What Pursuing a Construction Claim Costs Before Anyone Decides It

A claim consumes money and attention long before it is determined. The cost lines on both sides, what moves them, and how to decide whether a claim is worth running.

Deciding whether to pursue a claim is a commercial decision, and it needs a cost estimate on both sides of the ledger: what the claim will cost to build and defend, and what it is realistically worth after a discount for risk and delay in recovery. The lines below are the ones that appear in practice, and most of them are incurred before anybody rules on the merits.

What this number does and does not include

This covers the cost of preparing, presenting and negotiating a claim up to the point of a determination, whether by the contract administrator, an adjudicator or a tribunal. It does not attempt to price the outcome, and it excludes the cost of the underlying event. Costs vary enormously with the complexity of the facts, the quality of the records and the behaviour of the other party, and any figures you develop must be your own rather than borrowed from another project. Where the matter may become a formal dispute, the cost position should be discussed with a licensed legal adviser at the outset rather than after the spending has started.

Internal commercial and planning time

The largest hidden cost on most claims. Assembling the records, reconstructing the as built position, writing the narrative and responding to requests for information consume weeks of senior commercial and planning time, and that time is diverted from the live project rather than added to it.

• Pushes it up: Poor record keeping, which turns reconstruction into forensic archaeology, and events spread across a long period.
• Brings it down: A records routine kept from mobilisation, a claim file owner appointed early, and a submission prepared while the events are fresh.
• How to control it: Cost the internal time explicitly before deciding to proceed, and include it in the comparison with the sum claimed.

Programming and delay analysis

Independent or in house analysis of the programme effect, including reconstructing the as built programme where updates were poor. The cost scales with the number of events, the length of the period and the condition of the programme records rather than with the value of the claim.

• Pushes it up: Many overlapping events, a long programme, missing native programme files and inconsistent progress updates.
• Brings it down: An accepted baseline, properly updated monthly programmes retained in native format, and a small number of discrete events.
• How to control it: Fix the method and the scope of the analysis in writing before it starts, so the work does not expand as new theories arise.

Quantum assessment and document production

Building the cost case from invoices, timesheets, payroll and hire records, and producing it in a form the other side can audit. On a long delay this is a substantial accounting exercise, and incomplete source records make it longer rather than impossible.

• Pushes it up: Cost systems that do not allocate to the project or the period, subcontract claims passed up unassessed, and heads of claim that require a basis of valuation rather than an invoice.
• Brings it down: Cost coding that aligns with the contract from the start, and monthly reconciliation that keeps the position current.
• How to control it: Assess the quantum before finalising the narrative, because a claim whose value turns out to be small does not justify the rest of the spending.

Legal advice on entitlement and procedure

Advice on whether the contract gives the entitlement claimed, whether the notices were compliant, how the governing law treats the issues and what procedural steps are required. Taken early this is usually the highest value spending on the whole claim, because it prevents effort being spent on a route that was closed by a notice provision.

• Pushes it up: Unusual or heavily amended contract wording, multiple interacting clauses, and a question that has to be answered before the facts can be marshalled.
• Brings it down: A standard form with few amendments, a clean notice record, and a single clearly defined issue.
• How to control it: Get the entitlement and procedure question answered before building the full submission, not after.

Expert evidence in a formal dispute

Where a matter proceeds to arbitration or litigation, independent experts on delay, quantum or technical issues may be required, together with the cost of their reports, their responses to the other expert and their attendance. This is typically the largest external line in a formal dispute.

• Pushes it up: Several disciplines in issue at once, a long factual period, and a dispute where the other side has also appointed experts.
• Brings it down: Narrowing the issues before the formal stage, and agreeing facts or a joint approach where possible.
• How to control it: Define the expert scope tightly and insist on an early view on the strength of the case rather than a full report first.

Tribunal, institutional and hearing costs

Formal proceedings carry their own costs: institutional fees where arbitration is administered by a body such as the Saudi Center for Commercial Arbitration, the tribunal fees, hearing facilities, transcription and translation where the proceedings run in more than one language. Fee schedules are set by the institution and change over time, so confirm them at the time rather than estimating from an earlier matter.

• Pushes it up: A high value claim where fees scale with amount, a three member tribunal, and documents requiring certified translation.
• Brings it down: A sole arbitrator where the parties agree, a documents only procedure where available, and bilingual document management from the start.
• How to control it: Ask your legal adviser for the current fee basis before committing to a route, and model it against the realistic recovery.

Management attention and opportunity cost

Claims absorb the attention of the people who are also responsible for delivering the remaining works or winning the next project. This cost never appears in any ledger and is frequently the largest item of all, because a distracted project team generates the next problem.

• Pushes it up: A claim run by the live project team rather than a separate resource, and a dispute that drags across many months.
• Brings it down: Separating claim work from delivery work, with a named owner and a time budget.
• How to control it: Ring fence the claim from the project team where the value justifies it, and accept that the alternative is a slower project.

Costs that never appear on the first page

• The cost of the counterclaim, which arrives in response to most substantial claims and has to be defended with the same effort.
• Document storage and retrieval, particularly where records sit in several systems or have already been archived.
• Translation of documents and correspondence where the contract or the proceedings require a particular language.
• Financing cost of the money in dispute while the matter is unresolved, which on a long dispute can rival the claim itself.
• The commercial relationship, which affects your position on future work with the same party and sometimes with others.
• Staff turnover, since the people who know what happened move on and their knowledge leaves with them if it is not recorded.

Keeping the budget honest

Before committing, write down three numbers: the realistic recovery after a risk discount, the total cost of pursuing it including internal time, and the time until money would actually arrive. If the recovery does not comfortably exceed the cost, settle or drop it and say so clearly rather than letting the claim drift. A claim that is pursued without that calculation tends to consume its own value and then continue, because nobody wants to be the person who abandons it.

• Before any substantial spending, when the entitlement and procedure question should be answered.
• After the quantum assessment, when the realistic value is known for the first time.
• Before escalating from negotiation to a formal procedure, which is the biggest single step change in cost.
• After the exchange of positions, when the strength of the other side case becomes visible.
• At any point where a settlement offer exceeds the risk adjusted recovery less the remaining cost.

Domira builds and supervises projects across Saudi Arabia, and the commercial discipline above is how its projects stay inside their budget and their programme. Send the drawings, the contract or the site and Domira will tell you where the risk actually sits.