Claims Management | KPMG | PL

Change management and claims management in construction contracts

Claims Management

Change in the article 144, paragraph 1 of the public procurement law – the end of disputes? New hope for the contractor and the project owner

Change management and claims management in construction contracts

The changes, claims and disputes in the construction industry arise naturally and have to be managed just like quality or staff.

Claims management includes the identification of circumstances, valuation of costs and of impact on the schedule, definition of the position of the parties, justification of this position, collection and protection of evidence, decision making and the identification of tools and methods leading to the acceptance of claims. This is a task which combines the competences of an engineer, lawyer and an economist at the same time.

Construction contracts entail a conflict: the contractor aims to generate profit and the procurer to achieve the best result out of the investment. Polish public procurement law after the 2016 amendment has finally recognized this problem. Through the article 144 of the Act the project owner has received a tool for shaping a construction contract in a modern way. The changes and claims may be reflected in the contract structure, where there should exist a transparent tool to change the price, scope and schedule of implementation. In construction contracts outside of the public procurement regime, constant professionalization has also been observed in Poland recently.

Both the project owner and the contractor need professional assistance in the preparation of construction contracts and their implementation in order to get the best possible economic result out of the contract. Change and claims management on the owner’s side begins with a solid preparation of the contract. At KPMG a construction contract is prepared by engineers and economists. Only when the mechanisms of the contract are agreed and tested, the final text is edited by a lawyer.

KPMG defines three types of changes in a construction contract:

  • The change which does not require a written procedure - resulting from the rights of the party to the contract, already stipulated therein
  • The change which requires a Variation Order – resulting from applying the terms of the contract which define the extent of the possible variations
  • The change to the conditions of the contract which requires the signing of an annex by the parties; in public procurement such change is not recommended by us.

KPMG sees claims management as a whole set of tasks which lead to achieving a better economic result out of the construction contract. It consists, among others, of the identification of the circumstances, valuation of costs and of impact on the schedule, definition of the position of the parties, justification of the position, collection and protection of evidence, decision making, mathematical analysis of the consequences of decisions; ordering private expert opinions; the identification of useful witnesses; preparation of valuable notes or protocols. Claims management is an interdisciplinary branch of knowledge – connecting engineering, economic and legal competences.

We offer consulting services in the field of change management and claims management throughout the entire investment project cycle. We offer assistance in solving contract problems. We prepare scheduling, pricing, private opinions, we establish systems for claims management, we formulate claims. We help in adopting the best claims strategy.

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