IMPACT OF DELAYS & CLAIMS MANAGEMENT FOR CONSTRUCION PROJECTS

IMPACT OF DELAYS & CLAIMS MANAGEMENT

FOR CONSTRUCTION PROJECTS

SULEMAN, SUBHAN

FA16-MSPM-0013

MS (Project Management), MAJU

1
 IMPACT OF DELAYS & CLAIMS MANAGEMENT FOR CONSTRUCION PROJECTS

(Individually funded project for university use only)

CHAPTER #1.0: INTRODUCTION

1.1 Background

Construction and engineering projects commonly overrun their contractual completion dates, resulting

in significant costs to all project parties & may be declared as unsuccessful. To ensure equitable

adjustment to contract price or time to perform the project, on account of project delays, contractors

are often required to present delay claim submissions to project Employers (or their representatives,

usually consulting Engineer or Architect) for subsequent assessment of the claims. However, as

modern projects have become increasingly complex with multiple parties involvements, all subject to

their own performance exigencies. Construction claim management" can be construed as the process

of dealing with or controlling the variables or change by one of the parties involved in the construction

process. Disputes are a reality in every construction project. Without a means to address them, minor

issues can grow into serious disputes, with crippling consequences for project participants. The rising

cost, delay and risk of litigating construction disputes has prompted the construction industry to look

for more efficient ways to resolve these disputes outside of the courtroom. So being a civil engineer I

founded that it is important for presenting a system to avoid converting construction claims into

disputes as it can considered claims is the main source of disputes

2
 IMPACT OF DELAYS & CLAIMS MANAGEMENT FOR CONSTRUCION PROJECTS

1.2 Problem Statement

Many construction projects are of long-duration and high value and foreseeing and planning for every

eventuality may be impossible. Delay & disputes are a reality in every construction project. Without a

means to address them, minor issues can grow into serious disputes, with crippling consequences for

project participants. The rising cost, delay and risk of litigating construction disputes has prompted

the construction industry to look for more efficient ways to resolve these disputes outside of the

courtroom. So based on my personal professional career in construction industry , I realize that it is

important for presenting a system to avoid converting construction claims into disputes as it can

considered claims is the main source of disputes that may lead to project failure.

1.3 Research Objective

The basic objectivesof this research are outlined asfollows:

a. Identifying the different factors that causing disputable claims from point of view of

contractor /consultant or client.

b. Ranking these factors according to their relative importance to find out the most important

factors.

c. Provide a proposed system and a comprehensive checklist to be used as a management tool for

avoiding converting claims into disputes & control delays.

d. Conduct some practical case studies from actual projects.

e. Develop practical recommendations and guidelines to avoid or reduce construction

disputes/delays.

3
 IMPACT OF DELAYS & CLAIMS MANAGEMENT FOR CONSTRUCION PROJECTS

1.4 Research Questions

Inordertocompletethestudyandmeettheobjectives,asetofquestionsisraisedin
ordertobesolved,throughtheanswersallobjectiveswillbemet.Thequestionsraised areas follow:

a. What are the main reasons of project delays & causes of construction claims?

b. What is the best way of minimizing the project delays & claims?

c. What are the impacts of project delays & claims on project success?

d. How can decision maker reduce the project cost provided that it will not affect efficiency?

e. Why are time & cost overrun considered most frequent consequences of delays & claims in

construction project?

1.5 Research Gap

Whilst the many historical research efforts have generally contributed, in one way or another, to

improvements in delay claims analysis/resolution, very little has been reported in the literature as to

practitioners'practical experience with employing existing delay analysis approaches. The knowledge

of thisexperiencecouldprovide,amongothers,insights intotheactualusefulness anddifficultiesof

usingtheapproachesinpracticeand whichaspectsofthem requireimprovements.Furthermore,mostly

construction contracts and case laws havelargelyremainedsilent on mattersrelatingto the principles and

applications of the project approaches , leaving much to the often subjective judgment of disputing

parties and thus much on which to disagree on during delay claims resolutions. The need to

addressthisproblem soastohelppromotecommonunderstandingamongstpractitionersregardingthe

reduction of delays in construction projects. Thus I have tried to fill this gap for construction industry

projects.

