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CHAPTER ONE

1.0 GENERAL INTRODUCTION

Construction industry has been characterized by several problems regarding constructor

clients‟ relationship which has posed setbacks in several construction projects. One of

these problems is effective claim management and administration. Claim is something

that is difficult to avoid in construction industry and therefore needs adequate

understanding as well as proper methods of preparing and administration of claim.

Ghanaian construction industry is no exception to this and is faced with challenges

related to claim administration.

1.1 BACKGROUND TO THE STUDY

The construction sector is a major economic engine in the Ghanaian economy; as the

nation‟s economic development and growth rely heavily on physical infrastructure

created by construction industry (Mensah 2009). The growth of this sector has been

parallel to the encouragement of new investments in the country. The sector has played a

crucial role in extending job opportunities for the Ghanaian labour force generating many

jobs for skilled, semiskilled and unskilled workers. According to Ghana Statistical

Service (2007), the industry contributes to 8.5% to Ghana‟s GDP and it engages 2.3% of

economically active Ghanaian population in 2002 (Amankwa, 2003).

Construction projects are conventionally designed to a client‟s brief by a design

organization, and a contractor is then appointed by the client to build the designed works.

It has been an unfortunate characteristic of the construction industries in many countries

that projects are seldom completed on time or to budget (Sheikh et al (2003). Agyarkwa-

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Baah and Fugar (2010) also opined that construction delay is a major problem facing the

Ghanaian construction industry. It is endemic and its economic and social impact cannot

be over emphasized. Construction projects are often delayed by unforeseen conditions

and poor management practices with the drive to build cheaper and faster products

sometimes will result in several problems for engineers and managers on the construction

site (Singh et al., 2006) which in most cases lead to contractual claims. Over the past

decades, construction projects are becoming more complex due to new standards,

advanced technologies and owner-desired additions and changes. While the successful

completion of projects has been thought to depend mainly on cooperation between the

contractor, consultant and owner, problems and disputes have always erupted due to

conflicting opinions as to the various aspects of design and construction (Essam, 2006).

The increased complexity of construction processes, documents, and conditions of

contracts has been contributing to higher possibilities of disputes, conflicting

interpretations, and adversarial attitudes (Surawongsin, 2002).

1.2 STATEMENT OF THE PROBLEM

Claims have become an inevitable burden in implementing construction projects in

Ghana and have such high impact on construction project‟s cost and time that an effective

claim management system in the industry deserves serious attention

(Chovichien&Tochaiwat, 2006). The concept of a construction claim is not new, but what

has been lacking are the methodologies that can help construction managers assess the

level of effectiveness in their construction claim process. The need for such a structured

instrument for auditing construction contractors‟ claim process cannot be ignored.

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In this respect, a contractual claim requires a proper procedure for claim preparation and

administration in construction industry in order to make contractors obtain value for

money. However, there is currently the lack of empirical understanding by Ghanaian

Contractors as to how to prepare and administer claims and the measures that can be

implemented for improvement. This study seeks to establish this knowledge base so as to

help all the involved contractual parties to possess the knowledge and the necessary

experience to deal effectively with claims arising during the contract implementation.

1.3 THE AIM OF THE STUDY

Establish an understanding of the nature and administration of claims so that measures

can be recommended for improvement.

1.4 THE OBJECTIVES

1. To identify the main causes of claims in the Ghanaian Construction Industry.

2. To identify the significant factors that hinder proper preparation of contractual

claims.

3. To identify the procedure for the proper preparation & administration of good

construction contractual claims by Ghanaian Building Contractors.

4. To use the selected factors to establish an understanding of the best procedure for

the preparation & administration of building construction contractual claims.

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1.5 RESEARCH METHODOLOGY

Because of the relatively fairly large population (80) which was dispersed, the structured

postal survey method was adopted for this research to achieve the aim and objectives in a

timely and economic manner. The data collection tool for this research took the form of a

structured postal questionnaire and personal interview targeted specifically at key

Contractors in the Ghanaian Construction Industry.

A self-administered postal questionnaire was used as an investigative tool.

The validity and reliability of the data collected and the response rate achieved to a large

extent on the design of the questions, the structure of the questionnaire (Robson 2002).

1.6 SCOPE OF WORK

The scope of study is focused on contractual claims by building contractors in classes

D1K1 and D2K2. The form of contract being used is the Standard Conditions of Contract

by Public Procurement Authority in Ghana.

1.7 LIMITATIONS OF THE STUDY

This study is conducted using a sample as a result of limited time and resources. The

researcher has recognized that the sampling size from the target population might not be

totally free from errors; that is to say that there might be some level of errors.

Also time constraint did not allow in-depth inquiry with key informants within the

construction industry in Ghana. This interaction could have yielded information which

could not be captured with the survey too (questionnaire).

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1.7.1 ORGANIZATION OF THE STUDY

The study is organized into five chapters, of which chapter one consists of the

introduction and background of the study, problem statement, objectives, and justification

of the study, methodology, scope of the study and its limitations as well as the

organization of the study and also the organization of the study. Chapter two consists of

critical review of relevant literature on the topic under consideration; Chapter three on the

other hand entailed the methodology adopted in conducting the study.

Chapter four contained the critical analysis and discussions of results obtained from the

study whilst chapter five presents a summary of the major findings, conclusions and

recommendations of the study.

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CHAPTER TWO

2.0 LITERATURE REVIEW

CLAIMS UNDER DIFFERENT FORMS OF CONDITION OF CONTRACT

2.1 INTRODUCTION

The form of contract being used in this project is the standard condition of contract under

Public Procurement Authority in Ghana. However, there are others, among them are the

International Federation of Consulting Engineers (FIDIC), the Institution of Civil

Engineers (ICE) under the name of New Engineering Contract (NEC), Joint Contract

Tribunal (JCT), Institution of Electrical Engineers (IEE), Institution of Mechanical &

Chemical Engineer and so on. The FIDIC is used throughout the world and is thus

referred to as International Standard. The FIDIC range of Contract comprises three major

forms which are usually known as Red Book, Yellow Book and Silver Book. All of them

contain a set of General Conditions, Guidance for preparation of particular conditions and

several model forms. Another frequently used standard form has been published by the

Institution of Civil Engineers (ICE) under the new name New Engineering Contract

(NEC). The NEC contract family is even broader than that of FIDIC and is accompanied

by guidance notes, flow charts and advisory documents. In the field of technical and

Electrical plant the MF/1 form having been published by the Institution of Electrical

Engineers for the Joint IMechE/IEE Committee on Model Forms of General Conditions

of Contract has become quite common.

All the aforementioned standard forms originate from common law Jurisdiction and/or

strongly influenced by common law doctrines and experiences. They have been drafted in

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English and no authentic translations exist. Only FIDIC has begun in recent years to

change its policy to license translations.

2.2 TYPES OF CONTRACTS

One of the most critical issues in apportioning risks is that prices are calculated and fixed

in the contract. The three ways to define the contract price which is to be paid to the

contractor for carrying out the works are Lump sum, cost reimbursable and re-

measurement contracts.

In the Lump sum contracts the contractor agrees a fixed price (a Lump sum price) for the

execution of certain specified construction works. Payment is received either when the

contractor has substantially completed the works or by installments according to a

payment schedule. The Lump sum price is usually agreed at the time of contract

formulation when the work starts. The contractor bears the risk of any additional

quantities with its estimation.

The cost reimbursable contracts are not based on pre-agreed price. The contractor is paid

for the works that are expended together with an additional payment called a fee to cover

profit and overheads of the contractor.

The re-measurement contracts are a combination of unit prices and measured quantities.

The parties agree to the rates of remuneration per unit but not the price of the work as a

whole. The rate in the bill will be multiplied by the actual quantity of each item fixed.

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2.3 COMMON CHARACTERISTICS OF STANDARD FORMS

2.3.1 The above-mentioned internationally used standard forms have some common

characteristics with which craftsmen and user should be familiar before using the forms.

These are the position of the Engineer, Certification and Time.

(a) POSITION OF THE ENGINEER

All the above-mentioned standard forms use the concept of certification and a certifier.

The certifier is a person or company, usually nominated by the employer, who is

authorized to certify payments, completion of works and to determine claims. The

certifier known under different names such as Engineer, Project Manager, Employer‟s

Representative, Architect etc. is a third person to the contract who is not a party to it.

However, the certifier derives its powers from the construction contract. The idea is that

the parties to the contract agree that certain rights and obligation only exist under the

condition that the certifier exercises his powers. Hence payments is only due if the

certifier evaluates and certifies the relevant amount. A claim is given, if the certifier has

determined it.

(b) CERTIFICATION

It is a common feature of construction contracts to provide for an independent third party

to issue certificates signifying particular events and usually embodying administrative

decisions. By means of the construction contract the parties to it agree that such kind of

certificates will be issued. The effect of such a certificate is thus no more than the parties

agree to it. Usually the function of the certificate is to record factual events involving the

certifier to form a judgment or giving an opinion. Whilst such a certificate may be

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conclusive as to what it purports to certify, generally the parties confer only a power and

duty to file interim binding certificates which can be challenged in further proceedings.

On the other hand standard forms quite often require the existence or issuing of a

certificate as a pre-condition for payments. It is usual to provide a contract provision for

evaluation and payment certification by the contract administrator. If no such certificate

exists the employer will be entitled to refuse payment. This leads to what happens when

the certifier improperly refuses to issue the certificate. It is not at all astonishing that a

considerable number of court cases exist, where the alleged improper conduct of a

certifier has been dealt with.

(c) TIME

The parties to a contract may make time an essential element. They do this when they fix

time for completion. If they have done so, they usually also agree to liquidated damages

(LAD) for failure to comply with time for completion. But what happens if the employer

prevents the contractor from complying with the time limits, either by instructions or by

failure to grant possession of the site? In this event there is a risk to slip into time at large,

which means that the employer loses his right to sue for liquidated damages in the event

of delay by the contractor. At common law the usual approach to preserve the employer‟s

entitlement to liquidated damages is that the contractor becomes entitled to require time

extension, if and when delay and disruption occurs which is attributable to the employer.

Usually the certifier has the power to determine whether the contractor is allowed to ask

for time extensions. In order to make his decisions transparent and comprehensible a

sophisticated system has been established. Quite often networks techniques are used

showing the critical path of the works. If and when delay and disruption have any impact

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to the critical path time extension has to be granted. It depends on the contract wording

whether time extension will be given for each impediment or not.

For large complex projects, most often dispute adjudication is the preferred dispute

resolution method. It can save enormous amounts of money and time compared with

traditional court proceedings or even arbitration. Disputes are settled contemporaneously

with the construction project, which allows the parties to free up time and resources and

allows personnel to work on more productive things.

