Understanding the Crucial Differences Between Contract and Claim Management

Posted by: Srinivasan N

Designation: Advisor – Contracts and Claims

Date: July 11, 2024

Most EPC contractors and clients do not appreciate the difference between these two terms. Most organisations perceive this function as “preparing and issuing claims” and thus narrow down the scope of a contract manager to that of a claim manager.

Prudent processes stress the importance of good contract management as this is a proactive measure to PREVENT CLAIMS. Contract management practices address the key causes for claims which generally are: –

  • Non-performance of obligations: Understanding and identifying all the performance obligations of the parties and emphasizing timely performance – Know all your obligations.
  • Ambiguities /unclear contract stipulations: Identifying all ambiguities and resolving these to bring clarity. Resolve ambiguities before an event occurs. All resolutions may not be in your favour, but clarity ensures performance and prevents claims.
  • Incomplete and unclear scope split and interfaces: Have a complete and clear scope split document. All contract changes to be promptly notified and change orders agreed- Change order requests are not claims unless they are disputed.

Claim preparation is expensive and needs experts to prepare claims that can withstand scrutiny by an “Arbitrator”

Appreciation of the above will encourage a move away from claims to a more proactive and productive role i.e. contract management

Though, Eka Infra processes cover both contract and claim management, the emphasis is on good contract management.

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