4
 IMPACT OF DELAYS & CLAIMS MANAGEMENT FOR CONSTRUCION PROJECTS

1.6 Significance of the Study

The findings from this research will serve as a guide line to construction project holders of

Government, onGovt, business organizations, contractors, consultants and the

community at large. They will be aware of the uncertain factors that can result to delay

of projects right from the inception phase. This study will also generate a list of delay

causative factors that can be used as benchmark to control existing and future projects.

In addition stakeholders will also be aware of the delay related factors and how to avoid

them. The study will also generate measures to mitigate or eliminate the effects of

construction projects delay& claims. Finally the study will also serve as a support of what other

past researchers have written about factors causing delay in construction projects. It will

also provide some information for future researchers who wish to further investigate on

this particular or related case. Below is simple understanble diagram for dispute/claim alignments.

5
 IMPACT OF DELAYS & CLAIMS MANAGEMENT FOR CONSTRUCION PROJECTS

CHAPTER #2.0: LITERATURE REVIEW

2.1 Literature Review

This article is based on understandings of construction delays, claims management & their

impact for construction project success based on previous researches & references. According to

Assafand Al-Hejji (2006) construction delays refertothe timeoverrun either beyond completion

datespecified in a contract or thedate that theparties agreed upon for deliveryof aproject.Bramble

andCallahan (2011) conducted research on similar subject &classified claims & delays in to

twomajor categories: excusable and non-excusable. Excusable delays arefurther classified as

compensable ornon-compensable. Nonexcusable delaysare compensableto the owner as to actual

damages. Thesedelays occur dueto thefaultof thecontractorand thereforeprevent contractors from

obtaining atime extension and additional compensation.Compensable excusable delayson the

otherhand arecaused byowners ortheirrepresentatives withoutanycontributoryfaultof the

contractor orits subcontractors. The contractor is entitled to a time extension for contract

performance andadditional financial compensation for thecosts of delay, if thedelayisdeemed to

becompensable .Non compensableexcusable delays occur dueto the 'acts ofgod'or unforeseeable

causes such as unusual severe weatherconditions which arebeyond the controlof ownersand

contractors. These delaysarenot thefaultofboth parties and thereforeoften entitlethe contractor to

an EOT, but not to additional costs .According to (Sibanyamaet al. 2012) difficultyof

establishing fair andexpeditious settlement of claimsdepended on untimelynotification, poor

record keeping, inadequate legal andfactual justification and poorpresentation. Onasimilar

6
 IMPACT OF DELAYS & CLAIMS MANAGEMENT FOR CONSTRUCION PROJECTS

note,O'Connor(2003) suggeststhat primaryrequirements forsuccessfulclaims aretimelynoticeof

the claim in accordancewith theterms ofthe contract, effectiverecord keeping, establish

entitlement and causation, calculate damages in accordancewith the contract and negotiatethe

claim. Kululangaet al. (2001) thereforesuggest that toenhancethe chances of successofclaims,

contractors need to closelyfollow thesteps stipulated in the contract conditions,

provideabreakdown of alleged additional costs and time and present sufficient documentation.

Theforegoing reviewsuggeststhat the following issues areresponsible fordelayclaims failures.

Conclusively, above reviewsuggeststhat reasons forthe contractor'sdelayclaims failures may

include below listed issues:

a. Inadequate documentation to support a claim

b. Failure to notify the intention to claim in due time

c. Delayed submission of the claim details

d. Failure to establish causal link

e. Failure to establish entitlement to the claim

f. Insufficient breakdown of claim amount

g. Not calculate damages in accordance with the contract

h. Not negotiate the claim

i. Poor presentation of the claim.

