J.S. Held Releases Insights on Risks & Opportunities Expected to Impact Organizations in 2025
Read MoreThe material in this paper was researched, compiled, and written by J.S. Held. It was originally published by AACE International Cost Engineering Journal.
The AACE International Claims & Dispute Resolution Subcommittee ("CDR Subcommittee") is a group of professionals and experts actively involved in the preparation, analysis, management, mitigation, and resolution of claims and disputes on projects. The general purpose of the CDR Subcommittee is to provide a neutral, professional forum where professionals involved in the claims and dispute process can meet, discuss, and develop technical content about issues of common interest. These claims-related issues are typically focused on the analyses of schedule delay, disruption, and damages quantification, which also include assessments of entitlement and responsibility.
While the CDR Subcommittee is dedicated to claims and disputes, many of the other AACE International technical functional areas become a component of the various claims analyses. For example, some of the AACE technical subjects that are frequently addressed during a claims analysis include:
As such, it would be useful for practitioners in these subject areas to be more familiar with claims and disputes and how their work product could influence the analyses typically performed in claims on which experts often rely. The balance of this article serves as an introduction to and primer for claims and dispute resolution for professionals interested in this practice area.
Claims and disputes are different albeit related issues. The definition for each term represents that a dispute is a general disagreement, while a claim involves a more formal process, including written demands. [1]
While the above definitions suggest the dispute or claim is between an owner and contractor, disputes often involve other parties, including designers, subconsultants, construction managers, subcontractors, insurers, and funding partners, among others. The nature and involvement of parties will be determined by the project delivery method [3] and form of contract agreement. [4]
An important document referenced in each of the above definitions is the contract, or the legal agreement between the parties. The contract typically includes the following types of documents: the Agreement and Addenda; General, Special, and Supplemental Conditions; technical specifications, plans, and drawings; contractor’s proposal and bid; and other documents specifically referenced in the agreement. In a typical design-bid-build model for construction, the owner hires a designer to prepare the contract documents in accordance with industry standards. The owner then procures a contractor to construct the project as described in contract documents. Contractors bid on the project based on their planned project execution means and methods with the expectation that the design documents are complete and any material variations will be paid via change order.
With respect to claims and disputes, there are key clauses, concepts, and requirements that the contract should address, and which project participants must read, understand, and follow. The clauses for these key subjects are usually found in the general conditions and include:
Disputes and claims typically arise when a change is encountered within the context of the Contract and the parties cannot come to an agreement on the issues being negotiated.
Disputes and claims can be caused by numerous reasons, including but not limited to:
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As a result of one or more of the above-listed causal events, a contractor might believe that it is entitled to additional compensation and/or time and requests a change order, variation order, or a Request for Equitable Adjustment (“REA”). On the other hand, the owner does not believe the contractor is entitled to the change and denies the request or makes a counteroffer. At this point, the contractor can then file a claim and proceed with the matter through the dispute resolution process detailed in the Contract.
Most contracts provide a process for initiating and resolving disputes including the venue, jurisdiction, and forum for conducting proceedings. In general, the processes include a decision maker and can be categorized into a self-decided group or adjudication.
Regardless of the dispute resolution process method used, the practices to manage, document, demonstrate entitlement, analyze, and quantify claims are similar. As discussed earlier in this article, the contract should identify required information to be submitted with a change order or claim, including a Time Impact Analysis and detailed cost records. Failing to follow the process can result in losing the opportunity for recovery.
Generally, it is the claimant’s responsibility to prove a claim. AACE International Recommended Practice (“RP”) No. 120R-21, Demonstrating Entitlement for Contract Change Orders or Claims – As Applied in Engineering, Procurement, and Construction, is a primary technical resource that addresses necessary elements to determine technical entitlement and provides guidelines concerning the various elements to be considered for use in developing a change order or claim. As such, a change order, variation, claim, or REA submittal package should include and address the following elements:
When a dispute transitions into a formal claim, there are additional parts of the process to understand while preparing to submit the claim. The process for finalizing and submitting a formal claim should consider:
This article introduces the general concepts associated with claims and dispute resolution, the subject matter in which the CDR Subcommittee specializes. The goal is to provide various other AACE technical subject practitioners perspective into the claim process so they can better understand the influence that their work product could have on the various analyses typically performed in a claim and on which experts often rely. If you have interest in any of topics addressed herein, please reach out to CDR Subcommittee members or check the AACE Resource library for technical papers and recommended practices published under the CDR Subcommittee banner.
We would like to thank John Ciccarelli, PE, CCP, PSP, FAACE, for providing insight and expertise that greatly assisted this research.
John Ciccarelli is a Director in J.S. Held's Construction Advisory Practice. John has more than 25 years of experience performing expert consulting and project advisory services for clients in the engineering and construction industries globally. John’s experience includes dispute resolution and litigation support, construction cost assessments and audits, risk management assessments, construction project controls and management, and construction oversight. He regularly focuses on schedule delay, loss of productivity, and cost damage quantification issues and participates in various phases of claims management and litigation, including change order review; discovery, mediation, and settlement discussions; preparing expert reports and briefs; and presenting expert witness testimony at formal legal proceedings.
John can be reached at [email protected] or +1 917 779 0131.
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