Managing Construction Claims
Construction projects can be complex and disputes can arise, leading to claims for additional time or compensation. It’s important to understand the process for handling these construction claims and the options available for resolving disputes.
Disputes and Claims
A construction claim is a demand for more money, time, or any other adjustment to the contract. Claims must be initiated within 21 days of discovery (not more than 10 years after substantial completion). According to the AIA Contract forms, claims are first deferred to the Initial Decision Maker (IDM) – usually the architect unless outlined differently in the owner-contractor agreement. The IDM must make a decision within 10 days of the claim being received. They can request additional data, suggest a compromise, accept or reject the claim, or state that they can’t arrive at a decision based on the lack of evidence. The IDM can also request the owner to hire experts on the matter, as an expense to the owner. The approval or rejection of the claim by the IDM is final and binding but subject to mediation and binding dispute resolution.
Mediation and Arbitration in Construction Claims
When a claim is denied or not fully resolved, mediation and arbitration are options for resolving disputes. The American Arbitration Association (AIA) Contract forms conform to the Construction Industry Mediation Procedures contemporary to the contract signing. The general process is IDM to Mediation then Arbitration and lastly Litigation. In arbitration, parties submit the claim to a panel and agree to abide by the final decision.
Mediation is a less formal process where a neutral third party helps the parties to reach a settlement. It’s often quicker and less expensive than arbitration or litigation. However, it’s not binding and the parties can walk away if they don’t reach an agreement.
Arbitration is a more formal process, where a neutral third party makes a final and binding decision. It can be quicker and less expensive than going to court, but it is more formal than mediation.
When deciding between mediation and arbitration, it’s important to consider the cost, the time frame, and the level of formality required. Both have their pros and cons and the best option will depend on the specific circumstances of the dispute.
In conclusion, Construction Claims are a common issue that arises during construction projects. The AIA contract forms outline the process for handling claims and disputes, including mediation and arbitration as options for resolving disputes. It’s important to understand the process and options available to effectively manage construction claims.