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 Construction Projects Claims in Iraq   

Alaa Kharbat Shadhar

Assistant Lecturer

Civil Engineering Department / Wasit University

[email protected]

ABSTRACT

The construction industry in Iraq is one of the important areas because now we need to develop and set up a lot of projects in the scope of services and infrastructure as well as establishment industrial projects advanced to support the Iraqi economy. Usually projects development and complexity becomes a companion to a lot of claims, so it became necessary for us study and diagnosis the most important claims faced projects in Iraq and identify which of more frequently and opening the way for researchers to develop appropriate solutions to those claims.

This research presents the results of the causes and types for construction claims in Iraq and its frequency by using a data from more 30 claims for a variety of Iraqi projects. The data were analyzed and the results of this analysis along with recommendations on how to reduce or prevent those claims.

Keywords: causes, claims, construction, Iraq, projects.

المطالبات' 'في' 'مشاريع' 'التشييد' 'في' 'العراق

علاء' 'خرباط' 'شذر

مدرس' 'مساعد'

كلية' 'الهندسة'- 'جامعة' 'واسط

الخلاصة

صناعة' 'البناء' 'والتشييد' 'في' 'العراق' 'هي' 'واحدة' 'من' 'المجالات' 'المهمة' 'بسبب' 'الحاجة' 'إلى' 'تطوير' 'وإنشاء' 'الكثير' 'من' 'المشاريع' 'في' 'نطاق' 'الخدمات' 'والبنية' 'التحتية' 'وكذلك' 'لتطوير' 'المشروعات' 'الصناعية' 'دعما' 'للاقتصاد' 'العراقي'. 'المشاريع' 'المتطورة' 'والمعقدة' 'تصبح' 'مصاحبة' 'لكثير' 'من' 'المطالبات،' 'لذلك' 'أصبح' 'من' 'الضروري' 'بالنسبة' 'لنا' 'دراسة' 'وتشخيص' 'أهم' 'المطالبات' 'التي' 'واجهتها' 'المشاريع' 'في' 'العراق' 'وتحديد' 'أيه' 'أكثر' 'تكرارا،' 'وفتح' 'المجال' 'أمام' 'الباحثين' 'لوضع' 'الحلول' 'المناسبة' 'لتلك' 'المطالبات' .

يقدم' 'هذا' 'البحث' 'نتائج' 'لأسباب' 'وأنواع' 'المطالبات' 'لمشاريع' 'البناء' 'في' 'العراق' 'وترددها' 'باستخدام' 'بيانات' 'من' 'أكثر' 'من' 30 'دعوى' 'لمجموعة' 'متنوعة' 'من' 'المشاريع' 'العراقية'. 'وقد' 'تم' 'تحليل' 'البيانات' 'ونتائج' 'هذا' 'التحليل' 'إلى' 'جانب' 'توصيات' 'بشأن' 'كيفية' 'خفض' 'او' 'منع' 'تلك' 'المطالبات'.

الكلمات' 'المفتاحية': 'الاسباب،' 'المطالبات،' 'الانشائية،' 'العراق،' 'المشاريع'.

INTRODUCTION

Construction industry is complex and unique compared to other industries because it involves the impact of many participants in all trends. Therefore, any event or circumstance that impacts on the construction industry has the potential to affect the whole economy.

Disputes and claims are common due to the increasing complexity of the construction process. Owners used to transfer major obligations and all risks came from to contractors. These risks were including; financial crisis, work accidents, lowers labor productivity, adverse weather, shortage of materials and bad skilled labor, and unexpected site conditions. Thus, the construction contracts are becoming more complex.

Construction contracts are very often long and have complex documents. Consequently, disagreements or disputes can arise regarding contractual obligations or expectations. When one of the contracting parties feels that the other party is trying to escape from his obligations, this belief may push him to raise the claim, when they feel that they deserve financial and/or time compensation. Therefore, ‘Claims’ represent a legal form but do not establish an entitlement.

In Iraq, claims have become a repetitive phenomenon in the construction industry.  Such phenomenon, if not managed efficiently, would hinder the success of many construction projects and thus slow down the wheel of development.

Usually the solution of problem of claims lies in the establishment of partnership between the owner and the contractor. The adversarial attitude that owners take while dealing with their contractors should be changed to that of teamwork. The contractor should be invited to work as a member of the owner’s team and an arm of the owner’s company in order to utilize the contractor’s strengths, identify deficiencies in the plans and specifications, and to help eliminate claims.

