Group 5 Claim and Dispute

ASSESSMENT IN CAUSE AND EFFECT OF CLAIM AND DISPUTE
DEBRE BEREHAN UNIVERSITY
COLLEGE OF ENGINEERING
CONSTRUCTION TECHNOLOGY AND

MANAGEMENT DEPARTMENT
ASSESMENT IN CAUSE AND EFFECTS OF CLAIM AND

DISPUTEIN DEBIRE BIRHAN BUILDING PROJECTS
A thesis submitted to the School of Under graduate Studies of Debere berhan University in
Partial fulfillment of the requirements for the Degree of Bachelor of Science in Construction
Technology and Management
JUNE 2017(final date)
DEBRE BEREHAN, ETHIOPIA
DEBRE BEREHAN UNIVERSITY

WINDOWS 用户 1
ASSESSMENT IN CAUSE AND EFFECT OF CLAIM AND DISPUTE
COLLEGE OF ENGINEERING
CONSTRUCTION TECHNOLOGY AND MANAGEMENT

DEPARTMENT
ASSESMENT IN CAUSE AND EFFECTS OF CLAIM AND

DISPUTEIN DEBIRE BIRHAN BUILDING PROJECTS
A thesis submitted to the School of Under graduate Studies of Debere berhan
University in Partial fulfillment of the requirements for the Degree of Bachelor of
Science in Construction Technology and Management
PREPARE BY:
1. BISRAT ABEBE…(i.d)………………………………ENGR/776/05
2. TEWODROS BEKELE…(i.d)..….….…….………ENGR/409/05
3. NAHOM BELAY…………..….……………...ENGR/266/05
4. ABEL MESFIN………………………..………..ENGR/171/05
5. TEMESGEN TESHALE……….….………….ENGR/491/05
MAIN ADVISOR: INS. MOHAMED
CO-ADVISOR: INS. EYERUSALEM
JUNE 2017
DEBRE BEREHAN, ETHIOPIA
WINDOWS 用户 2
Assessment in cause and effect of claim and dispute 2009E.
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No need of writing on header and footer
TABLE OF CONTENT
CHAPTER ONE................................................................................................................... 2
ASSESMENT IN CAUSE AND EFFECTS OF CLAIM AND DISPUTEIN DEBIRE BIRHAN
BUILDING PROJECTS................................................................................................................. 2
1.1 Introduction...................................................................................................................... 2
1.2 Background....................................................................................................................... 3
1.3 Problem Identification...................................................................................................... 3
1.4 Research Questions........................................................................................................... 4
1.5 Objective of the project................................................................................................... 4
1.6 SCOPE OF THE STUDY........................................................................................................ 4
1.7 Significance of the study................................................................................................... 5
CHAPTER TWO............................................................................................................................ 6
LITRETURE REVIEW.................................................................................................................. 6
2.1 Introduction................................................................................................................... 6
2.2 Contractual Problems in Construction Industry.................................................................7
2.3 Claims in Construction Industry........................................................................................ 8
2.3.1 Valid claims.......................................................................................................... 10
2.3.2 Contents of a claim............................................................................................... 11
2.3.3 Classification of claims......................................................................................... 12
2.3.4 Causes of claims................................................................................................... 13
2.3.6 Remedial rights.................................................................................................... 17
2.3.7 Claim administration processes............................................................................18
2.3.8 When claims become disputes.............................................................................20
2.4 Disputes in Construction Industry...................................................................................21
2.4.1Causes of Disputes................................................................................................ 21
2.4.2 Construction Dispute Resolution Steps.................................................................22
2.4.3. Alternative Dispute Resolution (ADR)..................................................................27
Chapter Three............................................................................................................................... 30
RESEARCH DESIGN AND METHODOLOGY.....................................................................................30
3.1 Study area....................................................................................................................... 30
3.2 Research design.............................................................................................................. 30
3.3 Population....................................................................................................................... 30
3.4 Source of the data........................................................................................................... 30
3.5 Questionnaires survey.................................................................................................... 31
3.6 Rational questioner......................................................................................................... 31
3.7 Data analysis................................................................................................................... 32
CHAPTER FOUR............................................................................................................................. 33
4.1 The Case Study Project........................................................................................................... 33
4.2 Section one..................................................................................................................... 33
4.2.1 General information from the survey questionnaires...........................................33
4.3 Section two..................................................................................................................... 35
4.3.1 Analysis of the causes of claims............................................................................35
4.4 Section three................................................................................................................... 37
4.4.1 Impacts................................................................................................................ 37
4.5 Section four..................................................................................................................... 38
CHAPTER FIVE............................................................................................................................... 40
CONCLUSIONS AND RECOMMENDATIONS........................................................................40
5.1 Conclusion...................................................................................................................... 40
5.2 Recommendations.......................................................................................................... 42
REFERENCES............................................................................................................................. 45
Section 03 group 5 senior project 3

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Appendix....................................................................................................................... 46
LIST OF ILUSTRATION
Figure 1: Risk, Conflict, Claim and Dispute 8

Figure 2: Claim administration process………………………………………..……19
Table 1 Summary on the response rate of questionnaires……………………………33
Table 2 Rate and frequency of claim from awarded contract………………………...34
Table 3 Summary on the rate and frequency of reasons of claim …………………...34
Table 4 Frequency distribution of major category of claim factors………………….36
Table 5 type of claim and their frequency……………………………………………39

Table 6 techniques that are used before work begins and after work begins……..….39
Table 7 Degree of importance of mitigation system……………..…………………..40
1. Acknowledgement
2. Abstruct
3. Table of content
-use similar buleting
-titles should be started in a new page
-Reference citation is not proper

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ACKNOWLEDGMENTS
We wish to express our gratitude to those who made this thesis work of great success.
We are greatly thankful to our advisor instructor Eyerusalem and instructor Mohamed
for his continuous supervision and support.
We would also like to thank all those who were kind enough to give replies to our
survey questioners scarifying their precious time.

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ABSTRUCT
Current practice of the construction industry shows that it is a rare event most
construction projects are completed on the scheduled time, budgeted cost, and desired
quality. The main reason behind is that construction projects are unique in nature and
they are full of uncertainties. As a result, claims and disputes become common
phenomena engineering contracts.
This senior project addresses the causes Understanding the causes will be useful to
managing claims in terms of recognition, mitigation and early resolution.
This study concludes that the causes of claims and effects of claim and disputes in
Debire birhan building projects are many and the major causes are actions/inactions of
owner’s, consultants, contactors, third parties and deficiency in contract documents.
Hence this thesis gives recommendations anticipatory approaches that help to
minimize the incidence of claims and improve the management of construction
claims.
Key words Claim, causes of claims, claim administration, changed conditions,
deficiencies in contract document, dispute resolution, force majeure, third party, and
variations

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CHAPTER ONE
ASSESMENT IN CAUSE AND EFFECTS OF
CLAIM AND DISPUTEIN DEBIRE BIRHAN
BUILDING PROJECTS
1.1 Introduction
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 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. There are several researches
that show the order of magnitude of the effects from construction claims on cost and
time of the projects. During the past two decades, serious disputes concerning
construction contracts have become increasingly common in construction projects. It
is common practice for designers, contractors and owners to negotiate small and
uncomplicated disputes, but larger and more complex ones frequently hinder the
project through involvement with lengthy legal issues.