2.4 CONTRACT FORMS OVERVIEW

FIDIC forms of contract, the MF/1 form of contract and the NEC family of contracts

comprise each a full set of model forms, based on recommended General Conditions

which can be adapted and altered for special purposes. The FIDIC and NEC contracts

respond to the need of a diversified range of contract forms. Thus the FIDIC contract

forms and the NEC family of forms provide different forms for different procurement

routes. For example FIDIC has published a measurement contract form for the

procurement of works designed by the employer (so called Red Book) and two design &

build contract forms (the Yellow and the Silver Book). A new Design-Build-Operate

Contract forms is available since 2007. Additionally FIDIC has published a special

Dredging and Reclamation works form in 2006 and a Consultant Agreement Model

Form, 4th

edition 2006. The NEC family is even more sophisticated and comprises

modules for management contracting, cost plus fee contracts.

FIDIC, NEC3 and MF/1 forms are administered by a nominated contract administrator.

Under a FIDIC form the contract administrator is called Engineer. NEC3 has split the

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function of the contract administrator in a Supervisor and a Project Manager, who are

required to be impartial, when acting as a certifier (Costain Ltd and others v. Bechtel).

According to the MF/1 form an Engineer will be appointed for contract administration

purposes and especially as a certifier.

All three of the standard forms provide detailed provisions as to the certification of events

and claims. The duty of issuing the certificates is given to the concerned contract

administrator. Sub-Clause 3.5 of the FIDIC forms expressly rules that the Engineer (the

certifier) has to act fairly taking due regard to all relevant circumstances. No such express

contract term exists in the NEC3 form.

Contracts rarely attempt to specify all the obligations of the parties. Some contracts, such

as the MF/1 form even exclude implied terms by stating that the obligations, rights and

liabilities of the parties are only those as expressly stated. Others exclude implied terms

only on particular issues. Civil law contractors and consultants are used to be held liable

for fit for purpose as to the works and the design whilst common law contractors and

consultants usually expect as their design duties to be protected by the standard of due

diligence and care.

If a duty of care exists, it is necessary to establish a breach of that duty in order to recover

damages. If the contractor or consultant is under a duty of fit for purpose, the design must

result in works that fulfill the purpose for which they are intended (Huse 2002). The

designer under NEC will not escape liability by showing that his design satisfies accepted

standards of engineering (Huse 2002). Thus the contractor‟s liability for his design is

almost certainly on a fitness for purpose basis (Eggleston 2006).

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2.5 DEFINITION AND NATURE OF CLAIMS

Claims by contractors for additional payments have been identified by commentators as a

major source of difficulty in the industry (Rook et al, 2004). Ethnographic research with

industry members reveals some key features of planning practices that underlie such

events which are sometimes planned at tender stage and sometimes during the course of a

project (Rook etal, 2004). According to Norazian and Hammah (2013), there is no

construction project which is contractually claim-free, even if successfully executed. This

is because, the nature of civil construction projects are unpredictable, and are therefore

claim sensitive no matter how carefully drawn the contract may be.

In general, the purpose of claims by contractors is to seek additional money over and

above the contract prices (Bunny 2003). For the Client, however, it means additional

costs, which in the end may make the project commercially unviable. According to

Harvey (2002), such a differing interest in the execution of a project will inevitably lead

to disputes.

The term “claim” has become a commonly used word in the construction industry around

the world and it has been reported that disputes that occur in construction projects are

continually increasing in the industry (Harvey 2002). Over the years, there were various

attempts to define the term “claim”. Some defined a claim in terms of its relation to the

original contract. Semple et al (1994) defined a claim as “an assertion to the right to

remedy, relief or property” or as “a failure to fulfill obligations under the contract”.

Jergeas and Hartman (1994) defined a claim as “any application by the contractor for

payment that arise other than under the ordinary contract payment provisions”. A more

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elaborate definition however, has been provided by Hughes et al in their reference

“Claims in Perspective”, where they defined a claim as “a request, demand, application

for payment or notification of presumed entitlement to which the contractor, rightly or

wrongly at a stage, considers himself entitled and in respect of which an agreement has

not yet been reached” (Hughes et al, 1992).

2.6 CLASSIFICATION OF CLAIMS

2.6.1 (a) Claims within the Provisions of the Contract

(b) Claims outside the Provisions of the Contract

(c) Claims in Tort

(d) Quantum Meruit (“as much as it is worth”) claims

(e) Ex-gratia Claims

(f) Claims Concerning Disruption and Delay (Design)

(g) Claims Concerning Delay on Site Handover/Rights of Way

(h) Claims Concerning the Execution of Works

2.6.2 CLAIMS WITHIN THE PROVISIONS OF THE CONTRACT

Claims made under the expressed provisions of a contract fall under this category.

According to (Harvey, 2001), they arise and are dealt with under the provisions of the

contract. Such types of claims form the largest part of claims and the terms of the

contract define the situations in which they may be made and how they may be handled.

For example the employer may institute a design change, and if such an unforeseen event

occurs there is a procedure set out in the contract whereby the contractor may claim

restitution by submitting a straightforward contractual claim (Harvey, 2002). Certain

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„common‟ breaches of contract, such as denied access or late information are also

covered by claims procedures included within the claims clauses of the contract.

Generally such claims include a certain type of claim such as, additional work, damages

or risks (Harvey, 2002).

2.6.3 CLAIMS OUTSIDE THE PROVISIONS OF THE CONTRACT

These claims are those which are either not made under the conditions of contract or are

those allegedly made under them but considered legally unenforceable by the employer

on the basis that they do not fall within their provisions [Haswell et. al, 1989, pp172].

Such claims are invariably concerned with the recovery of damages and even though they

may be outside the scope of the contract, they are nevertheless subject to resolution

within it (Harvey, 2001).

2.6.4 CLAIMS IN TORT

Tort is a legal term used to describe the various wrongs, which may give rise to civil

proceedings, mainly in the form of action for damages (Bunny, 1991). Although the law

of tort regulates a wide variety of unlawful behavior, those related to construction

include, nuisance, slander, libel, trespasses and negligence. For example, excessive dust,

noise, vibration, fumes, seepage, gasses, smoke etc. produced by someone may expose

him to liability for nuisance. (Bunny, 1991)

2.6.5 QUANTUM MERUIT: (“AS MUCH AS IT IS WORTH”) CLAIMS

Quantum Meruit claims are claims where work has been done but no contract or price has

been agreed. Then it may be claimed that the work should be valued and paid for what it

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is worth (Harvey, 2001). A quantum meruit claim may also arise, for example where

work is done on the basis of a letter of intent and there is no contractual liability

(Bubshait et. Al 1998).

2.6.6 EX-GRATIA CLAIMS

These are claims made with no foundation in the contract or at law but

only in a sense of “fairness” or equity (Harvey, 2002). Such claims depend upon „ex-

gratia‟ or „kindness payments „by the employer made in the particular circumstances;

sometimes-such payments are made to avoid or to terminate claims negotiations or a

dispute. An „Ex-gratia‟ claim might be made to recover cost incurred by the contractor,

the expenditure of which gave benefit to the employer, but for which there are no grounds

for recovery under the contract. According to (Harvey, 2001), the principal bases of

claim, which may be submitted, are among others the following:

1. Costs associated with the encountering of physical obstructions and conditions

which would not have been foreseeable by an experienced Contractor;

2. Errors in setting out which are based on incorrect written data Supplied by the

Engineer;

3. Loss or damage due to employer's risks;

4. Indemnities that the employer has contractually undertaken to assume;

5. Fossils or discovery of things of geological or archaeological interest;

6. Delays caused by other interfacing contractors;

7. Uncovering work that has already been completed;

8. Suspension of the work ordered by the Engineer;

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9. Late Possession of the site, which is as a result of a failure of the employer to give

the required handover;

10. Remedying defects not the responsibility of the Contractor;

11. Searching for defects which are not the fault of the Contractor;

12. Valuation of variations which may include alternations, additions and/or

omissions;

13. Provisional sums pending a proper valuation of the variation under;

14. Special Risks which very often include war, hostilities, contamination, riots and

other such risks;

15. Fluctuations of labor costs (if provided for) and subsequent legislation that

adversely affects the project.

2.6.7 CLAIMS CONCERNING DISRUPTION AND DELAY (DESIGNS)

One of the most common causes of claims in international contracts has been the late

issue of information and drawings, by the consultant to the contractor (Carnell, 2000).

Most contracts are carried out on the principle that the bidding documents include fairly

adequate details of drawings to enable the contractor to carry out the works but that

working drawings is necessary for the implementation of the work to be prepared on site

by the contractor. These drawings are then checked, approved and then returned to the

contractor for implementation. In the event that the contractor suffers delays due to the

late issue/approval of the drawings, then he may claim for any loss made (Carnell, 2000).

In principle fundamental changes in the overall design of a project should not occur,

unless there was a major oversight in the initial design preparation stage of the works. In

spite of this however it has been observed in at least 100% of the projects surveyed that

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there are, claims resulting from the change in the design of the works. This type

of claims can only be mitigated by investing an appropriate amount of expenses in

the pre-tendering/design stage of the works. This type of an investment will have to focus

on obtaining adequate site investigation reports, and other pertinent data.

2.6.8 CLAIMS CONCERNING DELAY ON SITE HANDOVER/RIGHTS OF WAY

Another major cause of claims in the construction industry has been the late handing

over, or rights of way related issues (Carnell, 2000). In regard to failure to give

Possession of site the contract documents do make a provision in the event that the

Client/Engineer fails to exercise his obligation in handing over of the site, and thus

causes the contractor to incur additional costs, the contractor is then entitled to claim

costs of delay.

In such an event the contractor must produce evidence that the costs that he claims he has

incurred due to the delay can be substantiated by accurate programming. In most cases it

may be impossible to accurately describe the delay caused by programming. On the other

hand, the actual delay due to the fault of the Client/Engineer or that due to the

contractor‟s own fault must also be clearly differentiated(Carnell, 2000).

Claims has become inevitable in construction industry with it causes not farfetched. One

of the causes of claim in construction is delay. According to Sambasivan and Soon (

2007) Delay in construction is a global phenomenon which affect many aspects of

economy of countries across the globe (Faradi and ElSayegh, (2006). Delay as a reason

that warrants claim is complex issue which is of vital to the parties to the construction

contract. Bolton, (1990), these issues concern entitlement to recover costs of delay or the

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necessity to prolong the project with the consequential entitlement to recovery costs for

adjustments to the contract schedules. Delay in construction can lead to dispute

regarding the agreement of the cost and recovery process since parties to the construct

will always want to avoid or reduce cost.

