Claims Processing and Documentation

Why Claims Processing and Documentation Matters
Construction claims are among the most expensive and relationship-damaging events on a project. A poorly handled claim can turn a manageable change into litigation costing far more than the original disputed amount. For the Construction Manager (CM), who typically acts as the owner's agent, the ability to receive, log, evaluate, document, and help resolve claims fairly and promptly is a core Contract Administration competency. On the CCM exam, this topic tests whether you understand the CM's process-oriented, impartial, and documentation-driven role rather than an adversarial or decision-making one. The CMAA Standards of Practice stress that the CM protects the owner's interests by ensuring the contract procedures are followed and that a complete, contemporaneous record exists so any claim can be resolved on facts rather than recollection.

What Is a Claim?
A claim is a formal demand by one party to the contract (usually the contractor, but sometimes the owner) seeking additional compensation, additional time, or other relief that the other party has not agreed to. It is important to distinguish related terms the exam often mixes together:
• Change Order – an agreed, signed modification of scope, price, and/or time. No dispute exists.
• Change Directive / Construction Change Directive (CCD) – an owner-issued order to proceed with changed work before price and time are agreed; it may later become a claim if the parties cannot agree.
• Request for Change / Change Proposal – a contractor's pricing of potential changed work; not yet a claim.
• Claim – a disputed request that has not been resolved through the normal change process and is submitted under the claims clause of the contract.
• Dispute – a claim that has been formally rejected or remains unresolved and moves into the contract's dispute resolution procedure.

Common Types of Construction Claims
• Delay claims – excusable/compensable (owner-caused), excusable/non-compensable (e.g., unusually severe weather, force majeure), or non-excusable (contractor-caused). Only excusable delays warrant time; only compensable delays warrant money.
• Disruption / loss of productivity claims – work was performed less efficiently because of interference, stacking of trades, out-of-sequence work, or excessive changes.
• Acceleration claims – directed acceleration (owner orders faster work) or constructive acceleration (owner refuses a justified time extension, forcing the contractor to speed up).
• Differing Site Conditions (DSC) – Type I (conditions differ materially from those indicated in the contract documents) and Type II (unusual conditions differing from those ordinarily encountered).
• Scope / extra work claims – work the contractor believes is beyond the contract requirements, including constructive changes created by owner or designer interpretations.
• Defective plans and specifications – based on the Spearin doctrine, the owner impliedly warrants the adequacy of design documents it furnishes.
• Suspension of work and termination claims, and owner claims such as liquidated damages, defective work, or backcharges.

How the Claims Process Works
Most contracts (AIA, ConsensusDocs, EJCDC, federal FAR) establish a stepped procedure. The CM should know the generic sequence:

1. Notice. The contractor must give written notice within the time stated in the contract (commonly 7, 14, or 21 days after the event or after the contractor recognized it). Failure to give timely notice may waive the claim. The CM should make sure notices are date-stamped, logged, and acknowledged, and should issue the owner's own notices (e.g., of defective work or anticipated backcharges) with equal discipline.

2. Identification and Logging. The CM enters the claim in a claims log (or potential change / issue log) with a unique number, date received, description, parties involved, contract clause cited, amount and time requested, and status. A single log tracking issues from Potential Change Item through Change Order or Claim is a best practice because most claims begin as unresolved change requests.

3. Documentation and Fact Gathering. The CM assembles the contemporaneous record: daily reports, inspector logs, superintendent diaries, progress photographs and video, weather records, meeting minutes, RFIs and responses, submittal logs, correspondence, schedule updates and narratives, manpower and equipment reports, certified payroll, delivery tickets, testing reports, and the original and as-built schedules. The key word on the exam is contemporaneous – records made at the time of the event carry far more weight than reconstructions.

4. Analysis of Entitlement. Before looking at dollars, determine whether the contract gives the claimant the right to recover. Ask: Is the event the responsibility of the other party under the contract risk allocation? Was notice timely? Does the contract exclude this type of recovery (e.g., no-damages-for-delay clause)? Was the condition reasonably foreseeable or discoverable in a site investigation?

5. Analysis of Quantum (Time and Cost).
• Time – evaluated through schedule analysis using the critical path method. Common methods include as-planned vs. as-built, impacted as-planned, collapsed as-built, and time impact analysis (TIA) / windows analysis, which is generally the preferred contemporaneous method. Only delays to the critical path extend the completion date; concurrent delays typically yield time but no money.
• Cost – evaluated from actual cost records where possible (direct labor, materials, equipment, subcontractor costs, extended general conditions, home office overhead such as via the Eichleay formula on federal work, bond and insurance, markup per contract). The total cost method and modified total cost method are disfavored and used only when actual costs cannot be segregated. Productivity losses may be analyzed with the measured mile approach (comparing an impacted period to an unimpacted period of similar work), which is far more credible than industry factors alone.

6. CM Evaluation and Recommendation. The CM reviews the claim objectively, may request additional substantiation, consults the designer on design-related issues, and prepares a written evaluation with a recommendation to the owner. In most agency CM arrangements the CM recommends; the owner (or the architect/engineer as Initial Decision Maker under AIA documents) decides. The CM should never make admissions of liability on behalf of the owner or direct changes it is not authorized to direct.

