The Claims Process and Key Intervention Points

Overview
Claims are among the most expensive, time-consuming and relationship-damaging events on a construction project. The PMI Construction Professional (PMI-CP) credential expects you to understand the steps of a claim. It also expects you to know where and how a project professional should step in to stop a claim from becoming a dispute, or a dispute from becoming litigation. This guide covers why the topic matters, what the claims process is, how it works stage by stage, the key intervention points, and how to answer exam questions on it.

1. Why It Is Important
• Cost and schedule impact: Unresolved claims tie up cash flow, delay final accounts and add legal and expert fees. These costs can exceed the value of the original claim.
• Relationships: Construction depends on collaboration between owner, designer, contractor and subcontractors. Adversarial claims harm trust and productivity on the project and on future work.
• Contractual rights: Many contracts make notice a condition precedent (a time bar). Missing a deadline can extinguish a valid entitlement entirely.
• Early action is cheaper: The earlier an issue is addressed, the cheaper and faster it is to resolve. This is the core idea behind intervention points.
• Exam relevance: PMI-CP questions are scenario-based. They test whether you recognise the best next action at a given stage. That action is usually proactive, collaborative and compliant with the contract.

2. What It Is: Key Definitions
• Change: Any alteration to scope, time, cost or conditions. It is normally managed through the contract's change or variation procedure.
• Claim: A formal demand by one party for additional time and/or money (or other relief) under the contract or at law. A claim arises when entitlement is asserted but not yet agreed.
• Dispute: A claim that has been rejected or remains unresolved, where the parties hold opposing positions. A claim is not automatically a dispute.
• Entitlement vs quantum: Entitlement is whether a party has a contractual right to relief. Quantum is how much time or money is due. Both must be proven.
• Common claim types:
  - Delay and extension of time (EOT)
  - Disruption and loss of productivity
  - Acceleration, either directed or constructive
  - Differing or unforeseen site conditions
  - Variations or changed work
  - Suspension or termination
  - Payment and interest
  - Defective design or late information

3. How It Works: The Claims Lifecycle
Stage 0: Prevention (pre-contract and planning)
• Write a clear scope and specifications, and allocate risk fairly.
• Define notice periods, change procedures and the dispute resolution ladder.
• Prepare a baseline schedule and a claims management plan.
• Hold constructability reviews and risk workshops.

Stage 1: Event occurs
A risk materialises. Examples include a design error, owner-caused delay, unforeseen ground, a weather event or a change instruction.

Stage 2: Identification and early warning
The team recognises that the event may affect time, cost or quality. Under contracts such as NEC4, an early warning is raised. Parties then meet to reduce the impact.

Stage 3: Notification
Formal notice is given within the contractual period. Examples:
• FIDIC 2017 Clause 20.2: notice within 28 days of becoming aware of the event.
• NEC4: compensation event notification within 8 weeks.
Late notice may bar the claim.

Stage 4: Record keeping and documentation
Keep contemporaneous records, such as:
• Daily reports, photos and site diaries
• Labour and equipment logs
• Correspondence, RFIs and meeting minutes
• Schedule updates and cost records
Contemporaneous evidence carries far more weight than reconstructed evidence.

Stage 5: Substantiation and preparation
The claimant builds the claim in three parts:
• Entitlement: the contract clause relied on, plus the facts.
• Causation: the link between the event and the effect.
• Quantum: time, using delay analysis; and cost, covering direct costs, prolongation, head-office overhead and disruption.
Delay analysis methods include:
• As-planned vs as-built
• Impacted as-planned
• Time impact analysis (TIA)
• Windows or collapsed as-built analysis
Watch for concurrent delay. Avoid global or total cost claims where possible, because they are weak.

Stage 6: Submission
A fully detailed claim is submitted within the contract timeframe. For example, FIDIC 2017 allows 84 days after awareness, with interim updates for continuing events.

Stage 7: Evaluation and determination
The owner's representative (engineer, contract administrator or project manager) reviews the claim. They check:
• Whether notice complied with the contract
• Whether entitlement is valid
• Whether the quantum is supported
They then request further particulars and issue a determination or assessment.

Stage 8: Negotiation and settlement
The parties negotiate in good faith, using interest-based rather than positional bargaining. A settlement is documented as a change order or settlement agreement.

