlement to asserting a claim, whether through common law, contractual basis, statute or through the facts, and then establishing the cause and effect that would substantiate such claim, if proven.

Experience collecting, documenting and managing documentation for potential claims in real time, such as: change orders; correspondence; images; logs; reports; schedules; videos; witness narratives.

Experience with many types of claims, such as claims related to: abandonment; acceleration; access to all or part of the lay-down area or work site; accounting irregularities; additional insured status on insurance policies; affirmative duty to disclose; anticipatory breach; artisan lien (in Maryland); audit irregularities; bad faith; bid mistakes; breach of contract; breach of warranty; building code violations; cardinal change; certification failure (such as for any of the 4 leadership in energy and environmental design – LEED – categories: certified; silver, gold or platinum); “changed conditions” definition; changes in the law (such as tariffs increasing the costs of imported construction components); concurrent delay; consequential damages; construction code violations; construction malpractice; constructive change; contra charges (back charges); contract fraud; contractor bankruptcy; contractor debarment; correction costs; cost of materials escalations; cost overruns; COVID-19; defective as-built drawings; defective bidding; defective general construction drawings and specifications; defective design; defective issued-for-construction (IFC) drawings and specifications; defective management; defective materials; defective scheduling (such as failure to define all critical path activities); defective testing; defective workmanship; delayed payment; demobilization; diminution in value; directed change; discovery of archeological, historical or paleontological artifacts; disruption; earth movement; environmental issues (including the failure-to-warn); exculpatory provisions in the contract, construction drawings or specifications; “extras” (both authorized and unauthorized) definition; failure to apply critical path method (CPM) methodologies to the bidding and scheduling processes; failure to comply with the Buy American Act (BAA); failure to comply with the requirements for disadvantaged business enterprises – DBEs – minority-owned business enterprises – MBEs – women-owned business enterprises – WBEs – and veteran-owned business enterprises – VBEs; failure to comply with required diversity staffing rules; failure to cooperate; failure to perform indemnity obligations (such as the obligation to defend); faulty field decisions; Federal Acquisition Regulation (FAR) Section 52.243 request for equitable adjustment (REA); fidelity bonds; “final completion” definition; finance charges (resulting from any financing had to incur to complete the work due to delay or non-payment); flow-through provisions; ; fundamental breach; governmental intervention; hidden conditions; idle equipment; impracticality of construction; improper or non-existent required licensing; improper or non-existent required permitting; inadequate staffing; landslide; late payment; latent defects; lien fraud; loss of use; material breach; “mechanical completion” definition; mechanics’ liens; minor breach; negligence; negligent certification of payment; New York Scaffold Law ( State Labor Sections 200, 240-241 and New York Industrial Code Part 23); non-compete agreements; non-compliance with applicable codes; non-disclosure agreements; non-payment; non-solicitation agreements; numerous design changes (whether necessary or unnecessary); overhead costs; owner-furnished items; pass-throughs; pay-if-paid; pay-when-paid; payment bonds; performance bonds; personal injury; pre-commissioning activities; property damage; purposeful underbidding; remobilization; refusal to release retainage; refusal to release security deposit; right-to-work issues; repair costs; Federal Acquisition Regulation (FAR) Section 52.243 request for equitable adjustment (REA); safety issues; scope change; state Little Miller Acts; storage costs; “substantial completion” definition; surety bonds; suspension; termination (whether for cause or convenience); third-party delay; trust funds (under New York Consolidated Laws, Lien Law – LIE, Article 3-A); unclear milestones; unilateral delay; union issues; unjustified deductions from payments; unrealistic liquidated damages; unreasonable enforcement of notice provisions in the contract, construction drawings or specifications; unqualified contractors, personnel, professionals or subcontractors; vicarious liability; vague releases; wage underpayments; warranties (both expressed and implied); wrongful death.

