A paper presented to a TUNS/Revay seminar in 1990.
It has been modified only to suit a web presentation format.

Published here September, 2001.

Introduction | Claim Avoidance | Claim Identification | Sources of Dispute
Claim Notification | Reserving Rights | Record Keeping | Typical Set of Records
Focus on the Last Two Groups | Managing the Records | Useful Tips


First of all - what is a claim? Well here are a few suggestions, according to your point of view:

  • A claim is a disguised form of blackmail
  • A claim is the last chance to bail out a losing job
  • A claim is an assertion to a contractual right

It is probably not difficult to guess who expressed which point of view, but at least the common thread is clear. What is being discussed is extra money.

The construction business is probably Canada's largest single industry, accounting for some 30% of all economic activity. Yet, it is also the most fragmented. Unlike the giant manufacturing industries, the construction pie is shared by many thousands of smallish contractors and sub-contractors, mostly family owned. Only a comparatively few contractors and sub-contractors are large in size. Also, there is a continuous stream of companies entering the business at one end, and for one reason or another, leaving at the other. The average lifetime of a typical company may range from 2 to 20 years, rarely more.

The construction industry is also rather like the cottage industry needle trade. Both rely on prime contractor sub-contractor relationships each according to their required specialties. In the needle trade, buyers buy, designers design, some cut the cloth, others sew the pieces together, while yet others specialize in button holes and so on.

The construction industry works in a very similar way, but because of its fragmentation, and the way it works through competitive bidding, it is very, very competitive. When you think of it, is there any other industry that for a fixed amount of money, takes on the construction of a complex product, never ever built before, within defined time limits, and using a construction team, who, in all likelihood, have never before worked together?

By and large, the system seems to work quite well. But considering the giant size of the industry, it is hardly surprising that there are also some giant sized disputes. The real wonder is that there are so few rather than so many.

Much has been written on contractor/owner disputes, claims, litigation and settlements, especially as a result of various court cases. But perhaps we should first at least agree on terminology. For example, I have noted that on many construction jobs the monthly progress draw against the contract price has been loosely referred to as the monthly progress claim. In a sense it is, but I think that this particular word is much better reserved for a claim in the sense of an extra to the contract price.


Home | Issacons | PM Glossary | Papers & Books | Max's Musings
Guest Articles | Contact Info | Top of Page