Summary of above literature is whenever a delay does occur, its implications to the future performance

of the project can be instantaneously unwavering and counteractive action can be taken to reduce any

unenthusiastic collision on project efficiency. The contractor is expected to have control over the non-

7
 IMPACT OF DELAYS & CLAIMS MANAGEMENT FOR CONSTRUCION PROJECTS

excusable delays and, in all probability, to do more to prevent them. Perception of the fundamental

factors that donate to reasons for non-excusable delays would assist make out and prevail over the

tribulations faced by contractors during the construction process. Although several factors contribute

to project delays, the consequence of non-excusable delay factors that are merely the contractor's

contribution is apparent in this research. There are numerous factors that encourage delay on

construction projects, however in this study the factors causing delay are ranked according to the mean

index score. The factors includes: lack of funds to finance the project to completion, changes in

drawings, lack of effective communication among the parties involved , lack of adequate information

from consultants, slow decision making and contractors insolvency, variations. Also, there are project

management problems, faults and differences in contract documentation, equipment availability and

failure, mistakes during construction, bad weather, and fluctuations in prices of building materials,

incorrect overall organizational structure linking to the project and labor strike.

2.2 Theoretical Framework

Relationship between Project Success & Variables can be understandable in below diagram

8
 IMPACT OF DELAYS & CLAIMS MANAGEMENT FOR CONSTRUCION PROJECTS

2.3 Project Success (PS)

Project success mainly has two major components: issues dealing

with the project itself and issues dealing with the customers. The

core-issues of time, cost, performance, use, satisfaction, and

effectiveness are presented along with items for their success

measurement.

2.4 Organizational Behavioral Factors (OBF)

Behavioral factors are based on organizational process assets mainly. Construction projects

most commonly caused factors are as below,

Delay interim payment from client,

Cooperation and communication nature among project team

2.5 Poorly Defined Contractual Matters (PDCM)

Contractual & litigation matter are the most crucial factors used for controlling & management

of delays and overheads. Poorly defined clauses often cause construction projects success to

jeopardy. Example of contractual matters may be supply related, work or quality related

No clarity for extension of time

Poorly written contracts clauses for quality control& standards

Supply chain management & procurements irrelevant penalties

9
 IMPACT OF DELAYS & CLAIMS MANAGEMENT FOR CONSTRUCION PROJECTS

2.6 Project Aligned Operational Matters (PAOM)

Construction projects operational matters are most visible identifier for pointing project success

or failure due to stake holders involvement. An effective &aligned operational system for

construction projects always promotes project organization performance & adds valued

reputation to the market.

Complete & fool proof drawings and specification

Minimum change orders

On time supply of equipment and materials

10
 IMPACT OF DELAYS & CLAIMS MANAGEMENT FOR CONSTRUCION PROJECTS

CHAPTER #3.0: RESEARCH METHODOLGY

3.1 Research Philosophy

Based on positivism philosophy, data is been collected on what defines a delay claim, how it is

handled, the types of responses, the information necessary to determine its validity, and other factors.

The respondents are asked about the basis of delay claim /category wise for analysis.

3.2 Research Approach

Inductive Approach

This involves working from observations towards an inference.

Deductive Approach

Deductive approach involves inferring that if propositions A and B are both true, then this implies

that C is also true. During this research deductive approach will be implemented, in order to determine

the impact of delay risk events experienced during the course of a project on the contractual

11
 IMPACT OF DELAYS & CLAIMS MANAGEMENT FOR CONSTRUCION PROJECTS

completion date of the project, deductive approach will be implemented to have successful project.

3.3 Research Design

3.3.1 Research Strategy

Primary data for this research is been collected from construction management and

general contracting/client/consulting firms located in Pakistan by using a

convenience sampling & survey method. The survey form are sent to all the potential

participants familiar with authors via email who have experienced delay claims in

their

practice;Thesurveyquestions,developedafteranextensiveliteraturereview,wererelatedto

thematerialand informationneededtoanalyzea claimwithintheconstructionindustry.

3.3.2 Research Choices

Qualitative research is by definition exploratory, and it is used when we dont know

what to expect, to define the problem or develop an approach to the problem. Its also

used to go deeper into issues of interest and explore nuances related to the problem at

hand. Common data collection methods used in qualitative research are:

Focus groups, In-depth interviews observation, Bulletinboards, Ethnographic

participation/observation.