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Typically, if the parties cannot reach a resolution themselves, expensive, time-

consuming legal procedures begin, which severely affects all the participants.
Disputes are a reality in every construction project. Without the means to address
them, minor issues can fester and grow, with crippling
1.2 Background
The construction industry is a complex and competitive environment. Within the last
decade, the construction sector development has been one of the priority investment
areas for the success of Ethiopian economic recovery program. However, achieving
the required quality and completing projects within overall budget and allocated time
difficulties have been experienced during the implementation of most building
construction projects. Projects are unique and complicated by their nature. High levels
of art and craft are required to translate an owner’s vision into plans and
specifications, then into real structures, one that fits the needs of the owner or clients.
In addition to technical skills, the ability to coordinate the diverse efforts of many
individuals is critical to success.
Problems crop up during construction projects due to delay, unexpected additional or

extra work, defective work, cost overruns, structural failure and accidents, late
information, interpretation of documents, unforeseen circumstances, etc. If these
causes are not addressed, they result in claims and disputes that will involve more
people, additional time, and higher costs. Claims related to construction projects are
occurred in almost all construction. However, if a contract document is well designed
i.e. duties are clearly defined, risks are fairly shared, uncertainties are considered,
claims are anticipated, and a comprehensive resolution process are agreed upon, it
provides significant protection to both parties.

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1.3 Problem Identification
The main problem in construction is the claim on different cases which causes the
extra expenses and time delay so that it is important to identify the main causes of
claim before it develops to dispute to find the solution necessary to reduce costs
incurred due to claim resolution by minimizing the conflicting idea which causes the
claim early.
1.4 Research Questions
1. What are the different causes of claims and disputes in construction projects
2. What are effects (Impacts) of claims and dispute
3. How can claims reduced
4. Which types of claim administration process are used
5. Which kind of dispute resolution systems are used
1.5 Objective of the project
General objective
The main objective of this study is to assess the Causes and effects of construction
Claims and disputes in DebireBirhan building construction projects
Specific objectives
The specific objectives are:
 To analyze the causes of claims in Debire Birhan building construction
projects and forward recommendations for future action that helps in
mitigating.
 To find the root causes and effects of claims in Debire Birhan building
construction projects
 The study also addresses Impacts of claims in Debire Birhan building
 The find out the resolution methods of dispute in Debire Birhan building

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1.6 SCOPE OF THE STUDY
The scope of this senior project is to know the root causes and effects of claim and
disputes only in Debire Birhan Building. The identification of cause and effects of
claim and dispute from primary and secondary sources this study is intended to
exclude the personality claims & disputes in the pre-construction, construction and
post construction stage
1.7 Significance of the study
The main significance of this study is to know the causes of claim and disputes to get
the resolution methods. Claims and conflicts are common in almost all construction
industries so to minimize thus problems we need to find out the roots of the problems.
The main problem in construction is the claim on different cases which causes the
extra expenses and time delay so that it is important to identify the main causes of
claim before it develops to dispute to find the solution necessary to reduce time and
costs incurred due to claim resolution by minimizing the conflicting idea which
causes the claim early.

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CHAPTER TWO
LITRETURE REVIEW
Minimize the pages of literature review (not more than 10 pages)

You have to quote the references in your literatures
2.1 Introduction
The construction industry is dynamic in nature; however, in the past 20 years, some of
the factors within the construction environment have evolved because of increased
uncertainties in budget, technology, and development of the processes used.
Therefore, the environment of the construction industry has become much more
dynamic now than it was earlier and also extra complicated in terms of different
activities and parties involved within one particular project; all these aspects
characterize the construction industry.
Construction projects are entirely dependent on estimates of future occurrences.

Quantity surveyors and estimators must work on cost and time-related estimates for a
project that is essentially unpredictable and unstable in nature. Therefore, it is evident
that this industry is also associated with risk, as every project is differs in various
aspects, such as the project’s location, technology used, and the level of the design.
Claims arise on many construction projects. A great deal of emotion and anxiety is
wasted by parties to a construction dispute because claims are often not fully and
fairly documented and properly presented.
Due to these aspects, the construction industry is likely to have a natural potential for
disputes and conflicts and is also adversarial. This results from the reality that every
construction project is a multifaceted process that necessitates the harmonized effort
of a temporarily assembled multiple-member association of various distinct groups,
where every group has its unique organizational culture, goals and needs, and
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professional ethics and culture; moreover, every group aims at maximizing their own
profits and benefits. The key parties engaged in a construction project are the
Consultants/Architect, Client, and Contractor. Moreover, there are other significant
characteristics that are intrinsic in the construction industry such as fragmented,
temporary, and short-term.
Subsequently, according to Ashworth (2013), disputes are the one common aspect of
the construction industry anywhere. The construction industry always involves
multidisciplinary players, which further hinders the ability of this industry to evade
dispute.
2.2 Contractual Problems in Construction Industry
Construction 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. Interpretation of contract clauses,
differences of opinion regarding their application, effects of unforeseen subsoil and
climatic conditions, riots and strikes, etc. can create contractual problems. A vast
majority of contractual problems arise from lacunae in and misinterpretation of the
clauses, pertaining to the following 13 subjects:
1) Changes in Contract work
2) Differing in unusual site conditions actually encountered
3) Suspension of Work
4) Variation in quantities
5) Damage due to natural disasters and force-majeure
6) Re-inspection and acceptance

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7) Termination for the convenience of the client

8) Possession prior to completion
9) Escalation of price due to inflation
10) Acceleration of work progress
11) Ripple effect
12) Currency fluctuation effect
13) Ambiguity in specifications and drawings
If these conflicts are not clearly managed, Claims are made by contractor and further
if claims did not get clearly resolved disputes arises.
2.3 Claims in Construction Industry
During the execution of a project, several issues arise that cannot be resolved among
project participants. Such issues typically involve contractor requesting for either time
extension or reimbursement of an additional cost, or sometimes both. Such requests
by the contractor are referred to as “claim”. If the owner accedes to the claim of
contractor and grants him extension of time or reimbursement of additional cost, or
both, the issue is sorted out.
However, if the owner does not agree to the claim put out by contractor and there are
differences in the interpretations, the issue takes the form of a dispute. The claim
mentioned above can also be put up by the owner. It is, therefore, imperative for all
the parties to be fully acquainted with the procedures and systems, including resource
to certain preventive actions as found necessary and required. Construction claims are
found in almost every construction project. They are the seeking of consideration or
change by one of the parties involved in the construction process. They have
significant effect to project cost and time.

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Figure 1: Risk, Conflict, Claim and Dispute

Claims are unavoidable and necessary to accommodate unforeseen changes in project
conditions in a contractual sense. Essentially, claims in this context are the
administrative processes required to handle construction events that take place where
the contract “leaves off”– changed conditions, design changes, defective
specifications, quantity variations, delays, disruptions and accelerations. While many
claims can be resolved harmoniously, the prior presence of conflict between parties
may initiate an unnecessary dispute.
Disputes should not be demonized, as resolution mechanisms have their place in the
construction process. This is especially the case when onerous and one-sided
amendments to standard forms, often drafted by lawyers with the objective of
improving their client’s position at the exception of fairness; or when the only way in
which a party can actually protect their position because the contract conditions
promote conflict.
Inappropriate risk allocation through disclaimer clauses in contracts is a significant

reason for increasing total construction costs. The most common exculpatory clauses
used in construction are uncertainty of work conditions, delaying events,
identification, liquidated damages, sufficiency in contract documents.
Different writers define construction claim on their own ways;

 A claim is a defined as a demand or assertion by one of the parties seeking, as a
matter of right, adjustment or interpretation of contract terms, payment of money,
and extension of time or other relief with respect to the terms of the contract

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 A claim is mostly concerned with entitlements and liabilities arising under, or as a

result of, a legally valid contract
 A construction claim is a demand for payment of additional compensation,

adjustment of the parties' respective contractual obligations, or any other change
with regard to the contractual conditions or terms.
 Claim in practice can also be understood in different ways based on the

perceptions held by contractual stakeholders. R. Max Wideman, 2001 provide the
following suggestions:
 A claim is a hidden form of blackmail
 A claim is the last chance to bail out of a losing job
 A claim is an assertion to a contractual right
2.3.1 Valid claims
Valid claims are referred to those claims that the contractor is entitled to. All parties
involved in the contract (particularly the owner) should be aware of the causes of
valid claims. It often happens that claims that might otherwise be valid are rejected
because:
• Timely notice was not given,
• The claim is late,
• Contract procedures were not followed,
• Proper records were not kept
• The claim does not establish any valid entitlement under the contract,
• Inadequate information is available or provided to verify the claim or support its
quantification.
Requirements for valid claims

