POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

SANTA MARIA BULACAN CAMPUS

Km. 39 Sitio Gulod, Brgy. Pulong Buhangin, Municipality of Santa Maria, Bulacan

BACHELOR OF SCIENCE IN CIVIL ENGINEERING

BSCE ELEC 3

CONSTRUCTION PROJECT CONTROL AND ADMINISTRATION

CONSTRUCTION MATERIALS WORKMANSHIP,

CLAIMS & DISPUTES AND RISK ALLOCATION

GROUP 5

Bernabe, Dennisse
Carable, Fernando
Domen, Ricardo
Juan, Ivy Lorraine
Nicolas, Arjay
Paulino, Collin
Salvador, Nicole
Sangcap, Dustin Pierre
CONTENTS

Construction Materials Workmanship ............................................................................ 3

Construction Claims and Disputes ................................................................................. 4
Contractual Problems in Construction Industry......................................................... 4
Types of Construction Claims ....................................................................................... 5
Sources of Claims ........................................................................................................... 6
Creation of claims.......................................................................................................... 7
Claims Management .................................................................................................... 7
Disputes in Construction Industry ................................................................................. 8
Alternative Dispute Resolution (ADR) ........................................................................ 10
Advantages of ADR ................................................................................................. 10
Construction Risk Allocation .......................................................................................... 11
CONSTRUCTION MATERIALS WORKMANSHIP
WORKMANSHIP is the degree of skill with which a product is made or a job done. It might
also be described as craftsmanship or handiwork.

Poor construction methods and workmanship is responsible for the failure of buildings and
structure. The poor construction methods and workmanship is caused due to negligence and
inadequate quality control at construction site. The effects of some of the poor construction
methods are discussed below:

o Incorrect placement of steel

Incorrect placement of steel can result in insufficient cover, leading to corrosion of the
reinforcement. If the bars are placed grossly out of position or in the wrong position,
collapse can occur when the element is fully loaded.

o Inadequate cover to reinforcement

Inadequate cover to reinforcement permits ingress of moisture, gases and other
substances and leads to corrosion of the reinforcement and cracking and spalling of the
concrete.

o Incorrectly made construction joints

The main faults in construction joints are lack of preparation and poor compaction. The
old concrete should be washed and a layer of rich concrete laid before pouring is
continued. Poor joints allow ingress of moisture and staining of the concrete face.

o Grout leakage
Grout leakage occurs where formwork joints do not fit together properly. The result is a
porous area of concrete that has little or no cement and fine aggregate. All formwork
joints should be properly sealed.

o Poor compaction
If concrete is not properly compacted by ramming or vibration the result is a portion of
porous honeycomb concrete. This part must be hacked out and recast. Complete
compaction is essential to give a dense, impermeable concrete.

o Segregation
Segregation occurs when the mix ingredients become separated. It is the result of
o dropping the mix through too great a height in placing (chutes or pipes should be
used in such cases)
o using a harsh mix with high coarse aggregate content
o large aggregate sinking due to over-vibration or use of too much plasticizer

Segregation results in uneven concrete texture, or porous concrete in some cases.

 o Poor curing
A poor curing procedure can result in loss of water through evaporation. This can cause
a reduction in strength if there is not sufficient water for complete hydration of the
cement. Loss of water can cause shrinkage cracking. During curing the concrete should
be kept damp and covered.

o Too high a water content

Excess water increases workability but decreases the strength and increases the porosity
and permeability of the hardened concrete, which can lead to corrosion of the
reinforcement. The correct water-to-cement ratio for the mix should be strictly enforced.

CONSTRUCTION CLAIMS AND DISPUTES

The construction industry is a complex and competitive environment in which
participants with different views, talents and levels of knowledge of the construction process
work together. In this complex environment, participants from various professions, each has its
own goals and each expects to make the most of its own benefits.

In the construction industry, since differences in perceptions among the participants of

the projects, conflicts are inevitable. If conflicts are not well managed, they quickly turn into
disputes. DISPUTES are one of the main factors which prevent the successfully completion of the
construction project. Thus, it is important to be aware of the causes of disputes in order to
complete the construction project in the desired time, budget and quality.

