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Avoid Litigation When Resolving Construction Claims A Case for Implementing Third-Party Daily Reporting Solutions

Unfortunately, litigation is an all-to-common method for resolving disputes in the construction industry. It is common for a contractor involved in a construction claim to find it has not maintained the necessary project documentation to support the claim.

While contractors may prefer to not consider how a dispute should be resolved prior to its development, the reality is they should consider how to resolve potential disputes before entering into a construction contract. Many in the industry will agree that the best method for ensuring that a dispute is correctly and fairly resolved is through properly drafted contracts. However, the chance of succeeding through a typical construction litigation process are significantly reduced if well-documented evidence to support the claim is not provided. Implementing a third-party reporting solution can provide the necessary documentation via worker notes, photos and videos to resolve claims before they go to litigation.

Few, if any, projects do not involve some type of change or event that arises during the course of construction that impacts the overall cost of the job or the time it will take to complete the job. These unexpected occurrences usually result in change orders, or worse yet, construction claims.

Many construction contracts, especially government contracts, require contractors to maintain complete project cost records. These records could be subject to audit in the event of a change order claim. Also, with the increased tendency to respond to delays with liquidated damages or false claims of materials or code violations, detailed records are truly the only viable way to support the opposition of such claims.

The size and type of project affects the amount of documentation that will be maintained for each project. Larger projects require greater care in the preparation and maintenance of project documents, while smaller projects may not be economically cost-effective to support such extensive documentation.

To successfully recover the costs associated with these events, it is necessary to promptly identify and then support the claim with adequate documentation. If all parties involved cannot resolve the dispute over the additional costs or time extensions, it may be necessary to litigate the issue.

In order to prevail on a claim, first it is necessary for a contractor to prove that the company is entitled to prevail on the claim and then prove the additional costs incurred as a result of the claim. Typically, these aspects of the claim are proved by reviewing how the project was planned, as well as how the anticipated costs relate to the actual conditions and costs that were encountered during construction. While verbal testimony is admissible evidence, documented evidence is crucial to substantiate the claim. Therefore, the existence of accurate project documentation is necessary.

Daily reports provide construction managers with peace of mind concerning the compliance of their worksites and their ability to prove their lack of culpability if litigation does arise. Specifically, daily report documentation is crucial to defend against latent defects as contractors can be responsible for up to 10 years after the completion of the project. This makes it even more important to save accurate information in the event anything is disputed and precise details are needed months or even years after the project is completed.

In arbitration, a company’s best protection is to prove that the project took safety, cost and any regulations into account. For example, failure to provide proper cost record documentation could result in adverse opinion audits, while careless security documentation may leave a contractor susceptible to code violations.

Another way that companies can lose in arbitration is if there are inconsistencies in their documentation or if reports have been modified. Regularity in language and intent is critical in daily reports. If important elements of a project are omitted or vary from the standard forms created by the American Institute of Architects (AIA), legal and insurance issues can arise.

The best way companies can protect their organizations from negative outcomes in arbitration is by using objective, third-party documentation software. Accurate handwritten notes are often impossible to take in the field, but post-work documentation is also imprecise and outdated. Instead, superintendents and subcontractors should have the ability to call in, type or email notes, photos and video to a third-party company, which in turn will standardize the notes into accurate and consistent daily reports.

In addition, a third-party reporting solution can provide added protection in arbitration because it maintains an accurate, contemporaneous, time and location-stamped record of where and when notes and photographs were taken, as well as records all audio files. This kind of specific recordkeeping is essential because “at-the-minute” documentation is most credible in establishing workplace timelines. Additionally, the company should encrypt documentation and preserve it for at least 10 years, as well as provide a search function within the documentation to make it easy to access records.

Third-party daily reporting is necessary for other kinds of protection as well. Companies can use it to analyze delays, make changes and prevent minor safety issues from turning into major problems. In particular, active alert system reporting can make team members aware of real-time problems reported by employees so that issues can be resolved immediately before they become more problematic.

Companies should consider implementing third-party daily reports in an effort to provide the most protection and avoid the risks and ramifications associated with poor documentation.

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