Quantitative research is conclusive in its purpose, as it tries to quantify a problem and

understand how prevalent it is by looking for projectable results to a larger population.

For this type of study we collect data through:

12
 IMPACT OF DELAYS & CLAIMS MANAGEMENT FOR CONSTRUCION PROJECTS

Surveys (online, phone, paper), Audits, Points of purchase (purchase transactions),

Click-streams.

Below are types of research choices as per their methodology

Mono : focus either quantitative or qualitative analysis

Mixed : focus on both quantitative & qualitative analysis

Multi may focus on both mono & mixed.

Our research is based on mono type as per research subject requirement.

3.3.3 Time Horizon

It may be either Cross sectional or longitudinal study

Cross sectional studies area done once to gather requirements

Longitudinal studies are done at frequent period on certain sample

This research is cross sectional due to project time constraint.

3.4 Research Population

Research is conducted, based on below data for construction companies/consultants registered with

Pakistan Engineering Council (PEC).Sample size will be considered based on self-selection of major

categories only.

13
 IMPACT OF DELAYS & CLAIMS MANAGEMENT FOR CONSTRUCION PROJECTS

Constructors
Project Cost Limit (million rupees) No of Registered Contractor
Category

C-A No Limit 157

C-B Up to 4000 115

C-1 Up to 2500 319

C-2 Up to 1000 535

C-3 Up to 500 1207

C-4 Up to 200 2698

C-5 Up to 65 3274

C-6 Up to 25 9254

Total Population 272 (17559)

**Category C-A & C-B is self-selected for sampling

Top 5 Consultants Ranking

NESPAK 1

DESCON 2

EA Consulting 3

Siemens 4

ACE 5

14
 IMPACT OF DELAYS & CLAIMS MANAGEMENT FOR CONSTRUCION PROJECTS

Top 5 ContractorsRanking

Rockwell Group 1

Paragon Construction Ltd 2

Habib Rafiq Constructors 3

Habib Constructions 4

Izhar Constructions 5

3.5 Sample & Sampling Techniques

Sampling major techniques area as below

Probability : focus on equal participation through samples

Non Probability : focus on realistic population

Due to research paper time & industry constraints,

convenience type sampling is utilized & self-selection is

opted as mentioned above for major registered

contractors/consultants in Pakistan.

In accordance with above population size based on

Self-selection technique, recommendation of sample

Size count would be at least

15
 IMPACT OF DELAYS & CLAIMS MANAGEMENT FOR CONSTRUCION PROJECTS

3.6 Tools for Data Collection

Questionnaire has been adapted under lime light of below context references,

a. Alkass, S. & Harris, F.(1991).Constructioncontractor's claimsanalysis

b. Arditi, D. &Pattanakitchamroon, T.(2008).Analysismethodsintime-basedclaims

c. Baki, M. A.(1999).Delayclaimsmanagementinconstruction--astep-by-stepapproach.

d. Gulezian, R., &Samelian, F.(2003).Baselinedeterminationinconstructionlaborproductivity-lossclaims.

e. Yates, J. & Epstein, A.(2006).Avoidingandminimizingconstructiondelayclaimdisputesinrelationalcontracting.

All above identified variables & their questionnaire with scale counts will be implemented as below,

Project Success (PS) 05 Questions **Scale 1-5

Organizational Behavioral Factors (OBF) 5 Questions **Scale 1-5

Poorly Defined Contractual Matters (PDCM) 09 Questions **Scale 1-5

Project Aligned Operational Matters (PAOM) 09 Questions **Scale 1-5

** Scale referred as: 1-Strongly Disagree 2-Disagree 3-Uncertain

4-Agree 5-Strongly Agree

3.7 Data Analysis

About, twenty (125) questionnaires was distributed in individually selected 160 construction

companies. Out of which 120 questionnaires were found nalized in all aspects and are included in the

empirical analysis. The current research study mainly used (31) factors for independent variable and

their cause of project delay. Scaled items used to measure delay) this section explains how data

collected for the purpose of this thesis will be analyzed. To make analysis of data SPSS software

version 22 is used.