CONSTRUCTION CLAIMS are also found in almost every construction project. It is the
seeking of consideration or change by one of the parties involved in the construction process.
Nowadays, the substantially increasing volume of claims are the result of the rising complexity of
the projects, the price structure of the construction industry and the legal approach taken by a
lot of owners and contractors.

CONTRACTUAL PROBLEMS IN CONSTRUCTION INDUSTRY

CONSTRUCTIONAL PROJECT CONTRACTS are the agreements made by construction
project owners (contract issuing parties) and construction enterprises (contractors) according to
basic construction procedures in order to complete specific construction and installation
projects and to define the rights and obligations of both parties.

The parties assigned to a construction contract are not competitors among themselves,
but associates who have different functions to perform to achieve the common goal for
accomplishing the prescribed end-product. Despite this fact, differences of opinion leading to
conflicts do arise, since in the final analysis, each party has to protect his interests and financial
gain. Most of the happenings that could occur during the currency of a contract cannot be
foreseen.
TYPES OF CONSTRUCTION CLAIMS
1. Acceleration Claims

Acceleration claims occur when the contractually established construction schedule is pushed
toward an accelerated completion. Schedule acceleration may be pursued due to delays or
unexpected impacts of external forces. When acceleration occurs, extra costs are accrued in
order to hire the necessary additional labor, compensation for overtime, and the provision of
extra resources.

There are two kinds of accelerated claims: direct acceleration and constructive acceleration.
Direct acceleration occurs when the employer explicitly orders the acceleration of work.
Constructive acceleration occurs when the employer denies a contractors valid request of
schedule extension. However, acceleration claims are not associated with any voluntary
acceleration that might occur should a contractor wish to expedite the schedule in order to
alleviate delays, save money, or simply move on to the next project.

2. Change Claims

Change claims occur when the construction site, or construction project, encounter some kind
of change that violates the stipulations designated in the contract. Code revisions, incomplete
specifications, unclear contract drawings and bidding documents, are just a few harbingers of
change claims. The results of these changes directly impact the project and site, altering
schedules and costs.

3. Construction Delay Claims

Construction delay claims occur when the construction projects schedule is directly impacted,
slowing or stalling production. Construction delays are often the result of unanticipated events or
circumstances which prevent the plan of work from being fulfilled. When assessing construction
delay claims, three factors are heavily focused upon and emphasized: the delays source, the
delays direct impact, and the delays anticipated ramification. Construction delay claims are
the most common type of claim filed in the construction industry.

4. Differing Site Conditions Claims

Differing site conditions claims occur when the site physically differs from its contractual
description. For instance: if a contract does not disclose existing subsurface ground conditions
(whether knowingly or unknowingly) and an unforeseen obstruction, such as an underground
rock formation, prevents the continuation of the established method of construction, a differing
site conditions claim would be filed.

5. Design/Construction Defect Claims

Design and construction defect claims occur when a project lacks quality workmanship.
Incompetently chosen hardware, poorly specified guidelines, or lack of quality control, may all
result in construction defects. Sometimes, construction defects occur when substandard
materials are supplied in an effort to minimize costs, regardless of material insufficiency.

6. Force Majeure Claims

Force Majeure claims occur as the result of extraordinary circumstances, or Acts of God. Legal
changes, governmental changes, natural disasters, labor strikes, and severe weather, may all
herald Force Majeure claims. With a Force Majeure claim, neither involved party is entitled to
compensationhowever, excusable delays and circumstantial schedule extensions are usually
granted. Force Majeure claims often cover the direct damages of the extraordinary
circumstance, as well as any resulting complications that may cause reduced labor or
productivity.

7. Labor Productivity Claims

Labor productivity claims occur when loss of labor has been observed, or when labor has been
deemed ineffective. Labor productivity claims are the most challenging claims to file because it
is extremely difficult to distinguish, or identify, the decline of labor productivity. Often,
productivity rates on construction sites are not actively tracked with precision, creating a
disconnect between the cause labor loss and the effect labor loss. Though determining the root-
cause of labor productivity losses is challenging, common instigators are mismanagement,
inspection impositions, mismanagement, overcrowding, or inclement weather.

