Category:113 Construction Inspection Guidance for Contractor's Claims

Assure the contractor that project personnel are available and willing at all times to discuss and give decisions on all questions that may arise concerning interpretation of the plans and specifications. When agreement cannot be reached at the resident engineer level, inform the district construction and materials engineer of the misunderstanding. If agreement cannot be reached at the district level, the disagreement should be referred to the State Construction and Materials Engineer, through the district engineer. Personnel of Construction and Materials are available to attend any discussion of problems and assist in settlement of disagreements. If questions or misunderstandings arise between the resident engineer and the contractor about established policy, design features or standardization of procedures, refer the matters to the district construction and materials engineer for a decision. In all cases immediately inform the contractor in writing of the final decision and that the problem may still be appealed to higher authority.

When it becomes evident that a claim will be filed, inform the district office at once and start preparation of a detailed record. Cover the situation in detail each day in the resident engineer's diary.

The following are guidelines that shall be followed by contractors in filing a claim with the Secretary of the Commission.

113.1 Procedures for Handling Contractor Claims

1. The claim is received by the Commission Secretary, logged in, and forwarded to Construction and Materials. The division is responsible for providing all required reports and other documents to the Claims Committee, which is comprised of the Director of Program Delivery, Chair; Director of System Management, Vice Chair; and the Chief Financial Officer.

2. The division reviews the claim for compliance with specifications and may consult with the Chief Counsel’s Office (CCO) regarding compliance with specifications relating to timely filing and sufficiency of the claim documents submitted.

The division provides a preliminary copy of the claim to the CCO and the Office of Audits and Investigations to facilitate this review.

3. If the claim is accepted, the division assigns a claim number (year, sequential number, district; example: 03-01-07) and assigns the claim to a claim reviewer (Reviewer) in the division for review and evaluation. The claims reviewer is a Technical Support Engineer from Construction and Materials who has no previous extensive involvement with the issues presented in the claim. The Technical Support Engineer’s goal is to provide an independent review of the facts and merit of the claim. The reviewer maintains all correspondence and documentation associated with the assigned claim. Copies of all claim related correspondence between MoDOT and the contractor are provided to MoDOT’s counsel assigned to the claim.

The claim number is used in all references and correspondence regarding the claim. The division advises the contractor by letter if the claim has been accepted and provides the contractor with the claim number and the reviewer’s name. If the claim is not accepted, the division advises the contractor by letter citing the reason(s) the claim was not accepted, and provides a copy of the letter to the CCO and AI.

Claims and Controversies that qualify for Arbitration or Mediation must complete the review process including final notification to the contractor within ninety days from date of receipt by the Commission Secretary. At that point the contractor is eligible to submit these issues to binding arbitration or mediation. For claims with amounts that exceed the amounts provided by the Arbitration and Mediation laws, the State Construction and Materials Engineer may extend the time for review in order to provide time to adequately review the claim. The review of these claims should not extend beyond twelve months.

The following time lines will apply to the normal claims process:

a) The division shall notify the contractor of acceptance or denial of the claim upon completion of a review of the claim and supporting documentation for compliance with the requirements listed in the Missouri Standard Specifications for Highway Construction.

b) The district will submit the District Report on or before the date set by the division. A maximum of 28 calendar days will be allowed from the date of the letter of acceptance to the contractor.

c) The reviewer will submit the Division Report within 5 working days of receipt of the district report.

d) The division privileged report prepared by the State Construction & Materials Engineer will be completed within 7 calendar days of receipt of the Division Report. This report will be provided to the Claims Committee immediately upon completion.

e) The Claims Committee meeting will be held no later than 45 calendar days after acceptance as a valid claim.

4. The division furnishes each member of the Claims Committee a claim notebook containing a copy of the claim, the letter to the contractor, and all required reports and documents related to the claim. In all cases of federally funded projects, the Federal Highway Administration (FHWA) will be provided a copy of the claim and the letter to the contractor.

5. The reviewer will discuss the amount and complexity of the claim with the attorney assigned by the Chief Counsel’s Office (CCO) for preliminary advice on investigation. The reviewer will make a recommendation to the Claims Committee on the need to retain a consultant and the need to audit the claim. The reviewer may seek advice from the CCO and the Audits and Investigation (AI) prior to making a recommendation to audit the claim. The need for an audit will be based on the complexity of the claim and the scope, expertise and cost associated with the recommended audit. The Claims Committee votes whether to retain a consultant and perform an audit. If a consultant is retained, the reviewer coordinates the activities of the consultant and all department offices involved regarding the claim. The assigned reviewer in consultation with assigned counsel and project personnel will determine additional construction records required to investigate the claim and make formal, written request for them. If the contractor bid records have been escrowed, the escrow will be opened and documents obtained in accordance with the contract.

6. The division prepares a letter to the district, furnishing two copies of the claim (one for the District Construction & Materials Engineer and one for the Resident Engineer) for investigation and requests the district report to be submitted by a specific date. The district is further advised to retain all project records and keep them in a separate filing unit. The district report Is prepared by the district office in consultation with the Resident Engineer Office directly associated with the claim. With a copy of the letter to the district, the Controller’s Office is advised that a claim has been filed and that project records should be left open until further notice and the records clerk in the division and other affected units are advised to retain all project records and keep them in a separate file unit.