Norazian and Hammah (2013) opined that delays in construction can come about as a

result of the need for request for extension of time, to provide adequate time to complete

the project successfully. Most standard form of contract has provision that enumerate out

relevant events that warrant a contractor to apply time extensions; the contract often

expressly states that the claim should be made and dealt with timely as possible with the

delaying events. However, no specific explanation with regards to the assessment of the

claim is given, and this is left to the professionals involved in the project (Norazian and

Hammah, 2013).

2.6.9 CLAIMS CONCERNING THE EXECUTION OF WORKS

Such claims according to (Carnell, 2000) include:

1. Claims over Constructive Changes

2. Claims due to Acceleration of Works

3. Claims Concerning Unforeseen Circumstances

4. Claims Concerning the Payment Certification

5. Claims concerning Breach or Termination

6. Claims concerning Change of Legislation

7. Claims Concerning Delay and Disruption (due to Suppliers, Sub-Contractors etc.)

8. Claims Concerning Weather Conditions

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9. Claims Concerning Variations

10. Claims over Additions

11. Claims due to Omissions

12. Claims concerning Importation issues

13. Claims Concerning Design Error

14. Claims Concerning Acceptance/Handover/Refusal to Take Over Completed

Work

15. Claims due to Early Occupancy

16. Claims over Contract Administration Skills; the Role of the Consultant.

17. Bid Evaluation and the Incidence of Claims.

2.7 EFFECT OF CLAIMS ON CONTRACTUAL RELATIONSHIPS

Nowadays due to challenging situation, companies accept orders under conditions

which are not reasonable and even not achievable. Even though profit margins

are relatively low they still are barely acceptable by the clients.

Most of the time, contractors disregard safety and risk premiums in order not to

jeopardize the chance of receiving the project. Especially in a competitive

bidding system and public funded projects, it is not unusual for contractors to bid low

on a project and hope to recover the loss through negotiations and claims

(Rook et al, 2004). This approach is named by Zack (1993) as “bid your claims”

meanwhile the same approach is called as “opportunistic bidding” by S. Ping Ho and

Liang Y. Liu (2004). However, considering the shortcomings of this approach this

option is mostly neglected by contractors. Opportunistic bidding may lead to

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unanticipated results like damaging the relationship with the client therefore loosing the

possibility of getting new jobs from them. Moreover claim negotiations could end up

unexpectedly so that the case could be directed to courts. At this stage, risk of losing

the lawsuit should be considered thoroughly since the court will cost extra amount to

the contractor.

2.8 EFFECTIVE CLAIM MANAGEMENT

The construction process has become increasingly a dispute prone activity Riad et al.

(1994) cited and added; the distribution of risks between the owner and

contractor is tilting in favour of the owner, leaving the contractor with enormous risks,

including inflation, strikes, labor problems, adverse weather, accidents, shortages

of materials and skilled labor and unforeseen conditions at the construction

site. Furthermore, the contract between owner and contractor is getting more

complex day by day. The number of disputes increased significantly with

the increasing complexity and magnitude of projects. The disputes should be

resolved immediately, better if it is resolved within parties but not in courts, in order not

to hamper progress, achieve project objectives and go out of planned budget.

However, if one of the parties is not satisfied with the resolution, the

concept claim and claim management come into picture. Consequently, claims

within a project or an order can be directed toward the top (against client), from the side

(against a consortium partner) and/or toward the bottom (against the supplier).

Briefly, claim management is a process that starts with the agreement of a project and

gets completed with the finalization of the same. Furthermore, according to Proclaim

Management Solutions Company (www.proclaim.com.au);

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“Claim management is the application of the right resources to manage a portfolio of

losses arising from anticipated company activities. It involves combining the

right levels and amounts of internal technical expertise with systems and external

partners to minimize a company‟s exposure to a series of anticipated (and sometimes

unanticipated) exposures. When done correctly it should also produce risk management

reports, which can identify corporate exposures and form the basis of an effective risk

management strategy (Zack, 1993).

Jergeas and Hartman (1994) developed general guidelines to effectively manage

contractual claims and keep disagreements from escalating. These was cited by Norazian

and Hammimah (2013) and summarized as follows;

Record keeping: Accurate evidence including daily-progress reports, photographs

and video films, minutes of meeting, memos, transmittals, drawings, and many

others, are among the most important evidence that should be kept, maintained

and organized in a proper manner to facilitate contracts and project administration

tasks.

Knowledge of contract: often this is among the things neglected by contractors.

The Contractor should carefully read and understand their obligations and

responsibilities as imposed by the contract. Adherence to the contract is vital and

the contractor must fully comply with all contract requirements, especially those

that closely relate to extension of time, such as the variation clause, the claim

clause, etc., as failure to comply with these erode the chances of a claim‟s

success.

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Preservation of rights: in order to preserve their right to a claim, a written notice

of a potential claim should be served within the time stipulated in the contract.

Among the situations that require written notice to preserve the contractor‟s right

are; any contradiction in contract clauses; instruction to perform work in a

particular manner which differs from the original; any stop work order; owner

supply materials or equipment related matters; and many others.

Qualify change orders; Change order is sometimes imperative and any change

order that involves additional cost should be given proper attention prior to

negotiation and contract agreement

Planning and scheduling: Proper planning will ensure adequate resources are

available at the time needed and that adequate time is allowed for each activity

and all activities starts at appropriate times. As critical paths may change as the

work progresses, the client and the consultants should be kept informed by

regularly or periodically updating the activity schedule.

Proactive actions: a claim conscious attitude is encouraged, as it will facilitate the

claim management process. Proactive measures includes quick responses to

complaints from clients, requesting written confirmation on any important verbal

conversation or instruction, all form of requests on excusable delays should be

recorded and clarification on any instruction prior to the commencement of such

extra works should be made and understood by both parties.

2.9 CLAIM PROCESS FRAMEWORK

The basis for any contractual claim must be founded in a clause of contract, but although

identifying the circumstances where claim may be made, such clauses are often not

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exhaustive about how claim should be made. This often leaves much to the judgment of

the parties concerned and therefore much on which to disagree (Chester et al, 2005). On

the other hand, a well-established and developed claim management methodology

surely helps construction managers to assess the level of effectiveness for their

construction claim and audit their organizations‟ construction claim process capabilities.

As indicated by Kululanga et. al (2001) the need for such a structured instrument for

auditing construction contractor‟s claim process cannot be overemphasized for the

purpose of reducing time and cost increases. In order to be able to set up such a

methodology, the variables should be determined carefully. The researchers were

concerned with construction claim process and focused on variables that form it. Based

on literature review, the researchers modeled and developed the construction claim

process based on following variables. (Easton 1989; Diekmann et al. 1996; Kartam

1999);

i. Claim documentation

ii. Claim Identification

iii. Claim Notification

iv. Claim examination

v. Claim presentation

vi. Claim negotiation

2.10 CONSTRUCTION CLAIM DOCUMENTATION

Construction claim documentation constitutes a very important phase of claim

management and thus explained in detail in the following section.

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2.10.1 CONSTRUCTION CLAIM IDENTIFICATION

Construction Claim identification involves timely and accurate detection of a

construction claim. This is the first and critically important ingredient of the

claim process. For example, some construction claims of excellent merit are

lost solely due to failure of identifying them (Easton, 1989). Hence, an awareness

of job factors, which give rise to construction claims, is a skill that generally has to be

specially acquired. Such knowledge not only make construction managers sensitive

to possible construction claims but also exposes company-wide problems to

management.

2.10.2 CONSTRUCTION CLAIM NOTIFICATION

Construction claim notification includes alerting other party about a potential

problem in a manner that is not unpleasant as time limit requirements are very crucial and

critical. For example, a typical contract provision such as “shall be confirmed in writing

as soon as practicable and no later than twenty days” means exactly that (Sawyer and

Gillot, 1990). An initial letter of claim notice to the other party should be

short, clear, simple, conciliatory, and cooperative, that is to say, it should not contain any

hostile information and approach to the subject in order not to create tension between

parties at this early stage. The letter should point out the problem and alert to the

other party of the potential increase in time or cost.

25

2.10.3 CONSTRUCTION CLAIM EXAMINATION

This step involves establishing the legal and factual grounds on which the claim is going

to be based on. This should also involve the estimate of the possible recovery. Such

issues may have to be investigated carefully and in detail by interviewing staff who

worked on the project. The primary sources for claim examination could deal

with project files, video recording if possible, memos etc. That must be

used to prove the time and cost elements of the claim. Moreover analysis of

the existing data via available programs like Primavera, MS Project and office tools can

come to help at this stage to forecast roughly the route of the project.

2.10.4 CONSTRUCTION CLAIM PRESENTATION

A claim presentation should be logically built up, well organized and exactly

convincing. Therefore, claim should be written in a format that emphasizes the fact that

contract requirement was breached. A contractor must then demonstrate the

resulting harm was caused by the owner‟s acts. Feng (2000) has appropriately

said that presentation is best separated into two the entitlement and the quantum.

The former section should have the legal and actual basis while the latter should

provide the estimated recovery of the claim.

2.10.5 CONSTRUCTION CLAIM NEGOTIATION

According to Easton (1989) an organized and proper negotiation preparation

includes (1) ascertaining that all information is current and complete; (2)

minimizing the scope of negotiation beforehand so that insignificant points

26

should not precipitate a violent argument and disrupt progress; (3) knowing

one‟s weakness and trying to utilize weak points by conceding them in return from the

other party (4) foreseeing problems; and (5) anticipating the opposition‟s next move. To

benefit from this stage, a contractor needs experts that have skills for negotiation. It is

more important to be prepared than it is to be right. Therefore getting help from

experts or consultants may be advantageous if the project team dealing with the

claim is insufficient. Moreover, in construction disputes, it is often difficult to

determine the “right” whereas it is the preparation for negotiation that really counts.

2.11 CLAIMS DISPUTES AND THEIR HANDLING

Considering the unavoidability of such problems, dispute resolution mechanisms are

placed in many forms of contracts. Current dispute resolution mechanisms stipulated in

the FIDIC forms of contract place the Engineer as the central element in the dispute

resolution mechanism.

Prior to an amicably negotiated settlement, the contract documents usually require the

contractor to place his claim demands at the jurisdiction of the Engineer (Bunny 2003).

