Construction Claims Litigation

When a development project is finally at “shovel ready,” there is a sense of hope, excitement and collaboration among all stakeholders. There is often a groundbreaking ceremony to commemorate the team mobilizing onsite to “push dirt.”

All too often, and sometimes within a few short months, the relationship between the owner, contractor and design team deteriorates when costs rise or the schedule extends. That feeling of commonality and alignment that existed at groundbreaking is replaced with an ongoing battle to allocate blame among each other.

The most typical contract structures used in our industry fuel this dynamic, in that most contractors and some designers make additional profits as construction costs rise (unless the cause is solely due to the contractor’s underperformance). Meanwhile, the owner always wants the project completed as quickly and inexpensively as possible. This inherent misalignment of interests often fosters distrust and prevents the team from taking a swift and practical approach to challenges that arise in the field.

In our experience, a relatively small (in dollars, but “emotionally charged”) dispute among the parties can take on a life of its own and cause exponential distractions and delays if not addressed quickly and efficiently. Instead of working together to practically address an issue, the stakeholders spend significant time and attention (as well as money) building their respective legal positions and progress in the field is delayed.  

A well-crafted contract usually contains robust dispute resolution language. That said, we hope that you never have to read it during the course of your project. In cases where a conflict cannot be resolved internally, we do recommend that expedited mediation be implemented first, because the time and expense of a prolonged litigation is often more costly and damaging than the underlying issue. In most major cities, the adjudication process on a construction claim takes years to complete, and very few judges are construction experts who can really get to the essence of “what actually happened and why…”

It is easier said than done, but frankly, if we as an industry could conduct business with the following perspectives, our ability to avoid costly and time-consuming litigation would improve dramatically:

- Imagine that your project team will be a long-term relationship lasting far beyond this project. Select your clients and vendors and conduct yourself with that in mind.

- Remember that our industry is made up of largely well-meaning people who work hard but have varying levels of skill, experience and resources.

- Remember that the project team is profoundly “interdependent” and only as strong as the weakest link. One fails, they all fail. So, reinforce and reward good behavior and extra effort in order to promote the spirit of partnership.

- Most claims are the result of an oversight or “mistake,” either by an architect, engineer or trade worker. Ask yourself how severely someone should be punished for an inadvertent mistake. Also imagine that you are the person or firm that made the mistake as opposed to the firm lodging the claim. How would you own up to your mistake? What is “fair?”

- Sometimes an owner makes the “mistake” of undertaking a project with an inadequate budget to support the original vision or the modifications it has authorized. Why and to what extent should downstream stakeholders pay the price for that situation? What creative ways can be explored to keep a project on track?

- At all costs, keep the project moving forward. Time is the enemy. Set your differences aside for the good of the project.


 Good luck and keep building!


SPD Advisory Group provides comprehensive evaluation of design and construction risk for complex real estate projects, during pre-development and once construction is underway.

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