 

SCOPE OF THE STUDY

Information for 36 claims related to different construction projects in Iraq was collected. The data were collected from 61 different entities (26 contractors, 14 consultants, and 21 owners) for explain; see Fig. 1.

Based on their main area of specialty, the profiles of the 61 entities are shown in Table 1. The 61 owners and firms were asked to provide information related to types of projects and classified the claims according to main area of specialty see Fig. 2. The data for the 36 claims were mainly extracted from owners, consultants, and contractors’ claims database.

Owners and firms were asked to provide information related to types of claims, causes of claims, and frequency of each type by filling a questionnaire, in which they choose one of five possible options for the frequency of each type and cause of claims: (1) not frequent; (2) little frequent; (3) occasionally frequent; (4) frequent; and (5) most frequent. The Fig. 2 has shown the Respondents area specialty.

Data analysis

The data collected represent various types of projects constructed over a period of around five years (from 2010 until 2014, inclusive). The types of projects include buildings, roads and highways, water and sewer lines, power plants, in addition to some sport building.

Effect Level

   The effect level was assumed for each category of answer as explained in Table 1. This category of answer was assumed in order to facilitate the process of analyzing data results.    

 The arithmetic mean for answers calculated as follow

(Mean) = (total of number of iterations in the effect multiplied in the number of effect divided by the size of the sample).

   The arithmetic mean is used in the analysis for each factor of the sectors and it is calculated as per Equation 1.

M=(∑_(i=1)^n'▒'〖'xi*fi'〗')/(∑_(i=1)^n'▒'fi)                    (1)

To better understand the importance of each type of claims, an importance index percentage was then calculated as follows in Equation 2.

I.I.=(M*100)/4                          (2)

claims Types and their frequency

   The data collected was indicated that the types of claims in construction projects in Iraq can be classified depending on the type of compensation requested into four main types: financial compensation; work duration extension financial compensation and work duration Extension and re-pricing.

In order to assess the effect of each types, the answers were collected from all surveyed samples (employers, engineers, contractors) whereas the questionnaire form number that been successfully received was sixty-one (61).  

    The results have been analyzed and discussed depending on the “mean” of these results which is one of central tendency (tendency of value to center on the optimal value).

    Responses for the ‘‘financial compensation’’ type of claims, for example, indicated that one firms responded as ‘‘never’’, 2 responded as ‘‘little’’, 9 responded as ‘‘occasionally’’, 21 responded as ‘‘frequent’’, and 28 responded as ‘‘mostly frequent’’ see fig.3.

Data were analyzed and a weighted average was calculated for each type of claims and the frequencies for each type of claims received are listed in Table 3.

  When we analyze the above results, we find that the most frequent types of claims was \" Work Duration Extension\", while the lower types of claims frequent was\" Re-Pricing\" and the importance index percentage was shown in the fig 4.

Causes of claims and their frequency

  We know that every risk factor causes delay or over cost on project planning, this may lead to define as causes of claims.

  The data received indicated that there are 30 possible causes of claims. Similar to what is explained in the previous subsection for types of claims; firms were asked to choose one of five possible options for the frequency of each cause of claims: not frequent, little frequent, occasionally frequent, frequent, and mostly frequent with a weight for each in a scale from 0 to 4. Responses for the frequency of the ‘‘change orders negotiations’’ cause of claims, for example, indicated that 0 firms did responded as \"not frequent\", 3 responded as ‘‘, little frequent’’, 4 responded as ‘‘occasionally frequent’’, 22 responded as ‘‘frequent’’, and 32 responded as ‘‘mostly frequent’’.

   Arithmetic mean was calculated using Equation 1. for each cause of claims and the importance index percentage was then calculated using Equation2, as shown in Table 4. The results of this analysis indicate that ‘‘change orders in work’’ are the most frequent cause of claims with an importance index of 85.65% while ‘‘awarding the project to unqualified contractor’’ was ranked second with an importance index of 84.83%. ‘‘information’’ cause of claims was ranked last with an importance index of 27.88%. The ranks of all causes of claims are listed according to its importance index are shown in Table 4.

For example, the weighted average for the ‘‘payments delay’’ cause of claims = (0 * 0 + 1 * 2 + 2 * 6 + 3 * 22 + 4 * 31)/61 = 3.344, the importance index for this type of claims = (3.344 * 100)/4 = 83.60 %.

Recommendations

Industry practitioners and experts from Planning Department were asked to provide recommendations on how to prevent/reduce claims and how to deal with such claims in case they happen.