The Engineer is also required to act impartially. Should both parties consider the decision

of the Engineer to be fair, then the parties will agree to settle the issue. If one or both

parties, however, do not accept the decision of the Engineer, then an alternative dispute

resolution mechanism is instituted. This usually leads to negotiating amicable settlement

or finally to arbitration. Such occurrences of claims are the source of disagreements and

may sometimes result in disputes that could lead to arbitration proceedings. In case a

dispute occurs, forms of contract, such as the FIDIC form, set out details of the

submission and resolution of claims. These can be summarized as follows:

27

1. Submission of claims by contractor

2. Review of claims by the Engineer

3. Decision by Engineer

4. Negotiation and/or amicable settlement

5. Disputes review expert/board

6. Arbitration

The above stages of formulation and/or submission, assessment, repudiation, negotiation

of claims are in itself a complicated process (In order to avoid a complicated costly and

time consuming arbitration proceedings, parties to a contract may institute an Alternative

Dispute Resolution (ADR) as an option of claim settlement (Bunny 2003) which may

include ;

1. Direct Negotiation

2. Mediation

3. Conciliation

4. Mini-trail procedure

5. Claims review board (CRB); and

6. Pre-arbitral review board

2.12 METHODS OF CLAIMS DISPUTE RESOLUTION

2.12.1 DIRECT NEGOTIATION

Settlement of disputes through arbitration is a very costly process. Before the case is even

heard in court, the parties to a dispute may spend a substantial amount of money in legal

28

fees. Besides the substantial amount of money spent in pursing legal grounds to the

claim, relations at work may be strained.

This implies that as a first attempt negotiation is implemented in an attempt to carry out

an amicable settlement the simplest, cheapest, and quickest method of dispute resolution

is negotiation. According to, Gould (2004), negotiation “is a process of working out an

agreement by direct communication and it is voluntary and non-binding.”.. This is also a

form of an out-of-court settlement, and may maintain a conducive working atmosphere

between all parties. This form of negotiation or amicable settlement is carried out

between the parties to a claim, normally without a third party. In case the parties jointly

agree to the involvement of a third party, however, then this process is called mediation.

As can be seen above, claims may be resolved through negotiation. When negotiations

are not successful, however, the claimant, whether contractor, designer or owner, has the

option of resolving the claim through an alternative dispute resolution process such as:

2.12.2 MEDIATION

In the event that direct negotiations fail, then a third party is involved as a mediator

between the parties to a claim and help in the settlement of the claim. A mediator engages

in the task of persuading the disputants to change their respective positions in the hope of

reaching a point where these positions coincide (Bunny, 2003).

2.12.3 CONCILIATION

Conciliation is a dispute resolution procedure where the parties sit together in the

presence of a third party to discuss the way out. Usually the conciliator will draw up and

29

propose a solution, which represents what, he believes, is a fair and reasonable

compromise of the dispute, after having discussed the case with the parties concerned.

2.12.4 THE PUBLIC PROCUREMENT ACT AND CLAIMS MANAGEMENT

The Public Procurement Act of Ghana, 2003 (Act 663) set out the legal, institutional and

regulatory framework to secure fiscal transparent and public accountability in Ghana‟s

procurement system. The Act establishes five basic principles upon which the public

procurement is based World Bank, 2003). These pillars are: the legal and institutional

framework; standardized procurement procedures and tender documents; independent

control system; proficient procurement staff; and anti-corruption measures.

The objectives of Act 663 are to harmonize public procurement processes in the public

sector to ensure judicious, economic and efficient use of public resources and to ensure

that public procurement functions undertaken within the public sector are fair, transparent

and non-discriminatory.

The Act applies to procurement financed wholly or partly from public funds for the

procurement of goods, works, services and procurement financed by loans contracted by

the government of Ghana, including foreign aid and donor funds.

The Public Procurement Act 663 establishes the Public Procurement Board (PPB) now

PPA, Entity Tender Committees (ETCs) and Tender Review Boards (TRBs). It specifies

in clear terms the laws for procurement methods and thresholds, procedures, appeals and

complaints resolution procedures and disposal of stores. It authorizes the issuance of

30

enforceable regulations, Guidelines, Standard Tender Documents (STDs) and Manual

under the Act.

2.13 ADMINISTRATION OF CLAIM UNDER PUBLIC PROCUREMENT ACT (PPA)

Anvuuret. Al. (2006) reported that the performance of construction in Ghana is poor and

many reports have decried the public sector‟s lack of commercial edge in the exercise of

its procurement function. Contracts for both works and consultancy services take very

lengthy periods to reach financial closure and are subject to unnecessary delays (Crown

Agents 1998, Westring 1997). Westring (1997) attributes the causes of the delays to

extensive post-award negotiations, delays in the preparation of technical specifications

and drawings, delays in evaluation, an extensive system of controls, reviews and

approvals, and land ownership disputes. Project implementation has itself been

characterized by extensive cost and time overruns and poor quality (Crown Agents 1998,

Westring 1997, World Bank 1996, 2003). The process for payment to contractors and

suppliers is also long, involving over thirty steps from invoice to receipt of the payment

cheque, and often over-centralized, thus leading to delays in project execution (Eyiah and

Cook 2003, Westring 1997, World Bank 2003). Fiscal constraints and poor procurement

practices (as outlined above) have led to insecurity of funding for construction projects

and created a constant spectre of delayed payments and payment arrears to contractors

and consultants (World Bank 1996). The accumulated interest on late payments and the

frequent price changes due to extensive renegotiations, further exacerbate the funding

problem (World Bank 2003).

31

Consultants and contractors encounter difficulties in processing claims arising from

escalation clauses and are indirectly pressured not to push forward these claims (World

Bank 1996, 2003).

Many private sector entities delivering works and services to government establishments

try to limit their losses by cutting corners or abandoning the work altogether (Westring

1997). This often has negative consequences for project execution and leads to

adversarial relationships developing between contractors and clients. There is reduced

respect for contracts entered into with neither party to the contract expecting it to be fully

binding. Small contracts and ad hoc approaches are favoured at the expense of full-

fledged competitive bidding for economic sized projects. Long-term strategic planning by

both public and private sectors is difficult and so is the monitoring and control of

procurement (Ayirebi 2005, Westring 1997). Some procuring entities also resort to

making contractual payments before the due dates in order to prevent a budget allocation

lapse and advance mobilization funds provided to contractors can exceed considerably

the 15% allowable (Westring 1997, World Bank 1996). Contract management is very

poor and so are the training and working conditions of the construction workforce (World

Bank 2003).

Notwithstanding, the provision of the PPA there is a lack of empirical understanding on

the effective preparation and administration of claims by Ghanaian contractors and that is

what this study is seeking to explore.

32

CHAPTER THREE

RESEARCH METHODOLOGY AND DATA COLLECTION

3.0 INTRODUCTION

The outcome of any research is directly related to the methodology adopted and

consequently the success and validity of the research critically depends on the appropriate

selection and implementation of the research method (Naoum 1998; Fellows and Liu

2003; Saunders, Lewis and Thornhill, 2000). Naoum (1998) provides that once the

purpose of a study is determined and a thorough literature search has been completed,

one should be ready to design the research in detail. He maintains that research design is

an action plan for getting from “here” to “there” where “here” may be defined as the

initial set of questions to be answered, and “there” is some set of conclusion (answer)

about these questions. Between “here” and “there” may be found a number of major steps

including the collection and analysis of relevant data (Yin, 1994).

This section describes all the procedures that were followed to achieve the objectives set

for this study. The procedures adopted include all the information that were important to

the data, where those data were obtained and how they were obtained, the method used to

obtain the sample size, the difficulties and problems encountered during the search for

data, response rate and responses to the questionnaire, data collection and limitations.

Our main focus here shall be identification of main causes of contractual claims in the

Ghanaian Construction Industry, Significant factors that hinder proper preparation and

administration of contractual claim and the adoption of best procedure to preparation and

administration building construction contractual claims.

33

3.1 RESEARCH STRATEGY/APPROACH

This research took the form of a literature review and a survey using questionnaire

approach.

Generally two types of review with different purposes were identified. These are:

1. Integrative review which aims at summarizing past research by drawing overall

conclusions from separate studies which are believed to address related or

identical hypothesis (Torraco, 2005)

2. Theoretical review – which is the attempt to present the theories offered to

explain a particular phenomenon and to draw comparison between them (Read et

al, 2005).

This research took the integrative literature review approach as it was observed that it

suited the aim and objectives.

To determine the approach to the methodology of the research, the fundamental question

must be defined so that the research can be planned to follow logical steps from which

conclusions can be drawn.

The question that this research seeks to explore is the preparation and administration of

contractual claims in Ghana from the perspective of contractors under classes D1 and D2.

The study seeks to identify the main causes of claims in the Ghanaian Construction

Industry, to identify the significant factors that hinder proper preparation of contractual

claims, to identify the procedures for the proper preparation and administration of

contractual claims by Ghanaian Building Contractors and to use the selected factors to

establish the best procedure for the preparation and administration of building

construction contractual claims.

34

3.2 THE RESEARCH WAS CARRIED OUT IN THREE PHASES AS FOLLOWS:

Firstly, a literature search from academic journal worldwide and books were undertaken

to address the preparation and administration of Contractual Claims among Ghanaian

Building Contractors.

Secondly a questionnaire was designed and administered. It was administered to

contractors in the Western, Ashanti and Greater Accra Regions in a survey that sought to

provide data and opinion relating to the preparation and administration of claims. This

was supplemented with interviews.

Thirdly, the results of the questionnaire were analyzed statistically and the results used as

a basis for finding the perception contractors attach to the preparation and administration

of Contractual Claims in Ghana.

3.3 DATA COLLECTION

The primary source of data for this research was in the form of a questionnaire

administered to building contractors in the Ashanti Region in Classes D1 and D2. The

primary function of the survey was to collect information that can be analyzed to produce

conclusions in the areas of Preparation and Administration of Constructional Contractual

Claims in the Ghanaian Building Industry.

3.4 DEVELOPING THE QUESTIONNAIRE

The questionnaire was divided into three parts (Appendix 1). The first part contained

some questions that sought to identify the category of the company answering the

questionnaire. Respondents were asked to state whether they have been involved in

35

projects where claim was a problem and how it was tackled. They were also asked to

suggest ways of identifying, preparing and administering claims.

The second part of the questionnaire was originally developed by W.M. Chan (1994)

when he was pursuing his Master‟s Degree Programme at the Department of Civil and

Structural Engineering at the University of Hong Kong. It was modified to suit the

Ghanaian conditions.

This part of the questionnaire contained questions about the important level of 50

significant causes of claims. In this part a scale of 1 to 5 was used to measure the level of

important of each of the factors where I meant very little important and 5 extremely

important. Respondents were asked to check a number on the scale that reflected their

assessment regarding the different claim factors.

In the third part respondents were asked to comment on the possible effects of claims.

Respondents were to tick from the list of effects stated on the questionnaire, as many as

were applicable to them and to state any other effect they feel were not mentioned.

