DISPUTES AND CLAIMS IN CONSTRUCTION INDUSTRY.

Execution of a construction project is a process run from a specified date up to completion of designated task within specified period with specified materials and qualities under a legally binding document (Contract Agreement) between two parties. Construction projects is a complex and risky process requiring extensive planning, engineering, procurement, and construction management, which involve the major protagonists, owners, contractors, design professionals, consultants, Architectures, suppliers etc. When one or more of the terms or conditions set out in a contract has been broken by one of the parties involved in a contract (breaching contract), may lead to legal action and claims for damages. The term claim is not a defined term in books. However Pursuant to Sect. 194 German Civil code claim means the right to require another person to do or to refrain from doing an act. According to Mr.Bunni a claim means an assertion of a right to money, property, or to a remedy (Bunni 2005, p.293). In a FIDIC contract the claim means something in between the mere assertion for additional monies or for extension of Time for completion. (Axel-Volkmar Jaeger and Gotz-Sebastian Hok, 2009, p.357). Contractors claim is a legitimate request for additional compensation (cost and/or time) on account of a change in the terms of the contract (R.Max wideman, 1990,p.2) The topicality of claims has been accentuated by the fact that contractors keep chasing extras, and clients keep pursuing cost savings. Claims on construction projects are project risks and it is important to prepare for the uncertainty of such risks. While each project risk may have uncertainty associated with it regarding the degree that a particular risk will manifest itself on a given project, the identification of major project risk factors is a relatively advanced science. However, the essence of the ability to reduce the frequency and severity of claims is the identification of these construction project risk factors and dealing with them and/or providing for them in the construction or design contracts. Over the past three decades, the construction industry has experienced an increase in claims, liability exposures and disputes, along with an increasing difficulty in reaching reasonable settlements in an effective, economical and timely manner (Barrie & Paulson, 1992). Claims are now considered as a way of life for the construction industry (Bradley & Langford, 1987). The wide range of participants, the increasing size of projects, enhanced competitive tendering, increasing technological complexity, uncertainty in construction environments, unbalanced risk allocation, and complex and confused inter dependent relationships brought about by some project procurement systems, contribute to construction claims. Disputes will inevitably arise on any construction site. While it is neither possible nor realistic to expect that all claims can be avoided, although many projects end up without any claims.(In some cases, the claim values were almost as high as the original contract value). But the possibility of arising claims can be minimised at the planning stage of the project and most of the claims can be properly resolved.

Conducting an effective risk management analysis and proper designing and planning at the early stage will assist all parties to complete a project successfully with minimal claims and disputes. Claims under any form of contract can be complex. They throw up a number of themes and issues. During the settlement process of claims the first part of dealing is handled by the Engineer and trying to settle them impartially within the terms of the Contract having regard to all the circumstances during execution. But since the contractor is not ultimately bound by the engineers decision, The contractor can dispute the engineers decision and has the right to resort to Dispute Adjudication Board, arbitration, Litigation or other dispute resolution methods.

Basil Sooriyaarachchi Quantity Surveyor, Arab Ship Building and Repairing Yard (ASRY)