All stakeholders in construction business should be aware of and are expected to
know;

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 The way of dealing with claims and disputes along with their advantages
and disadvantages.
 Required procedures and how to keep important documents to make valid
claim.
 Invalid claims: refers to claims those Contractors are not entitled.
 Disputable claims: are those which arise when a claim of one party is not
being accepted by the other contracting party or when the decision of neutral
party is not being accepted by any or all the contracting parties.
 Non disputable claims: are those acceptable by the contracting parties.
2.3.2 Contents of a claim
It is essential that for every claim, the contractor provide to the engineer appropriately
documented claims. K.L Scott, 1992 suggests the following points to be included in
claim documents.
Introduction: - describing the parties to the claim, giving brief details of the project
and those elements that have given rise to the claim. The introduction should conclude
with a statement to the effect that the contractor is seeking reimbursement of direct
loss and/or expense.
Contract details: - including the form of contract employed with the appropriate
amendments, the date of possession of site, date for completion, date of practical
completion and rate of liquidated damage, etc. More importantly, all those express
terms of the contract upon which the contractor is to rely and any implied terms that
may be promoted should be set down. Any common law principles such as
misrepresentation should be highlighted.
A narrative: - describing in chronological order those elements which give rise to the
claim. It will be necessary to link this back to the contract details showing how, when
and where the breach occurred. All written applications for reimbursement of direct

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loss and/or expense should also be identified here and referred to and contained in
appendices at the back of the submission. The contractor includes a certain impact
documents such as schedule of events.
Quantum: - this section will include all those calculations of building up to the direct
loss and/or expense with all necessary evidential example, time sheets, invoices, etc…
being referred to an appendix.
Appendix: - each document or series of documents should be given an appendix

reference that will coincide with the relevant reference in the narrative, etc…
2.3.3 Classification of claims
Having arrived at the definition, it is necessary to look at the various types of claim to
better recognize a claim situation as it is happening. In addition it helps to arrive at
some reasoned basis for such claims. Claims can be classified based on their type and
entitlements.
A. Classification by type
Contractual claims: - These claims, sometimes referred to as claims in the contract,
concern matters which have a basis in the contract itself where particular provision
can be quoted as giving rise to entitlement.
They have particular clauses in the contract that define the basis of valuation to be
adopted and stipulate who (employer, contractor or consultant) is to do what.
Extra- contractual / Quantum Merit claims: - In the absence of express contractual

provisions dealing with entitlements and adjustments, common law remedies may be
available. The essential point is that a party wishing to benefit from a common law
remedy must assert his right by claiming it, but the engineer has no implied authority
to settle such claims.
Ex gratia: - These sort of claims are not covered under the contract but can be paid in
a sense of “fairness” or equity.

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B. Classification based on entitlement

This classification mainly deals with the parties’ entitlement in claim administration
process. Stuart J. EinbinderEsq, 2004 classified claims into two primary types based
on entitlements, but substantially overlap.
Non-Time Related Claims – Claims that seek additional cost (and usually profit and
overhead) to perform changed scope-of-work
Time Related Claims - these claims are usually related to:

• Delay
• Disruption
• Acceleration
2.3.4 Causes of claims
There are many reasons for claims to arise on a construction project.

Deviations from performance requirements among contractual stakeholders whether it
is related to completion time, or construction cost, or the fulfillment of its quality and
its intended purpose, or safety, health and environmental consequences can trigger
claims in construction contracts. In addition unforeseen political, economic, social
and technological uncertainties can also be the major factors causing claims.
 Principal causes of claims

Different writers classify causes of claims differently depending on the particular
issues they address. Most of the classifications are related to contract documents and
changed conditions.
Wagner, et al classified causes of claims as:
• Constructive changes
• Changed conditions
• Schedule change
• Delays
• Miscellaneous
1) Constructive changes

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Changes resulting from acts attributable to the owner, which cause more work or
more time on the job than planned but for which the owner refuses to execute formal
Change orders. The followings are listed in ‘Construction Claims Guide’ by Wagner,
et al,
a. Variations
b. Changes in design and specifications, and defective drawings
 Errors, omissions and changes
 Ambiguities
c. Non-Disclosure
d. over Inspection
e. Work out of Sequence
f. Changes in Method
g. Higher Standards
h. Impractical or Impossible
2) Changed conditions and Unusually Severe Weather Conditions
A. Changed conditions
Changed conditions are conditions other than what a wise person would have
expected. This includes:
• Subsurface of latent physical conditions differing materially from those indicated in
the contract.
• Unknown physical conditions at the site, of an unusual nature, differing materially
from those ordinarily encountered in work of the character provided for in the
contract
B. Unusually Severe Weather Conditions

any weather that results in an ability to perform work at the site, and which is in
excess of the average annual rainfall over a historic period of say, 5 or 10 years, might
be taken as unusually severe weather condition.
3) Schedule change
This refers changes in the time or sequence of the schedule to complete a project. The
following two are described in clauses 40 and 65.8 of FIDC condition of contract red
book, 1987.

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Suspension
Suspension is work stoppage for the benefit of one of the parties in the contract. In
construction contracts the engineer has the authority to suspend the progress of the
whole or any part of the works. In such cases the contractor is entitled to time
extension and additional costs incurred unless such suspension is provided for in the
contract by default or breach of contract by the contractor, by reasons of climatic
conditions or necessary for the proper execution or safety of the works.
If the employer fails to pay the contractor the amount due under payment certificates,
the contractor can suspend the work or reduce the rate of the work.
Termination
Either or both parties have the right to terminate contract under certain circumstances.
However, before termination parties should describe the contract events that trigger
the termination of the contract under certain conditions. In additions, there should be a
description of the methods of giving notice of exercise of the termination right and
whether the breaching party must be given an opportunity to cure the breach before
the other party can terminate the contract
4) Delays
Stuart J. EinbinderEsq, 2004 have classified delays in to three types as:
a. Excusable – Excusable delays are those delay-causing events that are unforeseen
and outside the contractor’s control. Contractor is typically entitled to time extension
and possibly extra compensation.
b. Non-Excusable – Any delay owing to the fault of a contractor or its subcontractors,

which does not merit extra compensation or time extensions.
c. Compensable – Delays which the owner or the owner’s representatives, entitle the
contractor to receive extra compensation in addition to time.

