HKSM

Claims administration is the structured process of receiving, analyzing, negotiating, and resolving claims and disputes under project contracts. It aims to enforce contract rights, control cost and schedule impacts, and document fair, timely outcomes.

Key Points

• Focuses on identifying entitlement and quantifying impact according to the contract.
• Relies on timely notice, complete documentation, and traceable records.
• Prefers negotiated settlement first, with escalation paths defined in the contract.
• Results often include change orders, time extensions, payments, or formal denials.
• Requires coordination among project management, legal, procurement, and technical experts.
• Good claims administration reduces disputes, preserves relationships, and protects value.

Purpose of Analysis

To determine whether a claim is valid under the contract, measure its cost and schedule effects, and reach a fair, well-documented resolution that maintains control of the project and complies with agreed terms.

Method Steps

• Log and acknowledge the claim; assign an owner and target response dates.
• Review contract clauses (scope, changes, notice, compensation, time, dispute resolution, insurance).
• Check compliance with notice and documentation requirements and request clarifications as needed.
• Analyze facts and causation; link events to obligations and verify performance records.
• Assess entitlement based on contract and objective evidence.
• Quantify impacts: estimate direct costs, time-related costs, and schedule effects.
• Consider mitigation and concurrency; adjust amounts and time accordingly.
• Negotiate settlement terms; draft and approve change orders or amendments.
• Escalate per the contract if unresolved (e.g., DRB, mediation, arbitration).
• Implement the decision; update baselines, logs, and lessons learned; close the claim.

Inputs Needed

• Executed contract, statements of work, and applicable terms and conditions.
• Change requests, prior change orders, and amendments.
• Correspondence, notices, meeting minutes, and issue logs.
• Schedules, progress reports, time sheets, and cost records.
• Technical specifications, drawings, RFIs, submittals, and test results.
• Risk register, procurement plan, and claims/negotiation procedures.
• Independent analyses or expert opinions, if required.

Outputs Produced

• Formal claim determination or settlement agreement.
• Change order or contract amendment reflecting agreed adjustments.
• Updated cost baseline, schedule, and performance forecasts.
• Payment approvals or recovery actions, as applicable.
• Updated issue log, risk register, and lessons learned.
• Complete claim file with supporting evidence and approvals.

Interpretation Tips

• Separate entitlement (does the contract allow it?) from quantum (how much time/money?).
• Verify that notice and timing rules were met; many contracts include time bars.
• Use objective evidence and contemporaneous records; avoid assumptions.
• Check for concurrency, betterment, and double counting when quantifying impacts.
• Stay professional and collaborative; negotiation usually costs less than escalation.

Example

A supplier claims extra costs and a 10-day extension due to late site access. The project team reviews access clauses, confirms the delay was owner-caused, analyzes schedule float and concurrency, and validates cost records. They negotiate a 6-day extension and partial cost recovery via a change order, update the schedule, and close the claim.

Pitfalls

• Ignoring notice requirements or responding late to a submitted claim.
• Weak documentation that cannot substantiate causation or amounts.
• Settlements with vague scope that trigger future disputes.
• Failing to update baselines and payment records after resolution.
• Allowing emotions to drive communication and damage relationships.
• Skipping the contract’s dispute resolution steps or approvals.

PMP Example Question

A contractor submits a claim for additional costs due to a design change. What should the project manager do first to administer the claim effectively?

1. Immediately approve the claim to maintain the relationship.
2. Refer the claim to arbitration as specified in the contract.
3. Review the contract and verify notice, entitlement, and required documentation.
4. Reject the claim because the budget cannot accommodate increases.

Correct Answer: C — Review the contract and verify notice, entitlement, and required documentation.

Explanation: Effective claims administration starts with contract-based analysis of entitlement and compliance, supported by evidence, before negotiating or escalating.