Faculty of Architecture and planning,

Arba Minch university

Introduction to Construction Management

(Variation, Claim & Arbitration– Lecture 10)

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Introduction to Construction Management January , 2022

X- Variation, Claim & Arbitration
 ▪ Variation
▪ Potential Causes of Variations
▪ Claims
CONTENTS
▪ Common construction claims
▪ Dispute
▪ Modes of Settlement of Disputes

Chapter X: Variation, Claim and Arbitration

Variation

 Definition:
 Variation is any change (additions or omissions) to the works, the time scale in which the works
are completed and the order or way in which the works are to be completed.
 Variation should be instructed or approved as a variation under the clause in the contract
dealing with variations to the contract.
 Variation orders are an unwanted, but inevitable reality of every construction project.
 Proper management of variation orders is very significant for all types of construction projects.

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Variation

 Causes of Variation

1. Owner Related Changes

2. Consultant Related Variations

3. Contractor Related Variations

4. Other Variations not directly related to the participants

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Variation
1. Owner Related Changes 3. Contractor Related Changes
 Change of plans or scope by owner
 Lack of contractor’s involvement in design
 Change of schedule by owner
 Contractor’s financial difficulties
 Owner’s financial problems
 Differing site conditions
 Inadequate project objectives
 Defective workmanship
 Change in specifications by owner
4. Other Variations not directly related to the
2. Consultant Related Changes participants
 Change in design by consultant  Weather conditions
 Errors and omissions in design  Change in government regulations
 Conflicts between contract documents  Safety considerations
 Inadequate scope of work for contractor

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Claims

 Definition:
 Claim is defined as a demand or request for something, which one has a right to have.
 Claims in construction industry are associated with cost overruns, mismanaged jobs, legal entanglements,
and wrong practices on the part of various contractors.
 They are often viewed by owners and engineers as the contractor’s strategy to cover bidding errors or
omissions, this is a misconception.

 There are two basic requirements for identification of claim. These are:
A) knowledge of contract document and
B) knowledge of legal concept and right.

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Claims

A) knowledge of contract document

 The construction project staffs must have a good working knowledge of the contract
documents.
 Familiarity with pertinent technical and general terms is essential for project personnel to
recognize contract rights and duties.
 If these key personnel have a thorough and detailed picture of the entire job, they will be in
the best position to recognize claims situations as soon as they occur.

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Claims

B) knowledge of legal concept and right

 The project staffs are expected to have a working familiarity with legal concepts and rights,
which will affect the outcome of potential claim situations.
 With a firm background in these legal percepts, the contract manager is in a position to sense
and appreciate the significance of events that may lead to later problems.

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Claims

Common Construction Claims

I. Claims of Owner/Client against Contractor

II. Claims of Contractor against Owner/Client

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Claims

I. Claims of Owner/Client against Contractor

 Claims for defective work done by the contractor  Claims for liquidated damages
 Claims for delay caused by the contractor  Claim against professionals
 Counter-claim as a defense  Claims following termination and breach
 Claims for expenditure incurred in completing the work left incomplete or abandoned by the contractor

II. Claims of Contractor against Owner/Client

 Claims to recover damages caused by breach of conditions by the owner.

 Claims to recover loss or damage caused by an unjust termination of the contract by the owner
 Claims to recover damages upon rescinding / withdrawing of the contract due to frustration.

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Dispute

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Dispute

 If construction claims are not properly handled they will be changed into dispute

 Modes of Settlement of Disputes

I. By direct negotiations between the client and the

contractor
II. Settlement by arbitration
III. Through civil courts

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Dispute

I. By direct negotiations between the client and the contractor

 Easiest and least expensive

 Majority of the disputes are settled through negotiations
 Arbitration is sought after, only if direct negotiations fail

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Dispute

II. Settlement by arbitration

 Arbitration is the hearing and determination of a dispute by an impartial referee selected by

the parties concerned.
 Arbitrator is a person chosen by the concerned parties to pronounce judgment on the
dispute.

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Dispute

III. Through civil courts

 Last resort
 Attempted only if direct negotiation and arbitration fails
 Time consuming, to the tune of several years
 Expensive

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Dispute

Advantages of Arbitration over Litigation

 Last resort
 Cost
 Speed
 Convenience
 Proceedings in private premises, etc.

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… THE END !!! …
 Introduction
Description of Study Area

1. Introduction Material and Methods

Result and Discussion