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Delays can also be dealt as described by Wagner, et al, as: delays which are the
responsibility of the owner, contractor, consultant, and delays that are beyond the
control of either party.
 Owner Caused
Possession of site: - before award of the contract, the employer and the contactor
should agree on the period of notice to commence, in order to allow for mobilization
and the taking of records and photographs showing the condition of access of the site
prior to possession by the contractor.
Owner interference / Disruption: - an event that increases the cost of performance

but does not necessarily delay the whole project.
Payment terms: - untimely payment for completed works is one of the problems
causing project delays. It is a major concern for contractors and as it affects their
financial situation, which intern will directly have an effect on the progress of the
work. The time it takes for the owner to effect payment from the date the payment has
been submitted must be specified. If the owner does not pay as per the specified time
range in the contract it can lead to a potential claim.
 Designer Caused
Late shop drawing approval,
Design error,
Failure to accept
 Contractor Caused.
Rework,
Lack of productivity,
Procurement failures
 Force Majeure
FIDIC condition of contracts, 1987 defines force majeure as “an exceptional event or
circumstance:
• Which is beyond the parties’ control

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• Which such party could not reasonably have provided against before entering into
the contract
• Which, have arisen, such party could not reasonably have avoided or overcome
• Which is not substantially attributable to the other party.” Reg Thomas, 2001 has
listed factors that cause force majeure
 Hurricanes,
 Tornadoes,
 War
2.3.5 Impacts of claims

Claims have considerable damage to the construction industry; at best claims are
undesirable. Besides incurring unwanted legal expenses, they strain the relationship
between the parties to the contract and affect the working atmosphere. Each party may
see the other as an adversary, which affects the future of the work, and can result in
the parties being defensive. In such atmosphere more claims may be inevitable. This
eventually affects the work and may result in many types of impacts some of these
impacts are:
􀂾Inefficient project delivery in terms of cost, time and quality;

􀂾 Takes much time of the policy makers;
􀂾 Reduces trust on public- private partnership for development;
􀂾 Reduces creative and innovative competition among the corporate; etc…
2.3.6 Remedial rights
Remedial rights are entitlements for non-performances of the contractual obligation

by the contracting parties. Such rights can be entertained considering the efforts
sustained by the contracting parties in lieu of their duty to mitigate the non-
performances. The following remedial rights are used in the construction industry.
 Time extension
Time extension is a provision for justified time delays. Time extensions may or may
not be entitled for compensation using critical path method; it is only justified delays

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that occur on the critical path that is compensable. The effect of time extension is to
relieve liabilities of delay damages such as liquidated damage.
 Liquidated damage
If the contractor fails to comply with the time completion in accordance with contract
document, then the contractor shall pay to the employer the sum stated in the
appendix to the tender to the tender as liquidated damages. However, if the owner
caused the delay the liquidated damages provision will not be enforced.
 Cost compensation
Damages can involve additional costs incurred by the extended duration of its
performance. Damages typically include costs of idle labors and equipment, higher
costs of performance during the late period of time and extended general conditions
Other remedial rights include
• Time extension and cost compensation at the same time
• Bonus
2.3.7 Claim administration processes
Claim administration process is understood as the process for the compensation of any
damage, and/or changes resulted during the implementation of Construction projects
which are called entitlements.
This is because claims require establishing both the liabilities as well as the damages
incurred in any construction contract.
The claim administration process is then understood as the process starting from a
willful act of the claimant through claim notification by either of the contracting
parties up to and including claims approval and acceptance by both the Contracting
parties for agreed or enforced compensations or called claim enforcement.
Either the Contractor or the Employer can initiate the claim administration process.
And, in some instances, the Engineer can also advice on a reasonable incorporation of
claims, on behalf of both the contracting parties, if the engineer believed that without

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the treatment of such claims, the successful performance of the project will
considerably be affected.
claim administration process can generally fall into three major functions . These
included Claim Submittal, Claim Processing and Claim Enforcement.
Figure 2: Claim administration process

i. Claim Submittal: This is a process by which the claimant is obliged to claim
within a reasonable period of time (28 – 30 days in most contracts) followed by
her/his preparation for all substantial documents and legal aspects supporting
hers/his entitlements for an official submittal. This constituted that a claim has
been filed for its consideration if all these three sub processes called Claim
Notification, Claim Preparation and Claim Submittal are fully undertaken by the
claimant.
ii. Claim Processing: This process initiates checking of the claim whether, it is
legally or contractually supported or not; documents provided are valid and
reliable to substantiate the claim for consideration or not; and overall procedural
requirements have been followed or not. After verifying the validity of the claim
proper computations and evaluations will be carried out to present the proposed
compensation for the contractual parties the claim is applicable to. Generally, the
sub process that undertakes these requirements is termed as Claim Handling.

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The contractual parties will pass through different dispute resolution system
depending on their acceptance over the proposed compensation varying from the
simplest mediation by the consulting engineer to the final court ruling in the form of
litigation. Basically, three types of dispute resolution systems are well recognized.
These included:
Preventive Dispute Resolution System including Partnering, Use of dispute

resolution advisors and Use of Facilitators for early neutral evaluation and advise to
prevent the happening of claims or their consequential disputes.
Amicable Dispute Resolution System including Negotiation (B/n the contracting

parties, win-win), Mediation (mediator is facilitative, just give a brainwash, no
suggestion), Conciliation (evaluative type, give recommendation suggestion) and use
of Mini-Trials to administer the claim in a less formal, simple procedure, more
flexible, less adversarial and strictly confidential mode so as to avoid the time and
cost implication of claim processing.
Judgmental Dispute Resolution System including Adjucation or Arbitration (you

can control the process like selecting your adjudicator but not the outcome) and
Litigation ( you can’t control the process and outcome).
Administrative contracts are not subject to arbitrate. This sub process where dispute
was handled in any form of its resolution systems is termed as Dispute Resolutions.
Once the contractual parties agree on the final outcome of the claim process then they
have reached into a stage where the claim is approved.
iii. Claim Enforcement: This is a stage where the approved claim is enforced and
finally becomes a closure. The claim enforcement process will entertain the
inclusion of the approved claim into payment certificates where their enforcement
is due.

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2.3.8 When claims become disputes
A claim arises – to be dealt with in the first instance by the Contract

Administrator – what options does he have?
1. Accept the claim
2. Reject the claim – the Contract Administrator might reject the claim for one of
two reasons either;
a) The Contractor has lost his right to claim by virtue of the claiming
mechanism set out in the Contract or;
b) The claim has no Contractual justification.
3. Accept the principal of the claim but reject the quantum.
4. Accept the principal of the claim, accept the quantum of the claim but claim
set off or contra charges;
5. In any of the aforementioned circumstances either party to the contract does
not accept the assessment made by the Contract Administrator, a dispute will
arise between the parties.
2.4 Disputes in Construction Industry
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 redressed through independent intervention. Although, in
principle, the discussion falls under the purview of construction law, effort has been
made to discuss some of the aspects related to disputes and dispute resolution with as
little legalese as possible. Technically, a dispute implies assertion of a claim by one
party and repudiation thereof by another. Thus, neither a mere claim without
repudiation, nor a pair of claim and counterclaim, can be called a dispute.

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2.4.1Causes of Disputes
The geneses of many disputes often lie in the contract document itself-it is often
observed that tenders are hastily made and sufficient attention is not paid to ensure
that
 All the required information and details are appropriately incorporated in the
tender document
 The documents are internally consistent, i.e., there is no contradiction in the
provisions of general conditions, special conditions and drawings, and
 Specifications, where required, are available. Of course, incompleteness,
inaccuracy and inconsistency of information are only part of the reasons for
disputes in a construction project. The following are some of the common
causes of litigation.
a) Incorrect Ground Data

Such data includes information about ground conditions, depth of groundwater table,
rainfall and temperature data, availability of power and water, etc.
b) 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.
c) 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.

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d) Unreasonable Attitudes
It should be 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.
e) Unfair Distribution of Risk

This could be a major reason for not only avoidable litigation but also increase in the
cost of the project.
2.4.2 Construction Dispute Resolution Steps
The contractual parties will pass through different dispute resolution system
depending on their acceptance over the proposed compensation varying from the
simplest mediation by the consulting engineer to the final court ruling in the form of
litigation. Basically, three types of dispute resolution systems are well recognized.
These included:
2.4.2.1. Prevention
i) Allocating fair contract risk

ii) Drafting Dispute Resolution Clauses
iii) Team Building
2.4.2.2 Negotiation
Negotiation is a “process of working out an agreement by direct communication. It is

voluntary and non-binding.” The process may be bilateral (between two parties) or it
could be multilateral (many parties). Each party may utilize any form of external
expertise it considers necessary, and this is often described as “supported
negotiating”.