3.5 SAMPLE SIZE DETERMINATION

3.5.1 Building Construction Firms

Ahadzie (2007) pointed out that there are over 20,000 registered “building contractors”

with Ministry of Water Resources, Works and Housing and 12% of these building

contractors are in the Ashanti Region. Meaning, the region has about 2,400 registered

contractors. To determine the minimum sample size of these registered contractors in the

36

Kumasi metropolis, Kish (1965) formula which gives a procedure for calculating

minimum sample size has to be applied.

k

n =

1 + k

N

Where: n = Sample Size, k = s2 N= Population Size

v2

S = Maximum standard deviation in the population element (total error = 0.1 at a

confidence level of 95%)

V = Standard error of sampling distribution = 0.05

P = the population elements.

S2 = P (1-P) = 0.5 (1-0.5) = 0.25

Therefore in determining the minimum sample size of contractors in Ashanti region given

that

N = 2400

K = S2 = 0.25

V2 0.05 = 100

k

n =

1 + k

N

N = 100

1 + 100

2400

= 96

37

n = 96 means that, the minimum sample size of building contractors in Kumasi to be used

for the study is approximately 96. This 96 number of contractor will help in establishing

the actual size for the study. Saunders et al (2007) however put forward a formula for

calculating for actual sample size. This formula according to Saunders et al (2007)

considers irregularities such as refusal to respond to questionnaires, ineligibility to

respond to questionnaires, inability to locate respondent which occur during distribution

and collection of data. The formula is presented here as:

n x 100

na =

re%

Where na is the actual sample size required, n is the minimum sample size, re% is the

estimated response rate expressed as a percentage.

Oladapo (2005) and other researchers such as Newman and Idrus (2002), Ellhag and

Boussabaine (1999) and others, have indicated that a response rate of 30% is good

enough in construction studies. Thus given that n = 96, re% = 30. na

will compute as:

96 x 100

na

=

30

= 320

Drawing from the assertion from Oladapo (2005) and the formula from Saunders et al

(2007), 320 is the actual sample size, however 80 respondents was decided because the

time for the submission of this dissertation to the Department of Building Technology of

Kwame Nkrumah University of Science and Technology (KNUST) for assessment was

short.

38

3.6 SUMMARY

Although many different methods were available to this study, only clear and appropriate

methods were employed in this research. The above chapter revealed all the different

research methodology available for conducting a successful research work. In addition,

the chapter proceeded to give an insight into how the questionnaires were prepared,

distributed and managed. The methodology adopted for the research work and the

reasons for choosing the methodology. A quantitative style questionnaire was chosen

utilizing closed and open ended question formats. A total of Ninety-Six (96)

questionnaires were distributed to contractors in the nation and a total of eighty (80) were

received representing 83% rate of return. 60% of the questionnaires were received from

D1K1 contractors whilst 40% were received from D2K2 contractors.

Table 3.1

CONTRACTORS

FIRM

QUESTIONING ISSUED

RESPONSES

D1K1

55

48

D2K2

41

32

TOTAL

96

80

Total Number of Questionnaires issued = 96

Gross Total Response to the Questionnaire = 80

Overall response rate = 80 x 100 = 83%

96

39

In analyzing responses to the questionnaire, the Likert scale was utilized to aid

quick, easy and clear meaning to results. Lastly the limitations to the research

have been stated.

40

CHAPTER FOUR

PRESENTATION AND DISCUSSION OF RESULTS

4.0 INTRODUCTION

This chapter presents the results of the study and discussions of the results. The results

are presented in graphs and tables for simple for easy understanding.

4.1 Background Information

The study had interactions with a wide variety of professionals in different firms in the

construction industry. These included quantity surveyors, civil engineers, architects,

construction managers as well as technician engineers (Fig 1). Technician engineers

made nearly half the number of professionals that the study interacted with (48.8 per

cent). Quantity surveyors took the next largest share of 27 per cent. Construction

managers followed suit with 10 per cent, architects with 8.8 per cent and civil engineers

with 5 per cent.

Figure 1: Profession

27.5

5 8.8 10

48.8

0102030405060

Pe

rce

nta

ge o

f P

rofe

ssio

nal

Bo

die

s in

th

e C

on

stru

ctio

n In

du

stry

Professional Bodies

41

Higher National Diploma (HND) holders made up the bulk of the respondents that were

interacted with in the study. They accounted for 59 per cent of the total number of

respondents. Master of Science Degree holders followed suit with 24 per cent of the total

while Bachelor‟s Degree holders made up 17 per cent (Fig. 2). This shows that the

respondents are averagely possess good academic qualification for the performance of

their roles in their respective positions.

Figure 2: Educational Qualification

Most of the respondents (56.2 per cent) reported that their firms have recorded an annual

volume of work of between GH¢500,000 and GH¢1,000,000 according to Fig. 6. More

than a tenth (12.5percent) reported that their firms have recorded an annual volume of

work of over GH¢1,000,000 while 30 per cent said that theirs have recorded an annual

volume of between GH¢250,000 and GH¢500,000 over the last five years. At least all the

respondents reported to have undertaking some appreciable level of activities within this

period which make them eligible to provide valid information for decision making.

0

10

20

30

40

50

60

70

Higher National

Diploma

Bachelor of

Science

Master of Science

17%

59%

24%

42

Figure 3: Annual Volume of Work in the Last 5 Years GH¢

Respondents also said that their firms largely use standard conditions of contract PPA (80

per cent) according to figure 7 below. The rest however use both FIDIC and PPA (18

percent) as well as FIDIC only (2 per cent).

Figure 4: Form of Conditions of Contract

4.2 Claims Management and Administration

With this background, a majority of respondents 46.2 percent have had between 11 years

to 30 years of experience in preparing claims for their firms (Fig. 3). Another 43.8

31.2

56.2

12.5

0

10

20

30

40

50

60

250,000 - 500,000 500,000 - 1,000,000 Greater than

1,000,000

PE

RC

EN

TA

GE

RE

CO

RD

ED

ANNUAL VOLUME OF WORK

0

20

40

60

80

100

FIDIC Standard Condition

of Contract of PPA

FIDIC and PPA

2%

80%

18%

43

percent have had experience of between 6 years and 10 years preparing claims for their

firms. 7.5 percent of the respondents have 1-5 years of experience in claims preparation

while 2.5 percent of them have less than a years‟ experience in claims preparation. The

information above suggests that respondents to this study have enough experience in

claims preparation as reported by the respondents themselves.

Figure 5: Length of Experience in Preparing Claims for Firm

According to Figure 4, more than half (48.4 percent) of the respondents in this study get

assistance from their site managers in the preparation and administration of claims. A

fifth (20 percent) get assistance from a technician in the preparation of claims, 16.2

percent gets assistance from a quantity surveyor and 12.5 percent get assistance from the

managing director in the preparation and administration of claims. 2.5 percent claim that

they are assisted by no one.

2.5 7.5

43.8 46.2

05

101520253035404550

Less than 1

year

1-5 years 6-10 years 11-30 years

PE

RC

EN

TA

GE

LENGTH OF EXPERIENCE

44

Figure 6: Who Assists in the Preparation and Administration of Contractual Claim?

While 23.8 percent of the respondents claim to receive this assistance always in the

preparation and administration of claims, more than three-quarters (76.2) percent said

that they only receive this assistance sometimes.

Majority (63.8 percent) of the respondents said that their firm belonged to the D2K2

category of classes and 33.8 percent said that their belonged to the D1K1 category. 2.5

percent of the respondents could not state the category of class that their firm belonged to

As displayed in the pie chart of figure 5, 76 percent of the respondent‟s best described the

nature of the firm‟s activities as both civil and building engineering construction while 21

percent described theirs as building construction only. 3 percent said their firm was

involved in other activities apart from building and civil engineering construction –

notably, research and development activities.

12.5 16.2

48.8

20

2.5

0

10

20

30

40

50

60

Managing

Director

Quantity

Surveyor

Site Engineer Technician

Engineer

No One

PE

RC

EN

TA

GE

CIVILS AND BUILDING ENGINEERS IN CONSTRUCTION

45

Figure 7: Nature of Firm’s Activities

4.3 Identification and Notification

According to most of the respondents (91 percent) clients are always clients are always

notified when a claim is identified. However, 9 per cent of respondents said that their

firm sometimes notifies clients when a claim is identified.

Majority of respondents (71.2 percent) reported that notification of clients takes place

within 14 days after the claim has been notified. Others (28.8 percent) however said that

they do notify their clients within 14 days to 28 days after the claim has been identified.

After claims have been identified, 75 percent of the respondents said that records of the

claims are kept by the filing system and on the computer. The other 25 per cent however

reported that only the filing system is used for the recoding of claims.

In addition, 87.5 percent of the respondents reported that these records are always kept by

their firm while the rest (12.5 percent) admitted that sometimes the records are not kept.

0102030405060708090

Building Construction

Only

Building and Civil

Engineering

Construction

Other

21%

76%

3%

46

Every four out of five firms visited (79 percent); substantiate claims when identified in

writing according to respondents from these firms as represented in figure 8. Others

substantiate the claims by face-to-face interactions (16 percent). While a small minority

(2 percent) uses the telephone to substantiate claims, 3 percent said that their firms use

other means to do it.

Figure 8: How Claims are substantiated

0

10

20

30

40

50

60

70

80

90

Face to Face Writing Telephone Other

16%

79%

2% 3%

47

4.4 Preparation of Contractual Claims

Causes/Reasons for Contractual Claims

Respondents were asked to rank, in their estimation, the reasons for making claims as

captured in the Head of Claims in order of importance to their firms on a scale of 1 to 5;

where “1” signifies “Least Important” and “5” signifies “Most Important”

Table 4.1 Causes for contractual Claims

Causes/Reasons for Contractual Claims

N Minimum Maximum Mean

Std.