8. Suspension and Termination Claims

Suspension and termination claims occur when the employer instructs the contractor to cease
project functions in varying levels of severity. Suspension claims occur when a contractor is
instructed to temporarily stall project functions. Termination claims occur when a contractor is
instructed to permanently stop project functions.

SOURCES OF CLAIMS
The claim may arise due to the owner or the contractor. The claim may be on account of any of
the following causes:

1. There may be defects and loopholes in the contract document. For example, the
contract document may not be clear, may have dual meanings at different places, or
may not have sufficient details. Also, an unresponsive contract administration may lead
to contractor raising the claim.
2. There may be delay in release of areas as per contract. Besides, site conditions differ to a
large extent from those described in the contract document.
3. The owner may desire to get the work done at a faster pace than is required by the
contact document.
4. There may be delay in supply of power, water and other materials from the owner.
5. There may be hold on works due to delay in release of drawings and other inputs.
6. There may be delay in release of payments to the contractor.
7. The scope of work may be substantially modified by the owner.
 8. There may be levy of liquidated damages on the contractor. Other recoveries from bills
may also lead to contractor raising the claim.
9. There may be delay on the part of contractor in completion of works due to inadequate
mobilization of labor, material and plant.
10. There may be loss of profit and investment to the owner due to delays caused by the
contractor.
11. Construction claims can also arise on account of inclement weather.

CREATION OF CLAIMS
If contractors request for settling the claim is rejected or not acknowledged within a
specified time by the clients representative at the site, the contractor should then promptly
address the written appeal to the clients higher authority within the period specified for such
action in the contract. This is very important. An appraisal meeting should preferably be held at
the time of submitting this appeal so as to bring home to the client the technicalities involved.
This may result in a knowledgeable response through clearer understanding. It may be
necessary to make successive appeals to each level of authority in the clients organization to
exhaust the bureaucratic barrier until all administrative remedies are tried respectfully. If the
matter is still not resolved equitably or receipt of the appeal is not acknowledged by the client in
the specified time, notice of the same should be given to the client, asking that the dispute be
further considered at the time of settlement of all outstanding.

CLAIMS MANAGEMENT
In order to deal with or control the claims effectively, parties concerned with them
should establish good construction claim management processes in their organizations.

1. CLAIM IDENTIFICATION

The contractor studies the instructions in the form of drawings as well as oral or written
instructions provided by the owner/engineer. If it contains extra works, the same is read against
the provisions of the contract.

2. CLAIM NOTIFICATION

After it is established by the contractor that it is an extra work, the contractor is required to inform
the engineer within the time frame stipulated and clarify his intention to claim extra rates for the
same. This is very important because failure on contractors part regarding this shall entail its
rejection by the engineer.

3. CLAIM SUBSTANTIATION

The contractor has to fully establish the claim including his entitlement under the contract, giving
reference to the relevant clauses. The claim is supported by necessary backup calculations.
Backup documents like letters, vouchers and drawings are also enclosed. For period-related
claims such as extended stay costs and interest on delayed payments, it is required to revalidate
the claim at periodic intervals and submit the same to the engineer until the end of the relevant
period.
 4. ANALYSIS OF TIME AND COST IMPACTS OF THE CHANGE

The objective of this sub-process is to determine the impact of the change occurred. The
analyzer shall perform schedule analysis to calculate the time impact while break down the cost
into various cost components to calculate the cost impact.

5. PRICING OF THE CHANGE

The purpose of this sub-process is to give the other party in the contract a substantive description
and detail of the extra costs incurred or to be incurred due to a contract change. This detailed
cost description is necessary for understanding, negotiating, and justifying extra contract costs.
There are two types of claim pricing: forward pricing and post pricing.