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This is an informal process in the legal sense, but if an agreement is reached through
the process, it may have the usual legal significance. The negotiation process is fast
and does not involve additional expenses. The discussions are held between the
parties across the table in a cordial and peaceful atmosphere.
2.4.2.3. Standing Neutral
i. Dispute Review Board

The concept of the Dispute Review Board appears to have developed in the USA. It is
essentially a process where an independent board of three people evaluates disputes as
they arise during the project and make settlement recommendations to the parties. The
board is constituted at the commencement of the project, much like a panel of three
arbitrators. Each party selects one board member. The parties may then agree on the
third or, if they fail to do so, the two board members will select the third. The board
periodically visits the site and receives project information to ensure familiarity with
the project and the parties. The board meets regularly to discuss problems or disputes,
hears presentations from the parties and suggests solutions. It seems that the main
benefit of the DRB is that its mere existence helps to prevent disputes. The parties
themselves become familiar with the board's view on particular issues which then aids
the negotiation and settlement process which the parties undertake before presenting
their dispute to the board.
Dispute Resolution Adviser

The basic concept of a Dispute Resolution Adviser involves the use of a neutral third
person who advises the parties to a disagreement or dispute and suggests possible
settlement options. This concept is clearly similar to that of the Early Settlement
Adviser.
The independent intervener would be paid for equally by the employer and contractor
to settle disputes as they emerged, rather than wait until the end of the contract. The
decision would be binding until the end of the project when either party could
commence arbitration proceedings. Unlike the independent intervener the DRA does

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not make interim binding decisions, but advises on the means by which settlement
could be achieved. The power to settle ultimately rests with the parties.
There are a variety of benefits with such an approach. First, disagreements at site level
can be addressed before a full-blown dispute develops.
2.4.2.4. Non-Binding Resolution
i. Mediation and Conciliation

Mediation and Conciliation are essentially an informal process in which the parties
are assisted by one or more neutral third parties in their efforts towards settlement.
These mediators do not sit in judgment but try to advise and consult impartially with
the parties with the object of assisting in bringing about a mutually agreeable solution
to the problem. Naturally, under the conditions, they have no power to impose an
outcome on disputing parties. Mediation and conciliation are voluntary in that sense
that the parties participate of their own free will and a neutral third party simply
assists them in reaching a settlement.
The process is private, confidential and conducted without prejudice to any legal
proceedings. The process is non-binding unless an agreement is reached. Of course,
once an agreement is reached, and the parties have signed it, the document is as
binding as any other agreement would be. Although the process is largely informal,
the following could be identified as parts or stages in a mediation process.
In the pre-mediation stage, there has to be a basic agreement among the parties to the
mediation process, including the identification of a mediator. Mediation could be
direct or indirect, and could involve meetings with parties, presentations being made
by them, putting together of facts, negotiations and a settlement. Finally, a mediator
may also like to be involved in the process of compliance with the settlement reached.
Advantages of Mediation
 lot less time-consuming
 lesser costs,
 outcome could be more satisfying to the parties,

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 minimizing further disputes

 enhancing a professional relationship
 Give them greater confidence in their ability to handle disputes.
ii) Adjudication
The term adjudication refers to the process by which the judge decides or a neutral
third party gives a decision, which is binding on the parties in dispute unless or until
revised in arbitration or litigation. This narrow interpretation may refer to the
commercial use of an adjudicator to decide issues between parties to a contract. The
use of an adjudicator is found in a variety of standard forms of contract used in the
construction industry.
Adjudication in the construction industry has displayed certain characteristics
 Adjudicator is a neutral individual who is not involved in the day-to-day
running of the contract. He or she is neither an arbitrator, nor a state-appointed
judge.
 Adjudicator enjoys his or her powers by virtue of the agreement between the
parties. In other words, the parties have agreed by contract that the decision of
the adjudicator shall decide the matter for them.
 Adjudicator’s decision is binding on the parties, and therefore, unlike
mediation, the process does not require the co-operation of both parties.
 Adjudicator’s decisions are usually expressed as being binding until the end of
the contract when either party may seek a review of the decision, most
commonly by arbitration.
2.4.2.5. Binding Resolution
a) Arbitration
Arbitration is perhaps the most commonly used mechanism for settlement of technical
disputes in a construction project. It is a quasi-judicial process to the extent that legal
protocol is largely observed, and it is important that the arbitrator, who basically acts
as a judge, understands legal procedures. He should be able to guide and provide a
direction to the proceedings, which could be quite tough, especially when the parties
to the dispute are represented by professional lawyers. One arbitrator each is

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nominated by the contractor and the owner, and these individuals together choose a
third colleague arbitrator, to complete the constitution of a bench of arbitrators.
b) Provision of Neutral Arbitrator

This step is the last chance to resolve a dispute before resorting to a binding
settlement. Providing for a neutral party to analyze issues and providing dispute
resolution, if negotiations come to an impasse, is an important step towards
minimizing the problems caused by disputes. This technique involves a pre-selected
independent “neutral‟ to serve the parties as an observer, fact finder and dispute
resolver throughout the construction process. Ideally, a neutral is selected at the
inception of the construction phase of the project to act immediately in resolving
disputes that cannot be otherwise settled.
2.4.2.6 Litigation
Litigation is often the final resolution step should previous procedures have failed in
achieving a desirable outcome. Litigation involves the determination of the dispute in
a court before a judge and involves a complex process requiring the use of significant
resources generally including the use of legal representation. The court of law in
which the dispute is heard depends on the size of the dispute in monetary terms.
Additionally the jurisdiction and procedures of each court is governed by a strict set
of court rules. Settlement through a court of law is obviously the last resort and this
usually takes years and can be frustrating. Courts, usually would like the party
concerned to exhaust all other administrative channels for seeking redress before
hearing the case.
Only if the contractor is extremely confident of his case and honestly believes that he
has been wronged at the negotiations and at the arbitration levels, must be embark on
court action. Court action will require engaging top legal minds who have some
experience in construction industry feuds, and the ensuing long legal battle-which will
require prolonged attention and physical presence of the contractors top personnel
whose services will thus be diverted away from their usual business-can be extremely
costly and demoralizing. Where the contractor is not a government run enterprise but

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a private organization answerable on its own strength to its shareholders, the decision
to resort to court action should only be made when the gravity of the case is really
enormous.
2.4.3. Alternative Dispute Resolution (ADR)
The term ADR has attracted a great deal of attention in legal and quasi-legal fields
since the mid-1980s. Although the concept of dispute resolution techniques which are
an alternative to the court system is not new, the more recent advent of the acronym is
essentially taken to describe the use of a third party mediator who assists the parties to
arrive at a voluntary, consensual, negotiated settlement.
2.4.3.1Advantages of ADR
a) 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.
b) 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.
c) 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.
d) 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.

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e) 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.
f) 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
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
Summary
We over view that there are many studies about claim and dispute but there is no any
study about Assessment in cause and effect of claim and dispute in Debire Birhan
Building projects. We need to fill this information gap in this senior project.

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Chapter Three
RESEARCH DESIGN AND METHODOLOGY
3.1 Study area
In this chapter we discuss the methodological issues connected to our senior project.
The research was conducted on buildings construction projects in Debire Birhan to
asses cause and effects of claim and dispute。
3.2 Research design
The research design involves preparation and selection of methods of collecting and
analyzing a data with aims to fulfill the research purpose. The effectiveness of the
research des Analysis of the experience of professionals was carried out through
questionnaires and interviews. The analysis was carried out based on the responses of
the participants, giving special attention to the management of claims, and Conclusion
is produced from the analysis made in the research and recommendations are given
for mitigating and/or administrating claims. In addition some areas of further research
are suggested.
3.3 Population
In order to acquire the data relative to the cause and impact of claim and dispute in
Debire Birhan building projects, the targeted groups will namely:
 contractors;
 Consultants.
The targeted population will cover the total collection of all units’ of analysis and lead
us to conclusions.

