Pursuing and Defending Construction Claims

Construction projects require cooperation and coordination among a long list of participants including architects, contractors, subcontractors and others. So it's not surprising that even the most straightforward construction projects can result in disputes and ultimately, costly litigation.

Before embarking on a construction project, consider how best to prepare your company to defend or pursue a construction claim in the event that all doesn't go as planned.

In order to fully support a construction claim in court, arbitration, or mediation, the documents pertaining to the project in dispute must be exceptionally well organized. Construction claims often involve the analysis of highly complex and contradictory documents.

Important: All appropriate documents should be readily available to be reviewed and analyzed well in advance of the scheduled court date. Depending on the issues in dispute, the documents that need to be gathered include:

• Applicable contracts;
• Appraisals;
• Architectural drawings;
• Project schedules (forecasted and actual);
• Change orders;
• Meeting minutes;
• Labor and equipment records;
• Draw requests (including all supporting documentation);
• Job site pictures;
• Inspection reports; and
• E-mail communications about the project.

Caution: Courts generally understand the complexity inherent in construction litigation. However, failure to locate, or share the appropriate documents can call in to question the overall accuracy and validity of the entire claim. Alternatively, a key document can be used to destroy the "other side's" entire case.

In addition, the use of graphs and illustrations may be appropriate in order to "paint the picture" for the judge, mediator or jury.

For example, graphs are often used to illustrate the number of hours worked, or the material costs incurred during the life of the project. A well-designed graph can communicate complex facts in an understandable way. This is especially important when the case is being tried in front of a jury.

It is also important that the claim reflects decisions reached in previous construction-related litigation. For example, there is case law regarding the best way to recover damages triggered by a delay. It is important to work with an accounting expert who has experience preparing construction claims and is knowledgeable about applicable case law.

Construction claims are inherently difficult to pursue and defend. However, with careful preparation and the assistance of your accountant, you can help increase the chances of prevailing in court.