6. NEGOTIATION OF THE CLAIM

This sub-process concerns the process of presenting the claim to the employer, and mutual
finding the solution of such claim. If an agreement cannot be reached and any party believed
his position is correct, he should propose an alternative dispute resolution method. If this fails, the
choice remaining is to implement the contractors disputes mechanism or take the matter to
court.

7. DECISION OF ENGINEER/OWNER

The Owner/Engineer is supposed to convey his decision on the claim to the contractor within a
time frame specified in the contract. If the claim is not allowed, the same needs to be stated
along with reasons. The value of claim allowed shall also be stated.

8. FURTHER ACTION BY CONTRACTOR

The contractor has to refer the claim for adjudication if provided, within a specific time frame
after receiving the decision from the engineer, if the same is being disallowed. The adjudication
process is carried out as per the provisions sat out in the contract

DISPUTES IN CONSTRUCTION I NDUSTRY

Given the uncertainties involved in a construction project and the magnitude of funds involved,
it is only natural to have disagreement between parties, but these need to be resolved. While
most of such day-to-day differences are resolved in an amicable manner, without having to
resort to a more formal mechanism, the parties at times agree to disagree and seek redressal
through independent intervention.

1. Incorrect Ground Data

Such data includes information about ground conditions, depth of groundwater table, rainfall
and temperature data, availability of power and water, etc. The estimates of a contractor are
based on the ground data provided with the tender documents, though depending upon the
size of the project and the means of a contractor, the letter also at times carries out an
independent assessment of the data provided. Obviously, any difference between the ground
reality during execution and the conditions provided in the contract could easily be the reason
for disputes.

2. Use of Faulty and Ambiguous Provisions or Language in Contracts

The language of the contract should be clear and such that it is not open to different
interpretations. Use of ambiguous language or provisions could open a floodgate of avoidable
litigation. It is also important that the contract clearly lays down specific procedures that are to
be adopted in the event of contingencies. A well-defined hierarchy of documents that will
prevail in the event of a discrepancy often goes a long way in determining the appropriate
course of action without having to resort to arbitration. Also, at times, absence of appropriate
provisions to handle technical inspections by the client or owner, or third parties, could become
a source of litigation, as such inspections themselves require money and at times result in
observations that need appropriate rectification action, which may have financial implications
or cause avoidable delay.

3. Deviations

The contract should be so designed that there are as few extra items or deviations as possible. In
other words, the scope of work in any contract should be unambiguously defined, and this
obviously calls for thorough preparation on the part of the client/owner before actually floating
an enquiry.

4. Unreasonable Attitudes

It should be b born in mind that in order to complete the work professionally, it is important that
the parties involved resort to unilateral action to preserve an environment of mutual trust. Thus
both the client and the contractor need to have a professional approach to the project,
including areas where there could be disagreement on interpretation, etc. Measures such as
suspension of the contract or invoking of causes related to imposition of liquidated damages
should be resorted to only in the most extreme cases, as they vitiate the atmosphere of the
project, and also affect the work on other contracts. Delays in payment of bills should also be
avoided to ensure that the contractor does not get cash-strapped, which will obviously affect
his ability to perform.

5. Contractor Being of Poor Means

It is important that the contractor identified to do a job possesses the required human, financial
and technical resources. In the absence of any of these, it is very likely that the contractor will
look for an escape route for leaving the project, and may try to force a suspension or
determination of the contract, or take the matter into arbitration/litigation to cut his losses.

6. Unfair Distribution of Risk

This could be a major reason for not only avoidable litigation but also increase in the cost of the
project. Indian contracts typically are heavily loaded against the contractor, who obviously tries
to cover the risks he is forced to take by either hiking the rates, or taking an approach of
crossing the bridge when we come to it, and the latter is almost a certain prescription for
litigation if adverse conditions are encountered.

ALTERNATIVE DISPUTE RESOLUTION (ADR)

Alternative Dispute Resolution ("ADR") refers to any means of settling disputes outside of
the courtroom. ADR typically includes early neutral evaluation, negotiation, conciliation,
mediation, and arbitration. As burgeoning court queues, rising costs of litigation, and time delays
continue to plague litigants, more states have begun experimenting with ADR programs. Some
of these programs are voluntary; others are mandatory.