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3.4 Source of the data
There are two kinds of sources to get information which are primary source and
secondary sources.
Primary source
In primary source datas are collected from then respondent directly. In this method
data is collected from questioner and interviews.
Secondary data
In this method data is collected from the following sources.
• Important Data was collected, analyzed and reviewed from documented sources
and recordings on building construction projects.
• Using different books and websites which help to access sample information
related to claim and dispute.
• This approach will be complemented by a structured questionnaire survey of a
sample of construction stakeholders.
• Conclusions will be drawn and recommendations formulated from the analysis of
the data.
3.5 Questionnaires survey
A questionnaire could involve closed ended. Closed ended forms of questions were
adopted for this study.
 In closed ended questions, the respondents are given a range of statements which
require respondents to tick the appropriate box. The respondents are restricted
according to the way they should answer the questions.
Closed ended Questionnaires or check list are prepared and distributed to selected
building construction project managers, project office and construction engineers, and
the like. These individuals are selected because they have high experience to know
more about the condition of the building construction problems to give reliable
information which is an important input for the research work in order to assess and
find out all the problems and their impacts very easily.

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3.6 Rational questioner
To prepare the questioner we classify the questions in three different sections. The
first section is aimed to get general information about company profile and
experience. Second section tried to know the causes of claim and disputes in Debire
Birhan building projects and the final section is composed of questions to know the
impact and mitigation methods
3.7 Data analysis
Analysis of the data is classified in to four different sections. In section one the
experience and profile of the companies are analyised. Causes of claim and disputes
are analyised in section two. Section three discuses about impacts and the fourth
section describe about methods to minimize these causes and disputes in Debire
Birhan building projects.

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CHAPTER FOUR
CASE STUDY AND QESTIONNAIRIES ANALYSIS

4.1 The Case Study Project
This section of the senior project focuses to investigate the cause and impact of claim
and disputes in Debire Birhan building projects by analyzing the expeiance of
different projects. The analysis classified in to four sections based on type of
information they contains. The first section contains general information about the
respondents. Second section is composed of cause of claim and dispute. Impacts of
claim are covered in section three. Section four is composed of mitigation methods of
claim and disputes.
4.2 Section one
This section is related to the profile of the construction firms and their experience in
construction claims.
4.2.1 General information from the survey questionnaires
A total of 16 respondents were received from 20 asked. It has a response rate of 80 %.

The respondents have been asked to respond on questions requesting for factual
practice/custom, opinion and view of their own as practitioners on causes of claims in
Debire birhan building projects.
Table 1 Summary on the response rate of questionnaires

Construction party Distributed Collected questions Response rate
questions (%)
Contractors 12 9 75
Consultants 8 7 85.7
total 20 16 80%

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From the distributed 12 questioner for contractors only 9 are collected. And 7
questioners are collected from 8 that are distributed for consultants. Totally we receive
16 questioners from 20.
Table 2 Rate and frequency of claim from awarded contract

Range of No of No of claim % % of claim
awarded respondent from Awarded from
contract in range awarded contract awarded
contract contract
1-5 5 8 31.25 50
5-10 7 7 43.75 43.75
10-20 3 1 18.75 6.25
20-40 1 6.25
The respondents to the questionnaires are rated in the following form. 31.25% of the
respondents have won/awarded 1-5 contracts, 43.75% of the respondents have
won/awarded 5-10 contracts, 18.75% of the respondents have won/awarded 10-20
contracts, and 6.25% of the respondents have won/awarded 5-10 contracts for the last
ten years. It indicate that more than half of their works are claim related.
Table 3 Summary on the rate and frequency of reasons of claim

Reasons of claim frequency %
Lack of Successful completion 6 37.5
Lack of claim administration process 4 25
Lack of construction industry policy 5 31.25
Lack of claim experts in firm 1 6.25
37.5 of the respondents to the surveyed questionnaires rated because of lack of

successful completion, it refers that there is non effective finishing capacity because
of less effective management of time, resources and also it include other problem
during construction.
25% lack of claim administration process, it is created by giving small attention for
administrating claims carefully.
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31.25 % lack of construction industry policy, it indicates specific policies for

construction industries are not well done.
And 6.25 % lack of claim experts as their experience, there are not specific experts to
manage claims that are created on the project.
4.3 Section two
Various claim factors /causes/in Debire Birhan building construction firms are tried to
assess with their relative occurrences. Also it tries to assess the occurrences of claims
as time related and cost related claims.
4.3.1 Analysis of the causes of claims
The different factors giving rise to the claims of the16 studied projects analyzed
bellow. Those factors with high frequency are considered to be predominant claim
factors, as they are repeatedly occurring. The factors can be regrouped into the
following five major categories based on their sources.
1. Owner’s / Engineer’s actions/ inactions
 factors included in this category are:
• Failure to give possession of site
• Delayed supply of shop drawings
• Removal of obstructions
• Untimely advance payment
• Interference with the works
• Late instruction by the Engineer
• Delayed Engineer’s approval
2. Third party’s actions/ inactions

This category includes factors that are out of the control of the contracting parties.
These factors are actions/ inactions that are caused by external parties like the
government, local peoples of other agencies act that affect the contract.
• Illegal labor strike
• Problem with obtaining license
•Obstruction by local people

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•Shortage and problem with delivery of materials

2. Deficiency in contract documents
The followings are factors that are included in this category
• Variations
• Contractor disagreement with Engineer’s measurements and valuation of works
• Delay due to lack of design information
• Design changes
3. Changed conditions/ differing site conditions

These are changes to what has been assumed during the design and tender document
preparation stages. This category includes
• Exceptionally adverse climatic conditions
• Shortage of suitable quarry (to gain good quality)
4. Force Majeure
 factors included in this category is Site security
Most of the above factors are similar and repeat themselves in the studied projects.
The relative percentages that scores greater than 60% are grouped in the above five
categories are shown below.
Table 4 Major category of claim causes that score greater than 60%
NO Questions consultant contracto total

r
1 Owner Caused cons cont total
Changes in designs and
0.786 0.7778 0.78
specifications
Untimely payment 0.571 0.6944 0.64
Inadequate bid information 0.75 0.5 0.61
2 Contractor Caused 0 0 0
Schedule updates not done 0.829 0.7222 0.775
Delay in completion time 0.643 0.7778 0.72
3 Consultant Caused 0 0 0

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Delayed approval of schedules,

0.882 0.7778 0.83
work order, samples, lab. Tests
4 Third party Caused 0 0 0
Shortage & problem on delivery
0.571 0.7222 0.66
of materials
5 Contract Document 0 0 0
Ambiguity and discrepancies
among documents forming 0.714 0.5278 0.61
contract
Conflicts in designs and
0.536 0.6667 0.61
specifications
The results of the analysis of the studied projects reveals that the top four major
reasons of the causes are:
1. Delayed approval of schedules, work order, samples, lab. Tests
2. Changes in designs and specifications
3. Schedule updates not done
4. Delay in completion time
4.4 Section three
In this section the survey questionnaires assesses the impacts and type of claims, the
practice of the firms in claim. The impact can be in terms of time or in terms of
finance.
4.4.1 Impacts
The respondents to the questionnaires reported about the impacts of claims on their
firms. The majority of the respondents referred claim impacts on project completion
time, financial impacts and both. They also forwarded points like inefficient delivery
of projects in terms of quality and claim affects the relationship among parties.

