Resolving contract claims is a time consuming and costly business. Any organization may have several contracts in dispute at any one time. Retrospectively looking at claims rather than concentrating on matters ahead is detrimental to the project and the business as a whole, not to mention the hidden costs involved in a dispute resolution process that could last two years or longer.

There is ever-increasing pressure to achieve cost delivery and profit certainty in both capital and operational expenditure investment. The resolution of contract claims through proper and appropriate claims defense, rebuttal, and preparation of counter-claims is ultimately one of the critical factors that dictates the likely success of a project and ultimately overall business performance.

It is probably fair to say that, for many, the consideration of contract claims only starts when the claim is presented, bringing to mind stable doors and bolting horses. Quite simply, consideration at this time is too late and can prove to be more costly and damaging to the project and the business.

However, with transparency as part of the contract process, organizations can ensure that risks are properly managed. What’s more is that both the client and contractor need to understand the full liabilities and the final costings and how those liabilities and final costings have arisen.

Most engagement models include provisions for additional cost claims and extensions to delivery dates, and even if the model does not contain such provisions, other rights not expressly stated in the engagement model may subsist in specific jurisdictions such as inflation costs, damages, etc. As a result, there is almost an invitation given to make such claims.

It is therefore critical that positioning, defense, and rebuttal of contract claims start during the project procurement and contract strategy stage. The engagement model and specific terms and conditions that form part of the agreement must include access to and copies of information that may be required to evaluate and assess entitlements. In other words, evidence as to purported costs, resources, and delays to the intended program should not be left until receipt of a claim. The terms and conditions at the outset should provide for this occurring throughout the project’s duration. As an alternative, a properly managed cost-plus model may be considered.

Once appropriate terms and conditions are put in place to provide for transparency as to costs, resources, and program activity, the next stage is to ensure that the project is set up to effectively manage the defense, rebuttal, and preparation of claims or alternatively to properly manage the proper costs allocated to a project if a cost-plus model is used.

This includes considering evidence surrounding matters such as purported costs and resources, intended versus actual build programs, critical path analysis and reasons for delay, purported acceleration measures and costs, and contract commentary and correspondence in respect to contract entitlement or otherwise.

With these measures in place, all purported claim entitlements or properly incurred costs can be spotted early, and appropriate resolution strategies can be considered and implemented to establish the best position to defend and rebut claims and prepare appropriate counterclaims.

For projects without these measures in place, specific contract audits can be carried out to establish what needs to be done to minimize exposure to contract claims, manage their resolution, and achieve a final outcome and overall settlement.

To avoid the bolting horse, the stable door needs to be closed. The right measures in place at the right time (i.e., at the procurement and contract strategy phase) mitigate the risk of spiraling project costs and time-consuming retrospective activity in resolving submitted claims.