ADVANTAGES OF ADR
1. Maintains a business relationship

The proponents of ADR argue that processes such as mediation can maintain existing business
relationships as the parties are aided towards a settlement.

2. Speed

The average mediation lasts 1-2 days. The proponents of ADR frequently compare this to a trial
lasting years. It is, however, important to remember that the parties may not be in a position to
forge a settlement early on in the dispute process and it may in fact take many months or even
years before they are in a position to mediate effectively.

3. Lower cost

Clearly a short mediation is a cheaper event than a trial or arbitration. Some argue that lawyers
are unnecessary in the process (and therefore a further cost saving is made) while others
consider lawyers a valuable addition.

4. Confidentiality

The proceedings of mediation are confidential. Contrastingly, litigation is in the public domain
and arbitration may become public if there is an appeal. Confidentiality is an advantage as
some clients wish to keep their disputes from the public domain.

5. Flexibility

Arbitration and litigation are based upon the rights and obligations of the parties to the dispute.
On the other hand a mediated settlement focuses on the parties' interests and needs. The
mediator encourages the parties to search for a commercial solution which meets with both
parties' needs.

6. Greater satisfaction

Many proponents of ADR argue that the ADR process and the outcomes are more satisfying for
the parties than a trial or arbitration. Apparently the reaching of a settlement by consensus is
viewed as producing high levels of satisfaction for the parties. Research has suggested that high
levels of satisfaction are not attained. However, a mediated outcome is still more satisfactory.
 7. Advantages of ADR over Legal Proceedings in a Court

Alternative dispute resolution (ADR) has clear merits over formal legal proceedings in a court of
law, and is often preferred over the latter. Though the award has legal sanction and can be
imposed, the process is less formal and quasi-judicial in nature, which allows a certain degree of
flexibility and ease to the parties. Of course, an arbitrator can always seek expert legal advice
on matters of law. The process is ideally suited for technical disputes-for example, the arbitrator
can be appropriately selected and a visit to the site made as many be required.

Since the arbitrator works on a lesser number of cases at any given time, the settlement
of cases is quicker and less expensive. Also, given the fact that the parties may have their offices
at places different from the site of the project, it becomes much more convenient if the time
and place of a hearing are fixed based on the mutual convenience of parties.

Since the hearings are not open to the public, the overall relationships are less affected.
This aspect is important considering the fact that the parties often want to avoid needless
publicity as it adversely affects their professional standing and relationships.

CONSTRUCTION RISK ALLOCATION

Allocation of risk refers to contract provisions that determine which party assumes the risk
of certain events occurring (or failing to occur).

A successful construction project depends on how well project participants manage

project risks. Risks are managed through sound business and construction practices and through
careful preparation and review of the project contract documents. A significant component of
successful risk management begins with how well the project participants allocate risks at the
contract formation stage. Ideally, the project documents will allocate responsibility for certain
risks to the party best situated to bear them, thereby minimizing the likelihood and the cost of
each risk. Following are six key risk allocation and management concepts that should be
considered at the project contract formation stage.

1. Allocate risk to the party best situated to control the risk. At the outset of each project,
an owner and a contractor should anticipate and evaluate potential risks to project
success and, where applicable, assign responsibility for those risks to the party or parties
best situated to control them. For example, a contractor should assign the owner
responsibility for design errors because the owner typically holds the design services
contracts and is in a better position to work with the project designer to minimize the risk
of those errors. From the owners perspective, the contractor should undertake primary
responsibility for bodily injuries or property damage arising out of the contractors
operations, since the contractor is in the better position to minimize those risks by
maintaining a safe jobsite.
 2. Allocate risk through indemnity provisions. Contract indemnity provisions generally
require one party to pay for losses incurred by the other party as a result of claims made
by third parties. A construction contract indemnity provision typically requires the
contractor to indemnify the owner against claims for bodily injury or property damage
arising out of the negligent performance of work by the contractor or its subcontractors.
Conversely, the owner typically is called on to indemnify the contractor against claims or
losses arising from the existence of hazardous substances at the project site, at least to
the extent that the contractor does not have any control over those substances.