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Table 5 type of claim and their frequency
impact of claim frequency % of claim

Impact on Time 3 18.75
Impact on Cost 6 37.5
both 7 43.75
• Impact on Time: 18.75%
• Impact on Cost: 37.5%
• Both cost and time claims: 43.75%
4.5 Section four
The opinions of the respondents on what to do to reduce the number of severity of

claims are analyised in this section.
Firm’s experience in claim mitigation
On the questions regarding the experience of firms to minimize, the respondents’ rate
is arranged in decreasing order of percentage of the responses and presented as shown
below. The points are grouped as techniques that are used before work begins and
after work begins.
Table 6 techniques that are used before work begins and after work begins
Before work begin Frequency In %
Design review 11 81.75
Enhanced quality of contract document 12 75
Planning & open communication 13 81.25
Value engineering 10 68.75
Constructability review 9 56.25
Partnering / team building partnering 7 43.75
Proper subsoil and geotechnical survey 7 43.75
Appropriate method of delivery system 6 37.5
After work begins
Record keeping 11 78

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Review schedules 12 75
Open communication& Partnering 10 68.75
Careful inspection 11 68.75
Design quality assurance/ quality control 9 56.5
Orders that prevent constructive changes 5 31.25
Response to submittals 4 25
The results of the above analysis suggests that design review before the construction
work begins and recording keeping during the construction process are the major
types of mitigation methods. Further the results shows that open communication and
partnering is an important mitigation method that should be practiced from the
inception to completion of a project.
The respondents were also requested to indicate the value of the use of different
techniques in reducing the incidence of and/or severity of construction claims. Their
response is shown below.
Table 7 Degree of importance of mitigation systems

Mitigation methods percentage
Clear contract document 0.906
Careful inspection 0.875
Enhanced quality of contract document 0.844
Roles and responsibilities of parties 0.812
Keeping records 0.812

Design quality assurance / quality control 0.812
Pre design / pre construction investigation 0.578
Internal professional managers 0.687
Construction / program management consultants 0.703
Construction meetings 0.734
Construction scheduling 0.765
Choosing appropriate delivery system 0.609

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Planning & open communication 0.734

Partnering / team building 0.734
Constructability review 0.656
Value engineering 0.609
Design review Proper 0.672
• Some of the techniques that are rated as very valuable with higher frequencies are:
Clear contract document
Careful inspection
Enhanced quality of contract document
Keeping records
Design quality assurance / quality control
Roles and responsibilities of parties

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CHAPTER FIVE
CONCLUSIONS AND RECOMMENDATIONS
This part of the thesis provides conclusions based on the findings form the case study
and questioners. It also contains recommendations of methods and techniques that
help in mitigating those claims that are taken as the major sources of claims.
5.1 Conclusion
 The root causes of claims on building pojects in Debire Birhan are,

 Owner ’s actions/ inactions,
*Changes in designs and specification
 Consultant actions / inactions,
*Delayed approval of schedules, work order, samples, lab. Tests
 Contractors actions / inactions,
*Schedule updates not done
*Delay in completion time
Results of the analysis reveal that most of the factors that give rise to claims are
sourced out from the above mentioned categories.
 Contracting parties do not understand their duties and responsibilities

The analysis of the data collected through questionnaires shows that the consultant’s
and the contractor’s responses to some of the causes of claims is contradicting. It
seems that the responses are meant to avoid the responsibility of their own faults.
• Claim has a considerable impact on the construction industry

Claim has considerable impacts on building projects in Debire Birhan. These are
financial impact, impact on project completion time, and it also weakens the relation
among parties.

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• Practices of the employer and construction firms in minimizing and/or

administering claims is not satisfactory
The current practice of employers and construction firms in minimizing and/or
administering claims is not satisfactory; this could be as a result of poor project
planning, lack of expertise in the firms, lack of clear claim administration process
etc…
• Documentation systems currently used by the construction firms are not
satisfactory
The results obtained from the distributed questionnaires shows that the current
practice of construction firms regarding the documentation of claim submittals of
different types of projects they participated is poor.
• Both types of claims are occurred on the construction industry

As our respondents’ response both types of claims which are time claim and financial
claim are available in Debire Birhan building construction projects
• There is a substantial overlap between claims for additional cost and

extension of time
The results of the questionnaires show that all claims for additional cost are
accompanied by claims for extension of time. This shows that there is a substantial
overlap between claims for additional cost and extension of time.
• Claims submittals on building projects in Debire Birhan

Generally, the claims amount and their frequency with projects completion delays are
becoming disappointing circumstances which indicate either the clients’ project
planning or the implementation of the project process is inefficient or the contractor’s
assessment of their claims is exaggerated.
On the basis of information gathered for this paper, the following research topics have
been identified as areas for further study:
• Techniques of enhancing quality of contract documents
• Enhancing claim management

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5.2 Recommendations
 The purpose of the following recommendation is not to deeply address areas that
need improvement. The intention is only to point out some major issues that need
consideration to enhance the current practice of claim management.
 the analysis of the questionnaires has identified Employer’s / consultant’s
actions / inactions, Deficiency in contract documents, and Third party actions /
inactions are the major causes of claims on building projects in Debire Birhan.
Hence the following recommendations are focused towards improvements to be
made on these causes.
Improvement in contract documents

 Knowing the areas where conflict is likely to arise from experience and carefully
planning to address them,
 The design process has to be given adequate time and more investigation has to
be made during design reviews. A highly qualified and experienced group of
professionals has to make design reviews, constructability reviews and value
engineering studies on the final design before going to tendering.
 These review tasks can also be given to the design review consultant if there is
lack of qualified in-house staffs.
 A standard checklist has to be prepared with all necessary details for reviewing
the completeness of designs, plans, specifications and tender documentations.
Accordingly documentations have to be checked before floating the tender. The
contract documentation problem areas encountered or design deficiencies on
projects undertaken previously can be used to develop the checklist;
 The client has to make sure that the contract documentation is free of ambiguous
terms of contract; errors and omissions; plans and specifications are adequately
referenced and coincide with the terms of references before entering in to
contract.
 During adopting any type of standard conditions of contract, care should be taken
on clauses to be added or amended with sufficient knowledge of their
implications.
 Clearly specification of expressed terms up on which the contractor is to rely and

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implied terms which may be prompted should be set down appropriately

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Improvement in Owner actions/inactions

 Owners should be informed, and even participate, in the setting of the baseline
statements.
 Knowing the duties and responsibilities of the parties
 Possession to site should be given for the awarded contractor.
 Proportional, time and cost should be added for the added extra work, change in
design and specification.
 Payments should be paid timely as mentioned in the contract document after the
consultant approved it.
 Owner should finish regulation related things like license
Improvement in Contractor actions/inactions

 Contractor have to get adequate clarification on procedures and arrangements on
practical issues like customs, licenses and other local norms so that they could
take into account in their offers.
 Adequate investigation should be made before bid.
 Information that are given t tender document should be actual (calculated
carefully),
 Adequate attention should be given for schedule updating.
 Contractor should follow Engineer’s instruction or invite them for discussion if
there is any idea that he/she didn’t believe on it.
 Keep records in well manner.
Improvement in Consultant actions/inactions

 Design consultants have to cover the additional costs that the client incurs due to
incorrect designs or insufficient data supplied by them and this has to be clearly
included in the service contract agreement.
 Adequate time should be given for designers and design consultants for the
preparation of design work with fair fee
 Engineers should give instructions, approvals of schedules, work orders, samples,
laboratory tests, etc… at the right time.
 Improvement in Third party actions/inactions
 The regulatory bodies should take part in the development of the construction

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industry by enhancing the current licensing regulation and regulations that are
related to importing of construction materials.
 Using proportional incentives for employees to increase their productivity and
dismiss labor strike
 Carful inspection