Deviation

Variation or modification of the quantity of the

works

80 3 5 4.90 .377

Late instructions or change of content of work 80 2 5 4.26 .590

Weather conditions 80 2 5 4.04 .737

Errors in description or quantities or any omission

there from

80 3 5 3.90 .377

Variation or modification of the design of the

works

80 3 5 3.64 .733

Suspension of the works 80 2 5 3.29 .640

Removal from site of any things brought on to site

and substitution of any such things

80 2 5 3.28 .595

Variation or modification of the quality of the

works

80 2 5 3.20 .560

Strikes 80 2 4 3.20 .604

48

Order of execution 80 1 4 3.19 .677

Any circumstance wholly beyond control of the

Contractor

80 2 5 3.08 .612

Damage to the Works including accepted risks 80 2 4 2.75 .490

Damage to Public Roads 80 2 3 2.70 .461

Facilities for other Contractors 80 2 4 2.64 .621

Nomination or appointment of any person 80 2 3 2.58 .497

Use of Materials from Excavation 80 1 3 2.45 .634

Ditto because of frost 80 2 3 2.34 .476

Opening up for inspection of any work covered up 80 2 4 2.30 .513

Statutory Undertakers 80 1 4 2.23 .527

Making of any defects due to frost 80 1 3 2.15 .424

Emergency works for Security 80 1 3 1.85 .480

Patent Rights 80 1 3 1.80 .604

Fossils 80 1 2 1.70 .461

Valid N (listwise) 80

Respondents recorded the Variation or Modification of the Quantity of the Works as the

most important reason for making claims in their firms with an average rank of 4.9 and a

standard deviation of 0.38. This is closely followed by Late Instructions or Change of

Content of Work (4.26 and standard deviation of 0.59) and Weather Conditions (4.04 and

standard deviation of 0.74). As displayed in figure 9, these three are followed in

downward order of importance by Errors in Description of Quantities or any Omission

49

there from, Variation or Modification of the Design of the Works, Suspension of the

Works, Removal from Site of any Things brought on to Site and Substitution of any such

Things, Strikes, Variation or Modification of the Quality of the Works, Order of

Execution any Circumstance Wholly Beyond Control of the Contractor, Damage to the

Works including Accepted Risks, Damage to Public Roads, Facilities for other

Contractors, Nomination or Appointment of Any Person, Use of Materials from

Excavation, Ditto because of Fossils, Opening up for Inspection of Any Work Covered

Up, Statutory Undertakers, Making of any Defects Due to Fossils, Emergency Works for

Security, Patent Rights and Fossils which comes in last with a rank of 1.70 with standard

deviation of 0.46.

50

Figure 9: Ranking of Causes of Claims

4.5 Procedures/Factors that helps most in Preparation and

Administration of Contractual Claims

Respondents were asked to consider and rank the factors and procedures that help most in

the administration of claims in their various firms on a scale of 1 to 5; where “1” signifies

“Least Important” and “5” signifies “Most Important”.

1.70

1.80

1.85

2.15

2.23

2.30

2.34

2.45

2.58

2.64

2.70

2.75

3.08

3.19

3.20

3.20

3.28

3.29

3.64

3.90

4.04

4.26

4.90

1.50 2.50 3.50 4.50

Fossils

Patent Rights

Emergency works for Security

Making of any defects due to frost

Statutory Undertakers

Opening up for inspection of any work covered up

Ditto because of frost

Use of Materials from Excavation

Nomination or appointment of any person

Facilities for other Contractors

Damage to Public Roads

Damage to the Works including accepted risks

Any circumstance wholly beyond control of the…

Order of execution

Variation or modification of the quality of the works

Strikes

Removal from site of any things brought on to site and…

Suspension of the works

Variation or modification of the design of the works

Errors in description or quantities or any omission…

Weather conditions

Late instructions or change of content of work

Variation or modification of the quantity of the works

51

Table 4.2: Descriptive Statistics for Procedures/Factors that helps most in Preparation

and Administration of Contractual Claims

N Minimum Maximum Mean

Std.

Deviation

Meeting Minutes Documents 80 3 5 4.88 .402

Client Correspondence 80 4 5 4.78 .420

Letters 80 2 5 4.63 .624

Site Diary 80 3 5 4.61 .539

Contract Modifications 80 3 5 4.56 .548

Field Reports 80 3 5 4.53 .595

Contractual Correspondence 80 3 5 4.46 .655

Drawings 80 4 5 4.45 .501

Invoices 80 3 5 4.38 .560

Weather Condition Record 80 3 5 4.28 .595

Agreement Document 80 4 5 4.25 .436

Financial Statements 80 3 5 4.20 .582

Consultant Correspondence 80 3 5 3.88 .682

Photography 80 3 5 3.75 .666

Time Records 80 3 5 3.71 .599

Specification Addenda 80 2 5 3.59 .669

Labour Change 80 3 5 3.25 .540

52

Respondents ranked Meeting Minutes and Documents as the most important factor that

helps in the administration of claims giving that factor an average rank of 4.88 and

standard deviation of 0.40 (Fig. 9). This factor is followed in a descending order by

Client Correspondence, Letters, Site Diaries, Contract Modifications, Field Reports and

Contractual Correspondence. Following are Drawings, Invoices, Weather Condition

Records, Agreement Documents, Financial Statements and Consultant Correspondence.

Following suit are Photography, Time Records and Specification Addenda while Labour

Change comes in last as the least important factor that helps with the preparation and

administration of claims with an average rank of 3.25 and standard deviation of 0.54.

Figure 10: Rank of Procedures/Factors that help most in Preparation and Administration

of Contractual Claims (Mean)

3.25

3.59

3.71

3.75

3.88

4.20

4.25

4.28

4.38

4.45

4.46

4.52

4.56

4.61

4.62

4.78

4.88

3.00 3.50 4.00 4.50 5.00

Labour Change

Specification Addenda

Time Records

Photography

Consultant Correspondence

Financial Statements

Agreement Document

Weather Condition Record

Invoices

Drawings

Contractual Correspondence

Field Reports

Contract Modifications

Site Diary

Letters

Client Correspondence

Meeting Minutes Documents

53

4.6 Important Steps in Preparing Contractual Claims

Respondents in the study were asked to rank the additional steps involved in the

preparation of contractual claims in order of importance to their firms on a scale of 1 to 5;

where “1” signifies “Least Important” and “5” signifies “Most Important”. Table

Table 4.3 Descriptive Statistics on Important Steps in Preparing Contractual Claims

N Minimum Maximum Mean

Std.

Deviation

Notification of the client 80 4 5 4.90 .302

Determination of contractual

clause (s) claim is to be notified

80 3 5 4.53 .746

Determination of payment clause is

to be sought

80 3 5 4.24 .830

On the average, respondents ranked “Notification of the Client” as the most important

step in the preparation of contractual claims, giving that step an average rank of 4.9 with

standard deviation of 0.30 (Fig. 9). Next, respondents ranked the “Determination of

Contractual Clause(s) on which claim is to be notified as the next most important step

with an average rank of 4.5 with standard deviation of 0.75. The least ranked important

step for the preparation of contractual claims is the “Determination of Payment Clause to

be sought with an average rank of 4.2 with standard deviation of 0.82.

54

Figure 11: Importance (Rank) of Additional Steps in Preparing Contractual Claims

4.7 Factors that hinder administration of Contractual Claims

Respondents were also asked to rank the factors that hinder the administration of

contractual claims in order of importance to their firms on a scale of 1 to 5; where “1”

signifies “Least Important” and “5” signifies “Most Important”.

Table 4.4: Descriptive Statistics for Factors that hinder administration of Contractual

Claims

N Minimum Maximum Mean

Std.

Deviation

Delays caused by the client 80 4 5 4.83 .382

Lack of claim documentation and tiring

procedures

80 3 5 4.76 .484

“Fear of the Consultant” Phenomenon 78 2 5 4.63 .705

Lack of contract awareness by the site 80 3 5 4.26 .707

4.24

4.52

4.90

3.80

4.00

4.20

4.40

4.60

4.80

5.00

Determination of

payment clause is to

be sought

Determination of

contractual clause(s)

claim is to be notified

Notification of the

client

PA

YM

EN

T O

F C

LA

US

E

IMPORTANCE OF ADDITIONAL STEPS IN PREPARING CLAIMS

55

team

Oral instruction from the client 78 2 5 3.88 .624

Valid N (listwise) 78

Delays Caused by Clients came up as the most important factor that hinders the

administration of contractual claims according to all the respondents. That factor was

ranked 4.83 with standard deviation of 0.38 above the other factors (figure 12). The

second most important factor that hinders the administration of contractual claims is Lack

of Claim Documentation and Tiring Procedures being ranked on the average, 4.76 and

standard deviation of 0.48. Coming in third is “Fear of the Consultant” Phenomenon

followed by Lack of Contract Awareness by the Site Team as fourth most important.

Lastly, Oral Instruction from the Client is the least ranked factor that hinders the

administration of contractual claims according to all the respondents with an average rank

of 3.88 with standard deviation of 0.62.

56

Figure 12: Rank of Factors that Hinder Administration of Contractual Claims

4.8 Dispute Resolution Methods in Resolving Claims

Respondents were then asked to rank the methods of dispute resolution that their firms

use in resolving claims issues in order of importance to their firms on a scale of 1 to 5;

where “1” signifies “Least Important” and “5” signifies “Most Important”.

Mediation was ranked as the most important dispute resolution method used by the firms

in resolving claims issues according to all the respondents in the study.

Table 4.5: Descriptive Statistics for Dispute Resolution Methods in Resolving Claims

N Minimum Maximum Mean Std. Deviation

Mediation 80 4 5 4.98 .157

Conciliation 80 3 5 4.95 .314

Adjudication 80 2 5 4.05 .549

3.88 4.26

4.63 4.76 4.82

0

1

2

3

4

5

6

Oral instruction

from the client

Lack of

contract

awareness by

the site team

“Fear of the

Consultant”

Phenomenon

Lack of claim

documentation

and tiring

procedures

Delays caused

by the client

RA

NK

ED

FA

CT

OR

S

FACTORS THAT HINDER ADMINISTRATION OF CLAIMS

57

Arbitration 80 1 5 3.38 .802

Litigation 80 1 3 1.58 .632

Respondents ranked that method highest (4.98 with standard deviation of 0.16).

Following Mediation is Conciliation as the most important dispute resolution method for

resolving claim disputes. This was ranked 4.95 but with standard deviation of 0.31 on the

average by respondents. Adjudication is the next preferred method with an average rank

of 4.05 and standard deviation of 0.55 followed by Arbitration (3.38 and 0.80 standard

deviation) and finally Litigation (1.58 and 0.63 standard deviation).

Figure 13: Rank of Dispute Resolution Methods in Resolving Claim Disputes

1.58

3.38

4.05

4.95 4.98

0

1

2

3

4

5

6

Litigation Arbitration Adjudication Conciliation Mediation

58

4.9 Attitude of Management towards Contractual Claims

Preparation and Administration

Respondents were split on their response on how often management was actively

involved in major claims decisions (Fig. 14). 48.8 per cent said that their management

was always involved in major claims decisions and 48.8 saying that they are involved

sometimes. A 2.5 per cent minority said that their management was never involved in

major claims decisions.

More respondents (51.2 per cent) thought that their management always track

performance of the claim administration compared to48.8 per cent who think that theirs

do that sometimes. A minority of 36.2 per cent said that their management always attend

periodic review meetings compared 63.8 per cent who said that theirs do attend

sometimes.