Stage 9: Escalation through the dispute resolution ladder
If unresolved, the claim moves through escalating steps:
• Executive or senior management negotiation
• Mediation or conciliation
• Dispute review board (DRB), dispute avoidance/adjudication board (DAAB) or statutory adjudication
• Arbitration
• Litigation
Each step up costs more and allows less control over the outcome.

Stage 10: Close-out and lessons learned
Implement the outcome, update the final account, and record lessons learned for future contracts.

4. Key Intervention Points
These are the moments where a project professional can most effectively prevent or de-escalate a claim:
• Contract formation: Clear scope, balanced risk allocation, workable notice provisions and a stepped dispute clause. This is the most powerful point, because it prevents claims at source.
• Planning and baseline: An agreed, realistic baseline schedule and cost plan. This creates an objective yardstick for measuring impacts.
• Early warning or issue identification: Raise the issue immediately and hold a risk reduction meeting. Solve the problem while options remain.
• Change control: Process changes promptly through the change order procedure. This stops unpriced changes from accumulating into a large claim.
• Notice stage: Acknowledge the notice, keep joint records and agree the facts early. Agreeing facts narrows any later dispute.
• Evaluation stage: Make a fair, timely, reasoned determination. Avoid delay or blanket rejection.
• Negotiation: Focus on interests, use objective data and consider partial settlement.
• Standing boards (DRB or DAAB): Use regular site visits and informal opinions to resolve issues in near real time, before positions harden.
• Before formal proceedings: Mediation or senior executive involvement preserves the relationship and controls cost.

Partnering and collaborative tools
Partnering charters, integrated project delivery (IPD), regular commercial meetings and shared risk registers all support early intervention.

5. Exam Tips: Answering Questions on The Claims Process and Key Intervention Points
• Pick the earliest effective intervention. If an issue has just been identified, the answer is usually to raise an early warning, notify per the contract, or meet the other party. It is rarely to file for arbitration.
• Follow the contract first. Look for answers that reference the contract's notice periods, change procedures or dispute clauses. 'Review the contract' is often a correct first step.
• Notice is critical. If a scenario mentions a looming deadline, the best answer protects entitlement by submitting timely notice. You can do this even before quantum is known.
• Documentation wins. Answers stressing contemporaneous records, photos, daily logs and schedule updates are usually stronger than relying on memory or reconstruction.
• Climb the ladder in order. Negotiation, then mediation, then board or adjudication, then arbitration, then litigation. Skipping steps is usually wrong unless the contract or urgency requires it.
• Separate the concepts. Know the difference between change, claim and dispute, and between entitlement and quantum. Distractors often blur these.
• Collaborative over adversarial. PMI favours collaboration, transparency and relationship preservation. Choose answers that keep work progressing and parties talking.
• Keep working. Contractors should normally continue the work while a claim is pursued. Stopping work is rarely correct unless the contract allows suspension.
• Delay analysis questions: Time impact analysis is the preferred prospective method. Watch for concurrent delay, which often gives time but not money. Global claims are weak.
• Role awareness: Be clear whether you are acting as the owner's representative, the contractor's PM or a neutral party. The owner's representative must determine fairly and impartially.
• Eliminate extremes. Options like 'immediately terminate', 'ignore until project end' or 'refuse all claims' are almost always wrong.
• Lessons learned: At close-out, the best answer often includes updating the lessons learned register and improving future contract terms.

Sample Question
A contractor encounters unexpected rock not shown in the geotechnical report. Excavation will be delayed. What should the contractor's project manager do FIRST?
The best answer is to notify the owner promptly in accordance with the contract, while recording the conditions with photos and logs.
The following are wrong at this stage:
• Submitting a fully priced claim
• Stopping work indefinitely
• Starting arbitration

Summary
The claims process runs from prevention through to close-out:
• Prevention
• Event and identification
• Notice
• Records
• Substantiation
• Submission
• Evaluation
• Negotiation
• Escalation
• Close-out
Value is created by intervening early: in the contract, at early warning, through prompt change control, and through fair, timely determinations. For the exam, choose answers that are proactive, contract-compliant, well-documented and collaborative, and that resolve issues at the lowest possible level of the dispute ladder.