7. Negotiation and Resolution. Early, good-faith negotiation at the project level is the preferred outcome. If resolved, the result is memorialized in a change order with appropriate release language. If not, the claim escalates through the contract's dispute resolution ladder: initial decision, senior executive negotiation, mediation, Dispute Review Board (DRB) or Dispute Adjudication Board, binding or non-binding arbitration, and finally litigation. The CM should understand that contractors generally must continue performance during a dispute and that the owner must continue payment for undisputed work.

8. Closeout of the Claim. Record the resolution in the log, update the schedule and budget, incorporate the change order, and preserve the complete claim file for the project record and for any later audit or litigation.

Best Practices in Documentation
• Maintain a document control system with numbered, dated, and distributed logs (RFI, submittal, change, claim, correspondence, meeting minutes).
• Require detailed daily reports: workforce by trade, equipment, weather, work performed by location, delays or disruptions observed, visitors, and instructions given.
• Take dated photographs regularly and specifically when conditions are disputed or about to be covered.
• Keep schedule updates monthly with narratives explaining changes to the critical path; never allow the baseline to be quietly revised.
• Document all verbal instructions in writing (confirmation of verbal instruction) and respond to contractor notices promptly and in writing.
• Use reservation of rights language where appropriate and ensure change orders contain clear release language for the issue they resolve.
• Segregate costs for changed or impacted work using separate cost codes as soon as a potential claim is identified.
• Stay factual and professional in all correspondence; assume every document may be read later by a mediator, arbitrator, or judge.

The CM's Role and Ethical Position
Under the CMAA Standards of Practice, the CM is a fiduciary-like agent of the owner but is expected to administer the contract fairly. A CM who ignores legitimate contractor claims or delays responses invites larger claims, strained relationships, and reduced bidder interest on future owner projects. The CM's value is in claims avoidance – clear documents, timely RFI and submittal responses, proactive change management, partnering, and realistic schedules – and in claims mitigation through early identification and resolution.

Exam Tips: Answering Questions on Claims Processing and Documentation
1. Think procedure first. When a scenario asks what the CM should do first, the answer almost always involves following the contract's notice or claims procedure, logging the item, and gathering documentation – not deciding entitlement, not paying, and not refusing outright.
2. Know who decides. The CM recommends; the owner (or the designated initial decision maker) decides. Answers that have the CM unilaterally approving money or time, or admitting owner fault, are usually wrong.
3. Timely written notice is critical. If a choice hinges on whether notice was given within the contract period, expect the exam to treat late notice as a potential waiver – but also expect the CM to evaluate on the merits where the owner had actual knowledge or the contract allows. Read the question for the contract terms given.
4. Distinguish time from money. Excusable delay earns time; compensable delay earns time and money; concurrent delay generally earns time only. Delays that do not affect the critical path do not extend the completion date.
5. Prefer contemporaneous records and actual costs. If asked which evidence is most persuasive, pick daily reports, photographs, and schedule updates made at the time over after-the-fact reconstructions, and pick actual segregated costs or measured mile over total cost methods.
6. Recognize constructive changes and constructive acceleration. A scenario where the owner's representative rejects a justified time extension and the contractor then works overtime to meet the original date describes constructive acceleration – a compensable claim.
7. Know the dispute ladder order. Negotiation → mediation (non-binding, facilitated) → DRB (advisory or binding depending on contract) → arbitration (binding, private) → litigation. Questions often test which step is non-binding or which is least costly.
8. Continue the work. Unless the contract or law says otherwise, the contractor must proceed with disputed work pending resolution, and the owner must keep paying for undisputed work. Answers suggesting the contractor stop work or the owner withhold all payment are typically wrong.
9. Watch for the best answer, not just a correct one. Several choices may be reasonable; choose the one that is most consistent with the contract, most protective of the owner's interests while remaining fair, and most focused on documentation and communication.
10. Eliminate extremes. Options containing words like always, never, immediately deny, or ignore are rarely correct in claims scenarios. The CM's posture is to acknowledge, document, evaluate, recommend, and communicate.
11. Connect to other domains. Claims questions often overlap with Time Management (schedule analysis, float ownership), Cost Management (change order pricing, markups), Risk Management (risk allocation clauses, DSC), and Professional Practice (ethics, agency role). Use that cross-knowledge to confirm your answer.

Sample Question Walkthrough
A contractor encounters rock not shown on the geotechnical report and submits a letter requesting additional time and cost three days after discovery. What should the CM do first?
Approach: Identify the claim type (Type I differing site condition). Note that notice appears timely. The CM's first action is to acknowledge receipt, log the item, direct the contractor to leave the condition undisturbed where possible so it can be observed, document the condition with photos and reports, and notify the owner and designer – not to approve costs, not to deny the claim, and not to tell the contractor to proceed at its own risk. The best answer will reflect documentation and notification, followed by evaluation and recommendation.

Key Takeaway
Claims are resolved on the record. The CM's job is to make sure the record is complete, the contract procedures are followed on time, the analysis separates entitlement from quantum and time from money, and the owner receives an objective recommendation. Master this framework and most exam questions on claims processing and documentation become a matter of applying it to the scenario presented.