Description:
Claims for disputed work, contract time delay, and assessment of liquidated damages are common at the completion of a construction project. The Construction Administrator should conduct a final review and negotiation session for a Contractor's claim(s) at the completion of the project in an attempt to resolve any hard costs associated with changed work and to address the merits of a contractor's claim(s). Time overrun should be addressed, and any merits for time extension may be negotiated with final claims. This process leads to minimizing the cost of contract closeout and avoids the possibility of excessive costs, if the recommendations of a Contractor's Claims Review Board are rejected and litigation is started. The closeout claims negotiation process follows:
- Conduct your final closeout claims negotiation session at the job site in case you need to inspect the installation, if appropriate. Assemble the appropriate parties including: Contractor (Superintendent and Project Manager), Architect, engineering consultant (if appropriate), any Campus representatives, Project Manager, Construction Inspector, and Construction Administrator. If the claims include expensive cost items, delay damages, then the Director/AVP should be included. A Construction Manager, CPDC, may be included in a consulting role.
- The meeting may be held in two phases, the first with all parties except the Contractor. This will allow a consensus of opinion to be reached or at least some guidelines laid down which the Construction Administrator may use to negotiate with the Contractor. The second meeting with the Contractor should be lead by the Construction Administrator, who should negotiate in accordance with the guidelines. If further discussion among the team is needed, a break-out session should be held so that, again, all parties except the Contractor can reach an agreement. It is important that the final completion date and any resultant liquidated damages should be negotiated and approved by all parties, if possible.
- Memorialize the meeting and settlement, if any, with a letter, memo, or some form of backup, and a complete change proposal that indicates concurrence by the Architect and Campus representative. If the Architect was not a party to the claim, then she/he may be excluded, but every effort should be made to include the Architect.
- The resultant change proposal must be signed by the Director/AVP or appropriate University official, which will demonstrate concurrence with the settlement. The Construction Administrator should be prepared to explain the merits of the claims and settlement, if appropriate to the Director/AVP/appropriate University official. The Construction Administrator’s role is thus to negotiate, in good faith, the best possible settlement, and to get approval as appropriate.
- Should the Director/AVP/appropriate University official fail to concur with the proposed settlement, a revised settlement may result with the Director/AVP/appropriate University official’s personal involvement. The Director/AVP/appropriate University official may wish to enlist the services of a Construction Manager from CPDC to help negotiate the claims. If negotiations fail, the matter may be referred to a Contractor’s Claims Review Board hearing.
- Include language on any resultant change order indicating that the included items (claims) were negotiated and settled, with the date. Consult with CPDC Chief of Construction Management before issuing settlement change orders.
- If the resultant settlement resolved all claims under the project, then so state. General Counsel has provided language to include for this purpose.
- If a time extension is negotiated for appropriate purposes, than so state.
- If there is a time overrun that has not been extended, then assess the liquidated damages.
Claims Review Board: If a contractor’s claim occurs and was not resolved through negotiations between the contract administrator and the contractor, then an official hearing may be scheduled following the completion of all work and acceptance of the project. The hearing is scheduled after completion so that only one such hearing will be held for a given project. The hearing shall be relatively formal and structured but without legal counsel. The results will be in writing and transmitted formally by the campus vice president of administration, or the assistant vice chancellor of CPDC if CPDC administered the project.
CPDC has two written procedures for administering a Contractor’s Claims Review Board hearing. Part I describes the process for filing a claim and describes the Claims Review Board process and may be shared with the contractor. Part II is an internal document that describes the duties of the Board participants, and should not be shared with the contractor. It is important to have three members on the Board who have a good working knowledge of construction and the CSU contract general conditions. It is also important to have a neutral board who has not been involved with the project or decisions leading to the claim(s). This may be difficult for a campus-administered project without relying on CPDC or other campuses to compose a neutral board. Written claims review board procedures have been prepared for campus or CPDC application. They propose composing a board with CPDC professional staff and campus staff, as necessary, to result in an appropriately composed, neutral board. Refer to Appendix D for Claims Review Board Procedures, Parts I and II (contract general conditions Articles 5.02 and 7.01).
References:
SUAM Section 9833-9833.04
Forms/Templates:
- Agreement re: Inadmissable Settlement Negotiations, Form 703.25
- One-way Global Settlement Change Order, Form 703.04.1
- Two-way Mutual Release Global Settlement Change Order, Form 703.04.2
- Milestone Change Order, Form 703.04.M Simple Global Settlement Change Order, Form 703.04.S