As much as 61.2 per cent of respondents were of the view that management is only

sometimes able to resolve claim disputes compared to 33.8 per cent who were confident

that their management are able to resolve these disputes always

59

Figure 14

Most of the respondents (65 per cent) said that clients take up to two weeks to respond to

claims notices and a considerable proportion (27.5 per cent) said that theirs take up to

three weeks. Few (2.5 per cent) held that their clients respond within one week and the

same proportion said it takes clients more than four weeks to respond.

According to a majority of respondents (70 per cent), contractual claims usually make up

between 11 per cent to 20 per cent of the actual contract sum while a quarter of

respondents said that theirs make up between 21 per cent and 30 per cent of the actual

contract sum. Contractual claims percentage too claims in general mostly make up 11 per

cent to 20 per cent according to 67.5 per cent of respondents while according to 25 per

cent, their make up between 21 per cent and 30 per cent.

48.8 51.2 36.2 33.8

48.8 48.8 63.8

61.2

2.5 5

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

How Often

Management is

Actively Involved in

Major Claims

Decisions

How often

management track

performance of the

claim administration

How Often

Management Attends

Periodic Review

Meetings

How Often

Management

Resolves Claim

Disputes

Never Sometimes Always

60

Figure 15: Percentage of the Contractual Claim as Compared to the Contract Sum and

Contractual Claims Percentage to Claims in General

In the event of a dispute however, firms are mostly represented in negotiations by both

management and professional involved according to 76.2 per cent of respondents while

nearly a quarter of them said that the professional represents the firm alone.

In all cases, the relationship between the firms and the clients has continued to be cordial

after a claims situation.

4.10 Discussions

Respondents in the survey are widely experienced in terms of claims preparation.

These however get support largely from site managers but also from technicians, quantity

surveyors and in some cases managing directors.

This support is not a regular thing since just over a fifth said that such is received always.

2.5

70

25

2.5

0

10

20

30

40

50

60

70

80

0 – 10% 11 – 20% 21 – 30% 31 – 40%

5

67.5

25

2.5

0

10

20

30

40

50

60

70

80

0 – 10% 11 – 20% 21 – 30% 31 – 40%

61

Firms duly notify clients when claims are identified which process does takes mostly

within a fortnight of the claims being identified.

Firms always keep records of claims largely through the filing system and electronically

on a computer. These claims when identified are then substantiated mostly in writing but

sometime s through face to face interactions. This is in adherence to guidelines espoused

by Jergeas and Hartman (1994) which was cited by Norazia and Hamimah (2013). This

action will in effect reduce disputes and improve claim administration by the contractors

in Ghanaian construction industry.

The leading reason or cause of contractual claims is the variation or modification of the

design of the work followed by late instructions or change of content of work as well as

weather conditions while. This also affirms the work of Harvey (2001) .The three least

important reason for claims are Emergency works for security, Patent rights and fossils in

that order.

Minutes of meetings as well as supporting documents are the most important factor that

helps in the administration of claims. This is followed by client correspondence and

letters. Factors that help least are Time records, specification addenda and labour change.

The most important step in the claims processing process is the notification of the client

before comes determination of the contractual clause(s) claim is to be notified on. Also

important is determination of how payment clause is to be sought.

According to the study, delays caused by clients are the most important factor that

hinders the administration of contractual claims as was espoused by Cornnel (2000). This

is followed by lack of claim documentation and tiring procedures, “fear of the consultant”

62

phenomenon and lack of contract awareness by the site team. Oral instruction is the least

important factor that hinders administration of contractual claims

Dispute methods used most in resolving claim disputes is mediations. Also important in

resolving disputes is conciliation and adjudication. Arbitration and litigation are

considered least as methods used in resolving claim disputes. However, the study

revealed all these methods has been used for dispute resolution as described as reported

by respondents who have had experience in construction industry. This is in support of

Bunny‟s work in (2003)

Management are actively involved in major claim decisions be it always or sometimes.

Management also tracks the performance of claim administration and sometimes attend

periodic review meetings but management is does not most of the times able to resolve

claim disputes as reported by the respondents in this study.

63

CHAPTER FIVE

SUMMARY OF FINDINGS CONCLUSION AND RECOMMENDATION

5.0 INTRODUCTION

This chapter presents summary of findings from the study, conclusions arrived at and the

recommendations made for decisions and further investigations

5.1 Summary of Findings

From the study, it was discovered that most of the respondents were very experienced in

terms of claims preparation. They reported, however, that they get support which is

largely from site managers but sometimes from technicians, quantity surveyors and in

some cases managing directors. This support is reported as not regular since just over a

fifth said that such is received always while others reported that support is sort in some

few cases.

In terms of notification of claims, it was revealed that firms duly notify clients when

claims are identified which in most instances are prompt and immediate after claims

identification. This in effect does not amount to a challenge to firms engaged in

construction in Ghana.

Firms always keep records of claims largely through the filing system and electronically

on a computer. These claims when identified are then substantiated mostly in writing but

sometime s through face to face interactions.

64

The study discovered that the leading reason or cause of contractual claims is the

variation or modification of the design of the work, which is followed by late instructions

or change of content of work as well as weather conditions while the three least important

reason for claims are Emergency works for security, Patent rights and fossils in that

order.

Minutes of meetings as well as supporting documents are the most important factor that

helps in the administration of claims. This is followed by client correspondence and

letters. This provides documentation that substantiates the claims made by firms.

According to evidence gathered from this study factors that help least are Time records,

specification addenda and labour change.

The most important step in the claims processing process is the notification of the client

before it comes to determination of the contractual clause(s) is to be notified on. Also

important is determination of how payment clause is to be sought.

Delays caused by clients are the most important factor that hinders the administration of

contractual claims. This is followed by lack of claim documentation and tiring

procedures, “fear of the consultant” phenomenon and lack of contract awareness by the

site team. Oral instruction is the least important factor that hinders administration of

contractual claims.

Dispute methods used most in resolving claim disputes is mediations. Also important in

resolving disputes is conciliation and adjudication. Arbitration and litigation are

considered least as methods used in resolving claim disputes. Proper dispute resolution is

65

crucial and should be integral part of claim administration and could be used to guide

Ghanaian Building Contractors so as to avoid lengthy litigation.

5.2 CONCLUSIONS

5.2.1 Main Causes of Claims

The main causes of claims in the Ghanaian construction industry are:

1. Variation or modification of the design of the work;

2. Late instructions or change of content of work;

3. Unfavourable weather conditions.

5.3 PREPARATION AND ADMINISTRATION OF CLAIMS

1. For proper preparation and administration of contractual claims, Ghanaian firm

duly notify clients within a fortnight of the claims being identified.

2. Firms always keep records of claims largely through the filing system and

electronically on a computer.

3. The claims identified are then substantiated mostly in writing but sometimes

through face to face interactions.

4. Additional procedures include the use of minutes of meetings as well as

supporting documents, client correspondence and letters.

66

5. Delays by clients, lack of claim documentation and tiring procedures, “fear of the

consultant” phenomenon and lack of contract awareness by the site team are the

factors that hinder proper preparation of contractual claims

6. As much as possible Ghanaian Building Construction firms avoid arbitration and

litigation as methods used in resolving claim disputes. They would prefer

mediation as a priority method if negotiation fails after which conciliation and

adjudication may be considered.

5.4 RECOMMENDATIONS

According to the research, the main causes of contractual claims are variation or

modification of the quantity of the works. This takes more than 50% of the causes of

claims by contractors. It is recommended that consultants in collaboration with the clients

should analyze their needs critically before the design in order to avoid the incessant

modifications.

The research also indicated that the significant factors that hinder preparation and

administration of contractors‟ contractual claims are delays caused by the client, lack of

claim documents and tiring procedures, fear of the consultant, lack of contract awareness

by the site team and oral instructions for the client.

It is recommended that the clients, after notification by the contractors, should respond

immediately within 14 days in order to avert delays. The contractors as well as clients

should document all contractors‟ claims in order to minimize the delays in contractual

claims preparation and administration.

67

Most of the contractors fear to pursue their rightful claims in that they may not be

considered for future projects. The contractors should be bold to pursue claims which

nuclei are founded on the relevant clause(s) contained in the General Conditions of

Contract and can be completely substantiated.

The site team should be conversant with the claim clauses, heads of claims and the

different forms of contact. Knowledge of the claim clauses in the contract will provide

parties to the contract to negotiate effectively for their interest when the situation under

the contract demands that.

It is also recommended that all instructions from the client or the consultants should be

documented but not in oral form. This form of communication will to a large extent

provide reliable evidence of claim to either party should the need arise. Oral

communication lack the ability to be stored and can be distorted as it passes from one

party to the other hence can lose it effectiveness and value.

The Public Procurement Act does not have a general procedure for contractual claims.

However, it talks briefly on claims procedure involving delays in performance. The

Public procurement Act could be improved to provide clear procedures to guide

contractual claim. This will help reduce disputes in Construction industry as well as

improve contractor clients‟ relations in Ghana as every party to a contract will become

aware of his or her responsibility should the conditions in the contract demand that

obligation.

It is therefore, recommended that procedures for our contractors to honour in the event of

contractual claims;

68

a) The contractor should notify the client within reasonable number of days after the

identification of the claim.

b) The contractor should keep contemporary records as may reasonably be necessary

to support any claim he may subsequently make.

c) The contractor should substantiate the claims by determining the contractual

clause(s) claim is to be notified as well as the payment clause(s).

(d) The contractor should send to the client/consultant an account giving detailed

particulars of the amount claimed and the ground upon which the claim is based.

69

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Contractors' Claim Process Framework", Journal of Construction Engineering and

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Thai Construction Industry, Master Thesis School of Civil Engineering Asian Institute of

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Claim in Malaysian Construction Industry.

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Construction Law Seminar: Introduction to the basic.

73

SURVEY QUESTIONNAIRE

Dissertation Questionnaire (Construction Firm)

Section A: General Information

(Please tick the appropriate box)

Q1. Please, what is your profession?

Quantity Surveyor [ ] Civil Engineer [ ]

Architect [ ] Construction Manager [ ]

Technician Engineer [ ] Other (Please Specify) ____________________________

Q2. What is your educational Qualification?

Higher National Diploma (HND) [ ]

Bachelor of Science (BSc) [ ]

Master of Science (MSc) [ ]

Doctor of Philosophy (PhD) [ ]

Other (Please Specify) __________________________

Q3. How long have you been preparing claims for your firm?

Less than 1 Year [ ]

1 – 5 Years [ ]

6 – 10 Years [ ]

11 – 30 Year [ ]

Greater than 30 Years [ ]

74

Q4. Please indicate who assists you in the preparation and administration of contractual

claim?