Familiarity with claims related to surety bonds in general and construction-related bonds in particular (both payment and performance), and the process for resolving claims against such bonds (which are intended to protect the interests of the actual person obtaining such bond – the obligee – rather than the interests of the business which employs such individual).

Performance of general tasks related to claims management and prosecution, such as: attending alternate dispute resolution (ADR) proceedings; establishing and managing claims controls and reserves; establishing claims-related corporate policies, forms, protocols, standard operating procedures (SOPs) and templates; managing all aspects of bond and construction claims from initial notice through final resolution; providing legal support, transactional support and training to bond underwriters and claims personnel; researching, analyzing, and providing timely updates on legal developments affecting bond and claims issues; sourcing, retaining and managing domestic and international outside counsel and legal staff, while staying within established corporate spending guidelines.

Experience sourcing, retaining and managing domestic and international construction claims analysis subject matter experts (SMEs), who should have, at a minimum, skills such as: ability to assume the role of either an expert testifying witness or a non-testifying expert who performs the claims analysis, and the ability to transition between each role as required; ability to perform retrospective schedule analysis to identify acceleration, delays, liabilities; advanced knowledge of the type of contract for the project, based on actual experience, whether cost plus fee (CPF), engineer-procure-construct (EPC), design-build (DB), fixed price (FP), guaranteed maximum price (GMP), lump sum (LS), turnkey, unit price (UP); appearance of credibility, confidence, integrity, objectivity and reputation, without any appearance of bias or impropriety; basic knowledge of any equipment at issue in the claim; commanding demeanor in depositions and on the witness stand, based on a thorough knowledge of the facts and the law as applied to the facts, without any confusion or hesitation; excellent communication skills, including clarity of delivery and diction; experience as an expert witness for both defendants and plaintiffs; experience with construction cost variance analysis; extensive experience with critical path analysis; extensive experience with standard construction control methodologies such as cost engineering, estimating and scheduling; extensive knowledge of the types and costs for construction defects and the respective costs for each type in the project venue; familiarity with applicable contractor standards of care regarding a general contractor’s fiduciary duty to an owner; familiarity with construction productivity analysis; familiarity with the various roles of key construction professionals, such as the construction manager (CM) and general contractor (GC); knowledge of general custom, practice and usage within the construction industry; knowledge of construction insurance types and limits, and of surety bond practice; knowledge of construction risk management principles; knowledge of the subject claim gleaned through lengthy prior practical experience applied to the facts of the project; equal preparation for the assertion or defense of the claim analysis, and the ability to transition rapidly between either role; project auditing; sensitivity to the various applicable Federal Rules of Civil Procedure (FRCP), such as Rules 16 and 26-37, and the Federal Rules of Evidence (FRE), such as Rules 402-403, 502 and 702-705; site inspections; site testing; working knowledge of construction damages and productivity analysis.

Experience drafting and negotiating all agreements, contracts and documents required to assert, prosecute and resolve various types of claims in various domestic and international jurisdictions.

Experience drafting and negotiating a liquidating agreement as a vehicle to both further a subcontractor’s apparently valid pass-through claim against the owner (with whom the subcontractor has no direct contractual relationship) generally for some extra work ordered by the owner which was not in the original scope of the subcontractor’s contract with the general contractor (GC), by entering into an agreement directly with the GC, and to remove from the GC the uncertainty of being sued by the subcontractor for overly-inflated damages amounts in relation to the subcontractor’s claim against the owner, in which the GC agrees to retain ultimate liability for the full value of the subcontractor’s claim (which is specified in very strong language as a guaranteed not-to-exceed cap in the agreement, thus “liquidating” – making the claim amount an amount certain – the GC’s total possible liability), and to pay to the subcontractor only the amounts the GC receives from the owner in relation to the subcontractor’s claim, in return for which the subcontractor agrees to hold the GC harmless for any amounts not recovered by the GC in relation to the subcontractor’s claim.