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REFERENCES
1. Eileen M. Diepenbrock & Chris A. Mccandless, July 2002; Allocating
2. risks of unexpected site conditions,
3. Abera Bekele, July 2005; Alternative dispute resolution methods in construction
industry: an assessment of Ethiopian construction situation, Addis Ababa
University Masters thesis
4. W Trench F. June 1995; Claim and claim avoidance, A CPD study pack
5. Edward R. Fisk, 2000; Construction project administration
6. R.Max Widman, 2001; Construction Claims
7. Public Procurement Agency (PPA), 2005; Condition of contracts
8. Wagner, et al; Construction claims guide,
9. Tesfaye Ayele 2004; Enhancing the management of construction
10. contract claims, Addis Ababa University Masters thesis
11. IDIC,1987; Conditions of Contract for Works of Civil Engineering
12. Construction
13. How to Effectively Mitigate Claims & Resolve Disputes
14. Hughes & Barber, 1992; Claims perspective
15. Journal of the Ethiopian engineers and architects, Volume 20, 2003
16. K.L.Scott, 1992; Managing contractual claims
17. Abdissa dessa, claims in ethiopian construction Industry
18. Bonaventura H.W. Hadikusumo12and Sonam Tobgay2, Construction Claim
Types and Causes for a Large-Scale Hydropower Project in Bhutan
19. Marzooq Abdul Karim Salem, The dispute in the construction industry in the
Kingdom of Bahrain with a view to developing a dispute mitigation strategy
20. Christopher J.O’Conner,C.Arb., FCIArb. Presenting claim
21. Chaitanya Khekale1, Nityanand Futane2, Management of Claims and Disputes in
Construction Industry
*Author, Name of the book, Publisher, Year, Page (use this

format)

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Appendix
Questioner
Dear respondent
This questionery survey is part of academic research that aims to assess the major
cause and effects of claim and disputes in Debire Birhan building projects. The
research is conducted for fulfilling the requirement of BSC. Degree in Construction
technology and management at Debire Birhan University.
All the information you provide will kept in strict confidentiality, it will only used for
academic research.
thank you for your participation and the commitment of time, energy, and effort and
fulfilling the questioners below
SECTION ONE: - General Information

1. Your agency profile (optional)
Name __________________________________________
Grade / Class __________________________________________
2. Type of agency
Consultant Contractor
3. How many contracts have you awarded / won within the last ten years?
1-5 5-10 10-20 20-40 >40
4. How many of the above awarded / won contracts have claims?
1-5 5-10 10-20 20-40 >40
5. If your firm did not make claims, what was the reason?
Luck of successful completion
Lack of construction industry policy
Lack of claim administration process
Lack of claim experts within your firm
Others, please
specify____________________________________________________

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SECTION TWO: - Causes of Claims

1. What were the major causes of claims?
1. Very often 2. Often 3.sometimes 4.not occurred
Owner Caused
Changes in designs and specifications
Untimely payment
Failure to provide possession of site
Extra work
Termination
Inadequate bid information
Suspension
Late removal of obstruction
Other, please specify_______________________________________________
Contractor Caused
Unbalanced bidding
Inadequate investigation before bidding
Non-compliance with contract document
Schedule updates not done
Not following engineer’s instructions
Change in construction methods
Termination of contract
Lack of expertise
Delay in completion time
Subcontractor’s delay
Consultant Caused
Late instruction additional work
Delayed approval of schedules, work order, samples, lab. tests
Late instructions

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Impractical or impossible
Higher standards
Lack of expertise
Third party Caused

Change in legislation
License for importation of explosives, equipment ,etc
Obstructions by local people
Labour strike
Shortage & problem on delivery of materials
Other please specify________________
Contract Document
Ambiguity and discrepancies among documents forming contract
Conflicts in designs and specifications
Non availability of survey benchmarks
Errors and omissions
Differing conditions
Landslides
Severe weather condition
Shortage of suitable quarry
Other please specify_______________
Force Majeure
Site security problems
War & hostilities
2. Which type of contractual claims usually occurs?

Time related claims Cost related claims both

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Section Three: - Claim Impacts and Mitigation

1. Identify the potential impacts of claims
Financial impacts
Impact on project completion time
Others, please specify __________________________________________
2. Does your agency maintain history /records of project claims?

Yes No No information
3. What steps does your firm take to minimize claims?
Before work begins

Planning & open communication
Partnering / team building partnering
Constructability review
Value engineering
Design review
Appropriate method of delivery system
Proper subsoil and geotechnical survey
After work begins

Open communication& Partnering
Record keeping
Review schedules
Careful inspection
Design quality assurance/ quality control
Orders that prevent constructive changes
Response to submittals
Other， please specify________________

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4. Please indicate the value of the use of the following techniques in reducing the
number of severity of claims or resolving claims
Please indicate on the boxes using the following criteria
1. Very valuable 2. Valuable 3. Not valuable
Roles and responsibilities of parties
Pre design / pre construction investigation
Internal professional managers
Construction / program management consultants
Design quality assurance / quality control
Construction meetings
Construction scheduling
Clear contract document
Keeping records
Choosing appropriate delivery system
Planning & open communication
Partnering / team building
Constructability review
Value engineering
Design review Proper
Careful inspection

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ASSESSMENT IN CAUSE AND EFFECT OF CLAIM AND DISPUTE

DEBRE BEREHAN UNIVERSITY

CONSTRUCTION TECHNOLOGY AND

ASSESMENT IN CAUSE AND EFFECTS OF CLAIM AND

JUNE 2017(final date)

DEBRE BEREHAN, ETHIOPIA

DEBRE BEREHAN UNIVERSITY

CONSTRUCTION TECHNOLOGY AND MANAGEMENT

ASSESMENT IN CAUSE AND EFFECTS OF CLAIM AND

MAIN ADVISOR: INS. MOHAMED

CO-ADVISOR: INS. EYERUSALEM

DEBRE BEREHAN, ETHIOPIA

No need of writing on header and footer

Section 03 group 5 senior project 3

Figure 1: Risk, Conflict, Claim and Dispute 8

Table 5 type of claim and their frequency……………………………………………39

Section 03 group 5 senior project 4

Section 03 group 5 senior project 5

Section 03 group 5 senior project 6

The construction industry is a complex and competitive environment in which

Section 03 group 5 senior project 7

Typically, if the parties cannot reach a resolution themselves, expensive, time-

Problems crop up during construction projects due to delay, unexpected additional or

Section 03 group 5 senior project 8

1.3 Problem Identification

1.4 Research Questions

1.5 Objective of the project

Section 03 group 5 senior project 9

1.6 SCOPE OF THE STUDY

1.7 Significance of the study

Section 03 group 5 senior project 10

Minimize the pages of literature review (not more than 10 pages)

Construction projects are entirely dependent on estimates of future occurrences.

2.2 Contractual Problems in Construction Industry

Construction project contracts are the agreements made by construction project

Section 03 group 5 senior project 12

7) Termination for the convenience of the client

2.3 Claims in Construction Industry

Section 03 group 5 senior project 13

Figure 1: Risk, Conflict, Claim and Dispute

Inappropriate risk allocation through disclaimer clauses in contracts is a significant

Different writers define construction claim on their own ways;

Section 03 group 5 senior project 14

 A claim is mostly concerned with entitlements and liabilities arising under, or as a

 A construction claim is a demand for payment of additional compensation,

 Claim in practice can also be understood in different ways based on the

2.3.1 Valid claims

Requirements for valid claims

Section 03 group 5 senior project 15

 Non disputable claims: are those acceptable by the contracting parties.

2.3.2 Contents of a claim

Section 03 group 5 senior project 16

Appendix: - each document or series of documents should be given an appendix

2.3.3 Classification of claims

Extra- contractual / Quantum Merit claims: - In the absence of express contractual

Section 03 group 5 senior project 17

B. Classification based on entitlement

Time Related Claims - these claims are usually related to:

2.3.4 Causes of claims

There are many reasons for claims to arise on a construction project.