Managing Director [ ] Civil Engineer [ ]

Architect [ ] Quantity Surveyor [ ]

Site Engineer [ ] Construction Manager [ ]

Technician Engineer [ ]

Other (Please Specify) _____________________

Q5. How often does he assist you?

Always [ ] Sometimes [ ]

Never [ ] Other (Please Specify) _________________

Q6. Which category of class does your firm belong to?

D1K1 [ ] D2K2 [ ]

Q7. Which of the following best describes the nature of the Firm‟s activities?

Building Construction Only [ ]

Civil Engineering Construction Only [ ]

Building and Civil Engineering Construction [ ]

Other (Please Specify) ____________________________________

Q8. Please indicate an annual volume of work your company has executed in the last 5 years.

Less than GH¢250,000 [ ] GH¢500,000-GH¢1,000,000 [ ]

GH¢250,000-GH¢500,000 [ ] Greater than GH¢1,000,000 [ ]

75

Q9. What form of Conditions of Contract do you use?

Pink Form [ ] FIDIC [ ] Standard Condition of

Contract of PPA [ ] J C T [ ] I C E [ ]

Other (Please Specify) ______________________

Q10. How often do you notify the client, when a claim is identified?

Always [ ] Sometimes [ ]

Never [ ] Other (Please Specify) _____________________

Q11. When do you notify the client after contractual claim has been identified?

Less than 14 days [ ] 14-28days [ ]

29-42days [ ] 30-56days [ ]

57-84 days [ ] Other (Please Specify) _________________

Q12. How do you keep records of the claim?

Filing [ ] Computer [ ] Filing & Computer [ ]

Never [ ] Other (Please Specify) _________________

Q13. How often do you keep records of the claim?

(a) Always [ ]

(b) Sometimes [ ]

(c) Never [ ]

(e) Other (Please Specify) ___________________________________

76

Q14. How do you substantiate the claim?

Face to Face [ ] Writing [ ] Telephone [ ]

Never [ ] Other (Please Specify) ________________________

Q15. Please rank the following steps including any additional steps in preparing contractual

claims? (1 is least important 5 is most important)

No.

Degree of Importance

1

2

3

4

5

i.

Determination of contractual clause (s)

claim is to be notified.

ii.

Determination of payment clause is to

be sought.

iii.

Notification of the client

iv.

Other (Please Specify)

77

Q16. Please rank the following head of claim including any other claim based on their degree

of importance found in that contractual claim? (1 is least important, 5 is most important).

No.

Degree of Importance

1

2

3

4

5

i. Variation or modification of the

design of the works

ii. Variation or modification of the

quality of the works

iii. Variation or modification of the

quantity of the works.

iv. Late instructions or change of

content of work

v. Errors in description or quantities

or any omission there from.

vi. Removal from site of any things

brought on to site and substitution

of any such things.

vii.

Order of execution

viii.

Suspension of the works

ix.

Ditto because of frost.

x.

Opening up for inspection of any

work covered up.

xi.

Making of any defects due to frost.

xii.

Emergency works for Security.

xiii.

Use of Materials from Excavation.

78

xiv.

Fossils

xv.

Patent Rights

xvi.

Damage to the Works including

accepted risks

xvii.

Weather conditions

xviii.

Strikes

xix.

Any circumstance wholly beyond

control of the Contractor

xx.

Damage to Public Roads

xxi.

Facilities for other Contractors

xxii.

Nomination or appointment of any

person

xxiii.

Statutory Undertakers

xxiv.

Other (Please Specify)

79

Q17. Which of the following information helps most in the preparation and administration of

contractual claims? (1 is least important, 5 is most important).

No.

Degree of Importance

1

2

3

4

5

i.

Letters

ii.

Meeting Minutes Documents

iii.

Weather Condition Record

iv.

Photography

v.

Client Correspondence

vi.

Consultant Correspondence

vii.

Agreement Document

viii.

Drawings

ix.

Labour Change

x.

Site Diary

xi.

Contractual Correspondence

80

xii.

Field Reports

xiii.

Specification Addenda

xiv

Contract Modifications

xv.

Invoices

xvi.

Financial Statements

xvii

Time Records

xviii.

Other (Please Specify)

Q18. In the last 5 years, what is the contractual claims percentage to your claims in general?

0 – 10% [ ] 11 – 20% [ ] 21 – 30% [ ]

31 – 40% [ ] 41 – 50% [ ] Other (Please Specify)

___________________________

Q19. How often is management actively involved in major claims decisions?

Always [ ] Sometimes [ ]

Never [ ] Other (Please Specify) _____________________________

Q20. How often does management track performance of the claim administration?

Always [ ] Sometimes [ ]

Never [ ] Other (Please Specify) _____________________________

81

Q21. How often does management attend periodic review meetings?

Always [ ] Sometimes [ ]

Never [ ] Other (Please Specify) _____________________________

Q22. How often does management resolve claim disputes?

Always [ ] Sometimes [ ]

Never [ ] Other (Please Specify) _____________________________

Q23. Please rank the following factors including any additional factors based on their degree of

importance in hindering administration of contractual claims (1 is least important, 5 is

most important).

No. Degree of Importance

1 2 3 4 5

1. Delays caused by the client

2. Lack of claim documentation

and tiring procedures

3. Lack of contract awareness by

the site team

4. “Fear of the Consultant”

Phenomenon

5. Oral instruction from the client

6. Other (Please Specify)

Q24. How long does the client take to respond?

One Week [ ] Two Weeks [ ] Three Weeks [ ]

Four Weeks [ ] Other (Please Specify) _____________________________

82

Q25. What is the percentage of the contractual claim as compared to the contract sum?

0 - 10% [ ] 11 - 20% [ ] 21 - 30% [ ]

31 – 40% [ ] 41 – 50% [ ] Other (Please Specify)

___________________________

Q26. In the event of dispute, who represents the firm in negotiation?

You alone [ ] You and the Management [ ]

Management alone [ ] Other (Please Specify) _______________

Q27. Please rank the following dispute resolution methods in order of importance in resolving

your claim disputes? (1 is the least important, 5 is the most important).

No. Degree of Importance

1 2 3 4 5

1. Mediation

2. Conciliation

3. Adjudication

4. Arbitration

5. Litigation

6. Other (Please Specify)

Q28. What has been your relationship with the client after the claim?

Unfriendly [ ] Very Unfriendly [ ]

Cordial [ ] Very Cordial [ ]

83

APPENDIX 1

Descriptive Statistics

Causes/Reasons for Contractual Claims N

Minimu

m

Maximu

m Mean

Std.

Deviation

Variation or modification of the quantity of

the works

8

0

3 5 4.90 .377

Late instructions or change of content of

work

8

0

2 5 4.26 .590

Weather conditions 8

0

2 5 4.04 .737

Errors in description or quantities or any

omission there from

8

0

3 5 3.90 .377

Variation or modification of the design of the

works

8

0

3 5 3.64 .733

Suspension of the works 8

0

2 5 3.29 .640

Removal from site of any things brought on

to site and substitution of any such things

8

0

2 5 3.28 .595

Variation or modification of the quality of

the works

8

0

2 5 3.20 .560

Strikes 8

0

2 4 3.20 .604

84

Order of execution 8

0

1 4 3.19 .677

Any circumstance wholly beyond control of

the Contractor

8

0

2 5 3.08 .612

Rank of Causes or Reasons for Claims 8

0

2.52 3.35 2.932

1

.20636

Damage to the Works including accepted

risks

8

0

2 4 2.75 .490

Damage to Public Roads 8

0

2 3 2.70 .461

Facilities for other Contractors 8

0

2 4 2.64 .621

Nomination or appointment of any person 8

0

2 3 2.58 .497

Use of Materials from Excavation 8

0

1 3 2.45 .634

Ditto because of frost 8

0

2 3 2.34 .476

Opening up for inspection of any work

covered up

8

0

2 4 2.30 .513

Statutory Undertakers 8

0

1 4 2.23 .527

Making of any defects due to frost 8 1 3 2.15 .424

85

0

Emergency works for Security 8

0

1 3 1.85 .480

Patent Rights 8

0

1 3 1.80 .604

Fossils 8

0

1 2 1.70 .461

Valid N (listwise) 8

0

Descriptive Statistics

Procedures/Factors that helps

most in Preparation and

Administration of Contractual

Claims N Minimum Maximum Mean

Std.

Deviation

Meeting Minutes Documents 80 3 5 4.88 .402

Client Correspondence 80 4 5 4.78 .420

Letters 80 2 5 4.63 .624

Site Diary 80 3 5 4.61 .539

Contract Modifications 80 3 5 4.56 .548

Field Reports 80 3 5 4.53 .595

86

Contractual Correspondence 80 3 5 4.46 .655

Drawings 80 4 5 4.45 .501

Invoices 80 3 5 4.38 .560

Weather Condition Record 80 3 5 4.28 .595

Agreement Document 80 4 5 4.25 .436

Rank of Procedures/Factors that

helps most in Preparation and

Administration of Contractual

Claims

80 3.82 4.71 4.2449 .20062

Financial Statements 80 3 5 4.20 .582

Consultant Correspondence 80 3 5 3.88 .682

Photography 80 3 5 3.75 .666

Time Records 80 3 5 3.71 .599

Specification Addenda 80 2 5 3.59 .669

Labour Change 80 3 5 3.25 .540

Valid N (listwise) 80

87

Descriptive Statistics

Factors that hinder

administration of Contractual

Claims N Minimum Maximum Mean

Std.

Deviation

Delays caused by the client 80 4 5 4.83 .382

Lack of claim documentation and

tiring procedures

80 3 5 4.76 .484

“Fear of the Consultant”

Phenomenon

78 2 5 4.63 .705

Lack of contract awareness by the

site team

80 3 5 4.26 .707

Oral instruction from the client 78 2 5 3.88 .624

Valid N (listwise) 78

Descriptive Statistics

Dispute Resolution Methods in

Resolving Claims N Minimum Maximum Mean

Std.

Deviation

Mediation 80 4 5 4.98 .157

Conciliation 80 3 5 4.95 .314

Adjudication 80 2 5 4.05 .549

Arbitration 80 1 5 3.38 .802

Litigation 80 1 3 1.58 .632

Valid N (listwise) 80

88

Descriptive Statistics

Important Steps in Preparing

Contractual Claims N Minimum Maximum Mean

Std.

Deviation

Notification of the client 80 4 5 4.90 .302

Determination of contractual clause

(s) claim is to be notified

80 3 5 4.53 .746

Determination of payment clause is

to be sought

80 3 5 4.24 .830

Valid N (list wise) 80