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Notification of Change or Claims - What it is and Why it is Important

In a recent construction dispute between a Developer of upscale urban properties and its General Contractor (GC), I was engaged to provide expert services for a forensic schedule delay analysis resulting in a presentation of the GC’s claims before a contractually-mandated dispute review board (“DRB”). There was approximately $14 million in claims and counterclaims at stake.

In the battle of issues and analyses, we proved to have the upper hand. When the dust settled, the DRB found the delay analysis set forth by the Developer’s consultant to be defective and incurable. Unlike our analysis, theirs had conveniently overlooked a number of critical active interference events by the Developer, which had caused delay and disruption. Furthermore, the DRB agreed that the Developer’s consultant did not perform an analysis in conformance with any of the accepted methodologies utilized by the construction industry. And more importantly, the DRB agreed with our findings that our opposition relied on a faulty and non-existent critical path in its allocation of responsibility for delay.

The facts were laid out quite clearly during our presentation to the DRB, showing that the Developer’s actions during the project performance period had disrupted the work and created significant additional contractor costs. This was an open and shut case, or so I thought. We later received the board’s verdict and read it with mixed emotions.

The DRB had ruled in our favor regarding every one of the developer’s claims - but why was the award to the GC limited to only 20% of its claimed additional costs? A careful reading of the DRB’s Resolution helped to clarify our confusion. The board had determined that testimony by the fact witnesses had been “self-serving anecdotal narratives” without “sufficient credible evidence.” Many of the issues put forth by both parties were dismissed, despite analysis that clearly established causation and responsibility for the two-year project delay.

In the mind of the board, the basis of this decision was insufficient “credible evidence,” which boiled down to one concept – notice. The DRB wrote that "neither party has given the other the sort of contemporaneous notice that is customarily given when serious interferences and delays are encountered.” We were a bit surprised by this portion of the board’s opinion because the DRB proceedings had not been conducted as a highly formalized process, and discussions never focused on the strict interpretation and enforcement of any contract provisions. But, in its Resolution the board made it crystal clear that it was moved by the fact that change orders were issued without accompanying contractor demands for time extension and that written notice of adverse project impacts were few and far between.

In looking back upon the facts of the matter and having time to digest the board’s resolution, it is clear to me that the board was not over-enforcing the contract. On the contrary, the DRB resolution did not demand strict, formal notification of each major issue. Instead, the DRB seemed to question whether either party had had a contemporaneous understanding of the ramifications of discrete projects events and/or impacts during construction. Raising the claims ‘post-mortem’ was deemed by the board to be unacceptable.

To better understand this, we must recall why timely notice of issues is a very reasonable requirement – and not meant to be a technical defense or waiver of rights. Notice is critically important in order to avoid prejudicing the rights of a party to a construction project. When a contractor becomes aware of an issue or event that could reasonably cause delay, disruption and/or additional cost, it is that contractor’s duty to make the owner aware of the unforeseen event as soon as is practical to do so. Very often there are strict timeframes within the contract for when this notice must be delivered, and often in what form this notice must take.

The reasons why timely notice of unforeseen events is important are as follows:

• The owner has a right to verify for itself the existence and extent of the issue;
• The owner has the right to an opportunity to mitigate the adverse impacts of the issue, and;
• The owner has a right to witness and quantify the impact(s) resulting from the issue.

Many differences of opinion between contractors and owners (or their agents) stem not from the occurrence of an unforeseen project event itself, but from disagreement over the magnitude of the impact (time and/or cost) or even the existence of any impact at all stemming from the event. When this difference of opinion occurs after-the-fact, such as when most if not all of the contract work is complete, a dispute is often born, and often unnecessarily.

If notice is timely, there is little to dispute regarding the existence of a condition that is verifiable, and the impact of which can perhaps be minimized. The adverse impact, if any, can then also be measured contemporaneously such as with observable and documented time & material operations. Disputes with regard to project schedule impacts and cost (both direct and indirect) cannot always be amicably resolved; but the basis for serious disputes, adversarial relationships and even work stoppages can be significantly curtailed by timely notice.

It is always good policy, and often critically important, to carefully adhere to the notice provisions of a contract from the standpoint of timeliness and form. It may not be necessary to provide all notices in the form of registered mail, and depending on the working relationships that have been adopted among the project participants, memos or emails may suffice. Although notification of a new problem on a project is never pleasant, it can be delivered in a spirit of teamwork that preserves good relationships along with everyone’s rights. When diligently and amicably provided, proper notice of unforeseen project impacts can help ensure the protection of the rights of owners, its agents and consultants, as well contractors and other vendors.

By William Prettitore, P.E.
Construction Claims, Dispute Resolution, Delay Analysis and Cost Damages Experts
ABOUT THE AUTHOR: William Prettitore, P.E.
William Prettitore, P.E., is an expert in the preparation and evaluation of construction claims and in the resolution of complex construction disputes. During his 38 years of background in the construction industry he has been a Principal in an international consulting organization, a Deputy Director of Project Managment for the largest school building program in the United States, and a Vice President of Operations for a major national Construction Management firm. He has worked throughout the U.S., in the Caribbean and South America. Bill has worked as an expert and testified successfully in Litigations, Arbitrations and Dispute Review Boards.

Copyright William Prettitore, P.E.

Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.For specific technical or legal advice on the information provided and related topics, please contact the author.

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