Experience drafting and negotiating tolling agreements (that contractually stops an applicable statute of limitations – SOL – from running during some mutually-agreed period of time) to preserve construction claims during lengthy negotiations, during which the applicable SOL might expire, thus obviating the necessity for filing a lawsuit during the term of the tolling agreement.

Experience drafting and negotiating surety takeover agreements on construction projects where the general contractor has defaulted.

Experience asserting Federal Acquisition Regulation (FAR) 43.204(c)(2) (which expressly recognizes a contractor’s right to reserve all rights regarding a claim) against government contracting officers attempting to require that all negotiations regarding the contractor’s claim must result in the full and final payment for the claim and the release by the contractor of all present and future rights related to the claim, by inserting reservation of rights language directly into the final version of the change order.

Experience with the critical path method (CPM) of construction project management and scheduling, and tracking delays affecting the critical path to completion.

Working knowledge of Oracle Primavera P6 Enterprise Project Portfolio Management.

Experience with the economic loss rule for claims, under which (with few exceptions) no negligence claims can be asserted for failing to perform a contractual duty, and only contractual claims can be asserted in such cases.

Experience using litigation financing (a type of non-recourse funding from third-party lenders, generally private), for the funds required to assert a claim.

Experience interpreting language and provisions in the types of bonds and insurance policies used by owners, general contractors, subcontractors and others for construction projects.

Familiarity with the basic types of damage calculation methodologies general contractors (GCs) may use for construction claims, such as the: actual cost method (a/k/a direct cost method or discrete cost method), generally the methodology preferred by GCs, involves enumerating and quantifying all the actual costs involved in the claim, based on actual documentation, without making any deductions that might be due to the GC’s fault; modified total cost method (generally used by a GC if there may be obvious costs attributable to the GC’s fault), generally involves preparing the claim as if the actual cost methodology were only being used, but then taking deductions for those costs that may be attributable to the GC’s fault; total cost method (the least-desirable methodology for GCs) generally used only if either of the previously-described methodologies are not available, enumerates the additional costs allegedly-incurred by the GC over and above the GC’s original estimate, and then adds an arbitrary profit margin to such additional costs.

Compliance with domestic Federal and state administrative guidelines, and laws, recommendations, rules, statutes, industry trade association guidelines and international administrative agencies relating to claims management and presentation, such as the: American Arbitration Association (AAA); Associated Builders and Contractors (ABS); Association of General Contractors (AGC); Buy American Act (BAA); Contract Disputes Act (CDA); Court of Federal Claims (CFC); Davis-Bacon Act (DBA); Fair Labor Standards Act (FLSA); False Claims Act (FCA); Illinois Prevailing Wage Act (IPWA); International Centre for Dispute Resolution (ICDR); International Chamber of Commerce (ICC); International Institute for Conflict Prevention & Resolution (IICPR); Judicial Arbitration and Mediation Services (JAMS); London Court of International Arbitrators (LCIA); Miller Act (MA); New Jersey Construction Industry Independent Contractor Act (NJCIICA); New Jersey Construction Lien Law (NJCLL); New Jersey Consumer Fraud Act (NJCFA); New Jersey Department of Community Affairs (NJDCA); New Jersey Department of Labor and Workforce Development (NJDOLWD); New Jersey Home Owners Warranty and Registration Program (NJHOWRP); New Jersey Library Construction Bond Act (NJLCBA); New Jersey New Home Warranty and Builders' Registration Act (NJNHWBRA); New Jersey Prevailing Wage Act (NJPWA); New Jersey Product Liability Act (NJPLA); New Jersey Prompt Payment Act (NJPPA); New Jersey Uniform Construction Code (NJUCC); New Jersey Wage and Hour Law (NJWHL); New York Consolidated Laws, Lien Law – LIE; Occupational Safety and Health Act (OSHA); Occupational Safety and Health Administration (OSHA); Pennsylvania Prevailing Wage Act (PPWA); Procurement Integrity Act (PIA); Small Business Administration (SBA); United States Department of Labor (DOL).

Last updated 210711_1526