The very thought of being involved in a lawsuit sends a chill down the spine of most.
Unfortunately, if you are involved in construction, you are likely to eventually find yourself in a lawsuit no matter how careful or reasonable you may be.
Recognizing that claims are a reality, the question is then – what should you do to prepare yourself?
First, read and understand your contract documents. Both parties and their project personnel should know the important terms of the contracts so that deviations can be detected early on and investigated at once.
Second, keep your bid documents. This should include materials and calculations that support the assumptions the bid is based on. Many claim situations will involve comparisons between the conditions expected at the time of bid and what was actually encountered on site. The failure to preserve bid documents and the assumptions upon which a bid was based can be fatal to a claim.
Third, document the construction as you go. Accurate and thorough documentation of construction is critical. Project diaries are probably one of the most important documents in this regard. Parties that have instituted procedures to document project conditions, costs, and problem areas will be able to address what specific costs were encountered due to what specific conditions. The absence of such information leads to vulnerability in the prosecution or the defence of a claim. Daily logs recording information such as progress on site, equipment and labour usage, extra work and unusual problems; are also essential.
Photographs provide excellent documentation when properly maintained. To be truly useful however, photographs and videos should be accompanied by a brief narrative documenting who took the photo, when, where and why.
Project participants should also document important notices, project developments, and claims in letters and memorandum. Those documents should be maintained in a sensible and accessible filing system.
Cost accounting records are also critical. Contractors in presenting claims are required to prove the material, labour and equipment costs arising from a claim. Accordingly, an accurate accounting of all costs incurred will more often than not support a successful claim.
Conversely, owners are well advised to monitor a contractor's activities, labour, equipment and materials when a claim is on the horizon. An owner who fails to take this step leaves himself vulnerable to inflated claims.
Finally, maintaining scheduling information is crucial. Keep accurate, thorough and regularly updated schedules as to the progress of construction. Analyzing what actually happened during the project is almost always the first step in a claim. Reconstructing the schedule after the fact is an extremely difficult, expensive, time consuming and occasionally fanciful process in the absence of detailed scheduling information that was accurately maintained during construction.
Your chances of success in such a claim will increase dramatically if you ensure that accurate record keeping and document management strategies are adopted at all levels of your organization.
This article by Christopher Hirst and Norm Streu first appeared in Business in Vancouver on 9th July 2013.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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