16
 IMPACT OF DELAYS & CLAIMS MANAGEMENT FOR CONSTRUCION PROJECTS

CHAPTER #4.0: DATA ANALYSIS, RESULTS AND FINDINGS

4.1 Reliability Analysis

4.2 Descriptive Analysis

17
 IMPACT OF DELAYS & CLAIMS MANAGEMENT FOR CONSTRUCION PROJECTS

4.3 Bivariate Correlation

4.4 Linear Regression Model

OBF

18
 IMPACT OF DELAYS & CLAIMS MANAGEMENT FOR CONSTRUCION PROJECTS

PDCM

19
 IMPACT OF DELAYS & CLAIMS MANAGEMENT FOR CONSTRUCION PROJECTS

PAOM

CHAPTER 5: DISCUSSION AND CONCLUSIONS

3.10 Research Questionnaire:

Below research questionnaire wasbeen developed to track impact & frequency of delays and claims,

Projects self-experienced by myself with in Pakistan & abroad were counted for below ratings.

20
IMPACT OF DELAYS & CLAIMS MANAGEMENT FOR CONSTRUCION PROJECTS

Frequency of dispute/claims (0-5<10) Impact on Project Success(0 to 10)

0-Low 5-Medium 10-High 0-Low 5-Medium 10-High

Classification of factorswhich caused delays &disputable Frequency Impact

claims (0-5<10) (0 to 10)

Organization Behavioral Factors (OBF)
Cooperation and communication nature among project team
Conflicting goals& objectivesof project parties
No trustbetween the parties
Qualification ofteam work
Negotiationslackedexperience
Lackof teamwork spirit
No trustonmediator
Other issues in humanbehavior
Poorly Defined Contractual Matters (PDCM)
Delay interim paymentfrom client
Extension of time
Inadequate scope definition
Incomplete drawings andspecification
Poorly written contractsclauses
Inaccurate estimating
Errorof pricing orcosting
Qualityoftechnical specifications
Planning errorsaccelerations
Contradictoryanderroneous informationinthe mass
ChangeOrders
Inappropriatecontractor selection
Inadequate risk identification/allocation

21
IMPACT OF DELAYS & CLAIMS MANAGEMENT FOR CONSTRUCION PROJECTS

Project Aligned Operational Matters (PAOM)

Site limitation,considering storage,access. Utilitiesetc
Problemswith authoritiesorneighborsaffecting
Changes in environmentalregulations
Force majeur
Consultants quality control procedures
Late supply of equipmentandmaterials
Poorlabor productivity
Variation inquantities
Badqualityof contractor'sworks
Inadequate site or soil investigationreport
Project Success(PS)
Impact of available funds
Qualification of project team members

Good PM'competence & leadership

Monitoring & control Factor
Change management control System

22
 IMPACT OF DELAYS & CLAIMS MANAGEMENT FOR CONSTRUCION PROJECTS

5.0 Research Questionnaire:

1) Wanjari, Swapnil. et. al (2016). Sadhana Volume #6 , Identifying factors causing cost overrun of

the construction projects in India, 679-693

2)Enz, D. L. (2006). IOWA state university thesis. IOWA: Construction project administration and

management for mitigating work zone crashes and fatalities, Copyright Daniel Lee Enz, 2009. All

rights reserved.

3) Pinto, Jeffrey K, Slevin, Dennis P (1988), Project Management Journal, definitions and

measurement techniquesWeb : https://www.pmi.org/learning/library/project-success-definitions-

measurement-techniques-5460

4) Society of Construction Law (2002) The Society of Construction Law Delay and

Disruption Protocol (Society of Construction Law, Wantage)

5) Williams T, F Ackermann, C Eden & S Howick (2008) Understanding the causes

and consequences of disruption and delay in complex projects: how system

dynamics can help in R Meyers (ed) Encyclopedia of Complexity and Systems

Science (Springer Verlag, Berlin)

23
Impact Of Delays & Claims Management on Construction Projects 24