For claims on projects that have not been finalized, no adjustments to disputed items or time for completion of the subject project may be made without prior agreement with the State Construction and Materials Engineer.

In concert, the district and resident engineer are to review the claim and provide both a report on the facts of the claim and a separate recommendation regarding settlement to the State Construction and Materials Engineer with 28 days of the date of acceptance of the claim. The first report contains a factual analysis of the claim with no recommendation regarding disposition. This report should answer the claim in the same order or format as presented by the contractor. This is so that each allegation and response can be compared side by side. All allegations made by the contractor should be responded to. The second report is a recommendation regarding disposition of the individual items in the claim.

7. The reviewer will contact the contractor to meet for the purposes of clarifying the claim and developing a better understanding of the contractor’s position regarding the claim. The reviewer and the District Construction & Materials Engineer will be MoDOT’s representatives at this meeting. If after this initial meeting with the contractor, the assigned reviewer determines there are grounds for negotiated contract adjustment, the reviewer will obtain approval from the State Construction & Materials Engineer to proceed with the negotiations. If necessary, the reviewer will ask questions for the purpose of clarification of contractor’s records previously obtained and identify further records needed and make informal request for the documents. If required, a written request for the additional records will be made. All negotiated contract adjustments must be approved as set out in item 15 of these procedures.

8. The reviewer reviews the reports and prepares a separate report for the division with a copy to the assigned attorney.

9. The division prepares a privileged report for the Claims Committee summarizing the information contained in the district and reviewer reports.

10. The contractor is invited by letter to meet with the Claims Committee. If the contractor elects to meet, a meeting is scheduled for the contractor to furnish additional information pertaining to the claim and to respond to questions from the Claims Committee. MoDOT personnel attending the claims committee meeting will be the reviewer, the Division State Engineer, a representative of the affected district (District Construction & Materials Engineer and /or Resident Engineer) and any other State Engineers that the Claims Committee Chair may deem necessary. In the presence of the contractor, the reviewer, the Division State Engineer, and the district representative will make oral presentations. The contractor may ask questions after the oral presentation. The Claims Committee will evaluate the contractor’s information and the information presented by MoDOT’s representatives. The Claims Committee will then make a decision regarding disposition of the claim (acceptance, partial acceptance, denial or the need for further deliberation) on the day of the meeting. The contractor will be given the option to remain in the building while the Claims Committee deliberates privately and will be advised of the Claims Committee’s decision if he or she remains. If the Claims Committee’s decision is to make an offer to resolve the contractor’s claim by negotiated contract adjustment, the reviewer and division engineer will determine the basis and amount of the proposed adjustment. If the Claims Committee approves the amount, the contractor will be advised by letter, prepared by the division, stating the basis and amount of the offered adjustment. If the Claims Committee decides to deny the claim or make a unilateral adjustment under the contract, the contractor will be advised by a letter prepared by the division. The Claims Committee Chair will sign each type of letter. Subject to limitations of authority provided elsewhere, the claims committee may act upon concurrence of any two of the whole membership of the committee. The Claims Committee has 7 days from the date of the last meeting with the contractor, the date of the Claims Committee meeting if the contractor elected not to attend; or the receipt of a required audit of the contractor documents, whichever occurs latest, to analyze all relevant material and render a final decision including any offer of a negotiated contract adjustment or directed equitable adjustment. The above letters will be reviewed by the CCO before mailing. All letters sent to the contractor will be sent by registered/overnight delivery mail.

11. A copy of the letter of decision is furnished to each member of the Claims Committee and the appropriate district. The above letter will advise the contractor of the option for a final meeting.

12. If requested by the contractor within 5 calendar days of the date of the letter of notification of the Claims Committee’s decision, a final meeting will be scheduled to give the contractor another opportunity to furnish any additional information pertinent to the claim.

13. If additional documents are requested from the contractor as a result of the initial investigation, the meeting with the contractor provided for in item 7, or the first or second Claims Committee meetings, the contractor will be allowed 14 calendar days from the date of notification to submit the requested documents. If the contractor will not or cannot provide the requested documents within the agreed time frame, the claim will be denied. The Claims Committee will notify the contractor of its final decision in a letter dated no more than 88 calendar days after acceptance as a valid claim.

14. Notes of meetings with the contractor; documents obtained, assembled or prepared for analysis of the claim; interviews with the department employees or third parties; reports of consultants and audits, whether by AI or an outside firm, of or concerning the claim; reports of MoDOT staff and of the CCO called for by this procedure; internal correspondence among MoDOT staff or between department staff and counsel concerning the claim; correspondence between MoDOT staff or counsel and consultants or outside auditors concerning a claim and notes or minutes of meetings, deliberations or notes of the Claims Committee are all considered to be documents prepared or activities conducted in anticipation of litigation, to be privileged communications or work product of MoDOT’s or Commission’s representatives and shall also be considered government predecisional memoranda.