3. Use insurance to support indemnity provisions. Contract provisions requiring insurance

coverage provide assurance that each party can satisfy its indemnity obligations.
Drafting effective insurance coverage requirements in contracts first requires properly
identifying the risk obligations assumed by each project participant, and then ensuring
each party has the right insurance to cover those obligations.

For example, owners must require their contractors to secure commercial general liability,
automobile liability and workers compensation/employers liability coverages. These obligations
should flow down to subcontractors. Commercial general liability insurance generally covers
bodily injury and property damage resulting from contractor or subcontractor negligence.
However, owners and contractors should bear in mind that liability policies typically do not cover
the contractor for defective work, which is instead subject to the contractors warranty. Similarly,
liability policies typically do not cover project improvements or construction materials for
damage due to unknown site conditions, natural disasters and similar risks. Those damages are
covered by a builders risk policy, which is usually required to be obtained by the owner.

Contracts with design professionals, such as architects, engineers, and contractors

performing design-build functions, must also require professional liability insurance to cover errors
and omissions in providing design or other professional services. Because professional liability
policies typically cover claims made on all of a particular design professionals projects during a
given policy period, the aggregate limit of coverage must be sufficiently high to protect the
owner with respect to the owners specific project. An owner can accomplish this by requiring
project-specific coverage or excess limits applicable to professional liability. For larger projects,
the owner may also consider obtaining owners protective professional liability coverage to
indemnify the owner directly for losses arising from the design professionals negligence.

4. Require additional insured status and evidence of insurance. Owners and contractors
should always require lower tier contractors or subcontractors to add the owner and
contractor as additional insureds. A central reason for additional insured status is the
insurers primary duty to defend claims made against the additional insureds. Additional
insured status is obtained by endorsement; thus, the applicable endorsement should be
broad enough to cover ongoing and completed operations on a primary and non-
contributory basis.
 Project participants must confirm that contractual insurance requirements, including
proper coverages, policy limits, and additional insured status, have been obtained and properly
documented. Project participants should never rely solely upon certificates of insurance to
confirm insurance requirements. Most certificates of insurance are issued by the broker, rather
than by the insurer, and are not contractually binding. Accordingly, the insurance provisions of a
project contract should mandate delivery of copies of policy declarations pages and all
applicable endorsements.

5. Include waivers of subrogation. Where applicable, contracts should include waivers of

subrogation to ensure that project risks are transferred in the manner intended by the
project participants. Subrogation allows an insurer to stand in the position of its insured to
recover amounts paid on behalf of the insured for damages for which another party
may be liable. Project participants intentionally shift risk through a variety of contract
provisions. Allowing an insurer to recover amounts paid on behalf of a contract
participant to whom that risk was shifted through indemnification or other means may
undermine the parties intentions. A waiver of subrogation precludes the insurer from
seeking reimbursement for amounts paid on claims, and thus prevents an insurer from
passing assigned risk back to the other project participants. In other words, a waiver of
subrogation ensures that transferred project risk stays with the insurers as contemplated
by the project participants.

6. Review documents with appropriate consultants. Construction projects typically require

multiple contracts, which need to be consistent and complementary. For example,
project lender and owner requirements for payment timing and conditions should flow
down through all project contracts. Dispute resolution provisions should be consistent
throughout the project contracts to assure that all parties to a dispute are involved in the
same proceeding at the same time and are subject to the same dispute resolution rules.
In addition, many standard construction contracts utilize insurance terms that are
inconsistent with current insurance industry offerings, usages and customs. To minimize
issues arising out of conflicting, inconsistent or antiquated terms in the various project
contracts, the project participants should rely on experienced counsel and trusted
insurance consultants familiar with current industry forms and practices. In short, careful
contract preparation and review are essential to proper risk management for a
construction project, and the ultimate goal of project success.