Based on their recommendations, the following are some rules-of-thumb on how to reduce/prevent claims in construction projects:

1. Allow reasonable time for the design team to produce clear and complete contract documents with no or minimum errors and discrepancies.

2. Establish efficient quality control techniques and mechanisms that can be used during the design process to minimize errors, mismatches, and discrepancies in contact documents.

3. Working to have a clearly written contract with no ambiguity.

4. Read the contract several times before signing it to understand any unclear clauses.

5. Deal with a third party (consultant) to read contract documents before the bidding stage.

6. Use special contracting provisions and practices that have been used successfully on past projects, to help us for avoiding and resolving disputes during construction.

7. Develop cooperative and problem solving attitudes on projects through a risk-sharing philosophy and by establishing trust among partners (e.g., the owner and the contractor).

8. Implement constructability during the different stages of a project.

9. Establish a tighter strategy on how to deal with scheduling requirements.

10. Change orders must be signed before starting doing these changes on site.

11. Retention of a copy of work records on a timely manner such as time schedule, reports, photographs, records of labors, construction technique, weather condition and its effect on construction progress and site guidelines.

Conclusion

This study can be used to identify several problem areas in the construction process in Iraq. Steps should be taken to clarify any issues or conflicts that may arise in these common problem.

   One of the common problem is the ‘‘changes’’ cause of claims which, according to this study, was the mostly frequent cause of claims and needs to special consideration.

While ‘‘Information’’ was ranked as less frequented causes in the last, this may be indicated to a lack of awareness about the information importance on the project management.

  According to the results of this study, it is recommended that special consideration should be given to contract clauses dealing with change orders, disputes, payments conditions, and delay. The best means to confrontation risk in construction claims is to avoid it or reduce their effect on project. There are many effective means for reducing the number of claims encountered.

  The main and perfect steps that can be taken to minimize risks of claims causes include the follow:

Checking the whole contract documents before adoption it\'s and ensure harmony between the various project documents.

Having a clearly written contract with no ambiguity by using special contracting provisions and practices that have been used successfully on past projects.

Ensuring full project cost when contracting and do not rely upon temporary cash flow.

Completion of all project drawings and ensure its accuracy before presenting the project to contract

using modern technologies and specialized programs when preparation work plans and project time schedule

In advance agreement on ways to disputes resolve

Checking work implementation plan taking into consideration the potential risks.

One of the major sources of claims in construction projects is the project design drawings or design errors and the resulting additional work or additional quantities.

Allowing reasonable time for the design team to produce clear and complete contract documents.

The project design must be confirmed by consultant offices to be audit by a team other than those who design.

This study was demonstrated needed to develop claims management system in each project to identifying claims authorized and avoids occurrence, for example: council to resolve project disputes.

Developing cooperative and problem solving attitudes on projects through a risk-sharing philosophy between the owner and the contractor.

   It is expected that the findings of this research will assist all contract parties to reduce liability by avoiding the main causes of claims and accordingly minimize any delays and produced cost overruns in construction projects. The suggested comments are also necessary for proper project management, which is far more advantageous and profitable than seeking advice of a construction claim consultants after the dispute is entrenched. The latter course often takes place too late and is too costly.

References

ALi_ ozge Ilgar (2005)” Quantification of Acceleration Claims: A Simplified Approach” M.Sc.; Middle East Technical University, Malaysia.

El-Dokhmasey, Ahmed.M. (2006). “An Expert system For Assessing Engineering –Related Delay Claims in Construction Projects”. Ph.D.; Faculty of Engineering, Cairo University, Egypt.

El-Mesteckawi.Lobna.M.(2008).“ Managing Construction Dispute in Egypt”.M.Sc.; Faculty of Engineering, Cairo University, Egypt.

Erik L. Demeulemeester and Willy S. Herroelen.(2002).” Project Scheduling”. Kluwer Academic Publishers New York, Boston, Dordrecht, London, Moscow.

Hanafy, Amr F. (2003) ”Developing Software Program to Control, Manage and Minimize Claims in Construction Industry” M.Sc.; Faculty of Engineering, Cairo University, Egypt.

James P. Lewis.(2011).”Project Planning, scheduling& control”, fifth edition, The McGraw. Hill companies.  

Jonathan F. Hutchings.(2004). “Project Scheduling” Licensed Building Contractor, Santa Cruz, California, U.S.A.

Maritz;  Schutte ( 2008 ). \" A Practical Approach to Calculate Acceleration Costs on Construction Projects in South Africa \", Department of Construction Economics, University of Pretoria, Malaysia

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