The burden of proof: Why should retrospective claims management be avoided?


2018-09-25. The term burden of proof sounds onerous, appearing to involve a lot of time and trouble. Burden of proof often becomes troublesome as soon as it's a matter of retrospectively substantiating a fact with verifiable reasoning in such a way that everyone will then believe this previously only alleged fact and no longer be in any doubt about the truth of this fact.


Reasoning is deemed to be verifiable if it can be supported by evidence. Evidence can take many forms: letters, photos, logs, anything is possible. Some types of evidence are more suitable, others less so. What is important is that the form, quality and quantity of the respective evidence must be in keeping with the alleged fact; as well as with the applicable legal system within which consequences may have arisen from this fact.

 

What does this have to do with industrial projects? The execution of industrial projects is not only the subject of prospective contract arrangements and similarly of prospective technical construction work; project implementation also means that your own prospective actions collide to a large extent with the uncertainties of everyday life within the project. This collision may create difficulties in the project that in the worst-case scenario must be retrospectively reworked by the contractual partners, if the contractual parties suffer any consequences as a result of the service disruptions, which contradict the originally calculated commercial benefit of the project.

 

Common practice in a project: "We're submitting a claim."

"We had an extremely difficult time on the building site," complains the project manager of the contracted pipeline construction firm. "The cable tensioning company's staff constantly got in our way".  "We're submitting a claim," they confirm to their boss during the weekly project meeting. Confident that the externally caused additional waiting time costs and productivity losses during the project will be reimbursed, the project manager sends a letter to the project client. They attach a table giving an overview of the estimated additional costs, for which they are claiming compensation.

 

When reading the letter from their contractor's project manager, the client is totally confused. Its pipeline construction firm is asking to be reimbursed for additional costs; the client's project team has only just been made aware of the existence and cause of these costs. The amount of additional costs, for which the contractor is claiming compensation from the plant's client, appears outrageous and barely credible.

 

The client quickly posts a suitable written response. Definitive and above all traceable claim documentation is formally requested from the claiming project partner.

 

Turning dubious evidence into acknowledged fact

At this point, both contractual parties are forced to delve deeply into retrospective claim management. The retrospective search for documents that are widely distributed in the internal project team's many mail boxes is extremely difficult. When the spatially distributed documentation of external service providers acquired for the project is added to this complex scenario, verifiable documentary evidence for the claim becomes almost impossible.

 

However, good claim preparation allows the recipient to understand the claimant's additional claims. And not only that. Good claim preparation also tells the "story" of the claim in a neutral, non-judgemental manner. In order to recount this story, it is necessary to structure and classify the available documentary evidence for the claim. This can be done prospectively, i.e. in advance, during the project, or even retrospectively, i.e. at a later date.

 

Affirmation is good. Evidence is better.

According to an old proverb, "Affirmation is good. Evidence is better". This particularly applies to claims management in the case of disrupted construction processes in industrial projects. In project files that often contain hundreds or even thousands of items of documentary evidence, however, it is difficult to identify evidence that is capable of substantiating your own additional claims against your contractual project partner. Documentary evidence must be structured and classified.

Documentary evidence could be structured according to:

 

  • Disputed remuneration as result of a variation order
  • Construction phase extension claim
  • Productivity losses due to complications
  • Price escalation clause due to a different service period
  • Additional costs due to an expediting order
  • Additional costs due to increased purchase prices
  • ….

Conceivable classifications could be:

 

  • Relevant contract clauses
  • Technical specification
  • Construction drawings
  • Delay notification / cancellation
  • Concern notification
  • Change request / order
  • Construction site journal
  • Logs
  • Records of working hours
  • Receipts

Any documentary evidence that underpins (or refutes) the credibility of a claim should be recorded in a database using such structured rankings and classifications. It soon becomes apparent that this can be achieved more quickly and efficiently if it is done immediately. Prospective claim processing therefore becomes a strategic (time) advantage if conflict arises with your contractual partner regarding compensation for externally caused additional costs in the project. A well-prepared claim file is impressively extensive, structured and transparent. All this conveys professionalism and credibility to your contractual project partner, allowing you to continue to work in partnership despite any additional claims during the project.


The burden of inspiration

"But we didn't have time for project-related claim preparation while executing the project," is a commonly heard phrase when discussing which documentary evidence is available for your own additional claims against the actively claiming party ("claimant").

 

"We now have to look for these documents together," is the confident assertion. Honestly, anyone who has ever had to compile evidence for individual facts that occurred a long time ago knows what difficulties have to be overcome. Deleted hard drives, undefined file name conventions, experts who have left the company, the different language used by individual project members to describe specific facts, etc. are all challenges facing anyone retrospectively producing claim documentation. They soon understand the word "burden" from the phrase "burden of proof" mentioned at the start.

 

"Burden of proof" is not a common expression, but rather a play on words describing how easy claim preparation can be if all the information about individual claims is available at all times during the project.


Summary

Avoid "poor" evidence when substantiating a claim. Claims management is like eating a sausage sandwich. Finely sliced sausage is placed on a roll garnished with a lettuce leaf, with not a single mouldy slice spoiling the taste. After all, no-one would eat a sandwich containing mouldy sausage or featuring all types of sausage at once. It therefore stands to reason that claims must also be "palatably" presented to the recipient for review and be of the highest quality.