15. The Chair of the Claims Committee and the Chief Financial Officer have authority to concurrently approve settlement of claims for $250,000.00 or less, with concurrence of a majority of the Claims Committee. The Chief Engineer and the Chief Financial Officer have authority to concurrently approve unilateral or negotiated contract adjustments of $1,000,000 or less, with concurrence of a majority of the Claims Committee.

16. If the recommendation is in excess of $250,000.00, the Chair of the Claims Committee submits the final recommendation to the Chief Engineer and the Chief Financial Officer for their separate consideration and concurrence. Upon concurrence the assigned division advises the contractor of MoDOT’s final decision and recommendation. A copy of the letter is furnished to each member of the Claims Committee and the district. The letter is reviewed by the CCO before mailing.

17. If the contractor provides written acceptance of the negotiated contract adjustment offer, the Controller’s Office is notified of the amount with appropriate documentation, and requested to process payment to the contractor. This completes the claim process.

18. If the contractor notifies the department that they do not accept the final negotiated contract adjustment offer, or if the contractor does not respond by the date given in the settlement offer letter, the claim will be closed and any unilateral adjustment determined appropriate will be made.

19. Upon resolution of a claim that results in an award to the contractor, either by action of the Claims Committee, by court action, or by negotiating, the division will submit information to the FHWA, if federal participation is desired. The information to the FHWA shall be in accordance with ATTACHMENT “A”.

Attachment “A”, CONTRACT CLAIM PROCEDURES

A. Contract Disagreements
1. Contract disagreements which are resolved informally between a contractor and Missouri Department of Transportation project or district personnel should be submitted to the Federal Highway Administration in the form of a change order for non-certification acceptance projects. Change orders for certification acceptance projects should continue to be approved by the Missouri Department of Transportation.
2. The change order should provide sufficient detail for the Federal Highway Administration to determine that the settlement between the Missouri Department of Transportation and the contractor is justified.
B. Formal Claims
1. If federal-aid participation is desired in a contract claim payment, early coordination between the Federal Highway Administration and the Missouri Department of Transportation is required for all claims handled through the Missouri Department of Transportation Claims Committee, or court adjudication.
2. If federal-aid participation is desired in a contract claim settlement for either a certification acceptance or a non-certification acceptance project, the Missouri Department of Transportation should transmit a copy of the contract claim, the legal and contractual basis for the claim, an analysis of the merits of the claim, and the results of the Missouri Department of Transportation Claims Committee review to the Federal Highway Administration Division Office for review and approval.
3. The Missouri Department of Transportation’s request for federal-aid reimbursement on an adjudicated contract claim award should include an explanation of the legal and contractual basis for the claim, the cost data and other facts supporting the award, and an audit by ABA or an independent consultant of the actual costs incurred by the contractor. A legal opinion from counsel should accompany claims with complex or novel legal issues.

When notification of a claim is received the district personnel and Resident Engineers office should not discuss the claim with any outside parties. Any inquiries should be referred to the Chief Counsels office. All appropriate files, diaries, records, etc. should be assembled and stored in a safe location at the project office or district office.

113.2 Keeping Concerned Parties Advised

Keep all concerned advised of the progress of the matter. There is an area in SiteManager for recording disputes and/or claim information that may be used. (Contract Administration- Contract Records-Disputes/Claims)

113.3 Claim Files

When a formal claim is filed in accordance with Sec 105.16, the district and resident engineer should establish a claim file. From that point on, interdepartmental correspondence relating strictly to the subject claim is to be filed in the claim folder and thereby will be considered confidential information in case of future litigation. Routine project records may have to be duplicated and placed in both the project and claim files. Construction and Materials will establish a Claim Tracking Record in the MoDOT Contractors Database. Portions of this tracking record are confidential attorney/client privileged information. The non-confidential portions are available to project office personnel to keep them updated on the status of the claim. Contact Construction and Materials if there are any questions concerning this procedure.

113.4 Claim Category Codes

In general, Contractor claims include allegations of differing site, changed and or extra work, delays or errors. In fact, claims often allege multiple causes. To aid in identifying and tracking claims, appropriate codes from the following listing should be assigned to each claim. The general description of each code will aid in identifying relevance to any particular claim. Each claim should be coded in descending order of importance for all appropriate allegations. The codes to be used are:

SD Differing Site – Subsurface or latent physical conditions at the site differing materially from those indicated in the contract, or unknown physical conditions of an unusual nature differing materially from those ordinarily encountered and generally recognized as inherent in the work

W Changed or Extra Work - An item of work not provided for in the contract as awarded, but found essential to the satisfactory completion of the contract.

D Delays - Use descriptive codes below

DU Utility Delays – All delays associated with utilities.

DA Access Delays – Delays associated with access to portions of the right of way.

DM Administration Delays – Any delay associated with decisions by Engineer

E Errors Misrepresentations in plans or errors in applying specifications.

O Other Claims that fail to fall into any of the previous categories