Toward a decision framework for the analysis of construction claims

Abstract

The assessment of extension of time (EOT) claims as part of a construction project can have far-reaching consequences. For the contractor, the rejection of EOT claims might have a significant impact on the financial success of a project and the profitability of his business. On the other hand, for the employer, the awarding of an EOT claim may increase the cost of the project and possibly impact on the financial success of the project. In major projects time-related preliminary and general costs can very significantly aggregate the negative impact for the contractor and the employer. With so much at stake, it is understandable that EOT claims are a major source of disputes in the construction industry. The proper and transparent assessment of EOT claims is therefore an essential component in the success of any project. The assessment of EOT claims can be a daunting task – not only because of the severe impact the outcome of the claim would have on the parties involved, but also as a result of the many complexities faced in the assessment process. The main purpose of this study was to develop a user-friendly guideline by making use of decision-tree analysis, to assist practitioners to navigate this potential minefield of complexities in the process of the assessment of EOT claims. The decision trees are well suited to be utilised as guidance tools in decision-making. One of the main benefits of decision trees is that they are simple and easy to understand. The decision trees make use of a sequential process, in order to consider different decisions. This is very much in line with the process normally followed in the assessment of EOT claims. Keeping in mind that the research is taking place within an applied-science environment, a qualitative approach was deemed the most appropriate for delivering the required results. An action-research approach, a very specific qualitative approach, was followed to achieve the objectives of the study. The starting point was to conduct a comprehensive literature review, in order to produce the relevant decision-support frameworks for EOT claim analysis in the form of decision trees. The data gathered, as part of the action-research process, contributed to the objective of providing a decision-support tool that could be effectively utilised in practice. The participation of practitioners regularly involved in the assessment of construction-delay claims was of much value. Focus groups, consisting of industry practitioners, with specialist knowledge in construction contracts, contributed to the development of the decision-support frameworks, and ultimately to the findings. One of the major conclusions was the development of a universal decision-tree analysis framework for EOT claims. The universal nature of the decision-tree framework allows it to be utilised as a holistic framework for any of the three different construction contracts reviewed, namely: FIDIC, GCC and JBCC. In addition, decision trees have been developed for these contracts, in order to assess the key considerations in the EOT claim-analysis process. The iterative process followed assisted in producing a tool that can be used in practice as a guideline for the analysis of EOT claims.