A construction claim is defined as any entitlement, generally, additional time and cost, to which one of the contracting parties feels privileged even though it may not have been agreed upon prior to the commencement of the contract (Sibanyama et al. Citation2012; Mishmish and El-Sayegh Citation2018). Recognizing the importance of claims, past studies have focussed on their classification, identification of the source, and evaluation of cause and effect. Additionally, studies have also shown that claims are inevitable, and thus, managing claims effectively and efficiently becomes a necessity (Vidogah and Ndekugri Citation 1997; Ren et al. Citation 2001; Cinko et al. Citation 2023). Effective claims management, while ensuring the success of the claim for the claimants, also plays a crucial role in preventing conflict and disputes (Ren et al. Citation2001; Komurlu and Arditi Citation2017; Cinko et al. Citation2023). Prevention of disputes is important; studies highlight the repercussions of claims being escalated to a conflict, especially the substantial additional time and resources consumed. While the importance of claims management has been stressed, studies focusing on the same have been scattered and limited. Management of claims is hitherto not devoid of challenges (Tan et al. Citation 2018), and it is vital to understand them to find appropriate solutions.
This study aims to review the challenges encountered in claims management. The focus is on the management of claims rather than the claims themselves. It identifies, evaluates, and qualitatively classifies the various difficulties in claims management, hence adopting a narrative review approach with thematic analysis. This paper presents the challenges identified in managing claims under themes as observed from past studies. It also illustrates the thematic cause and effect of the difficulties encountered in handling claims.
Managing claims: the challenges
Studies on the challenges encountered in managing claims have adopted different approaches and focused on various aspects of the problems encountered. This study identified five main themes of challenges in claims management ( Table 1 ).
Table 1. Challenges in construction claims management.
Stakeholder predisposition
Stakeholders’ prejudiced perception of the claimant being deceptive (Whaley Citation 2016) and opportunistic (Rooke et al. Citation 2003) presents a negative image of the claim culture. Stakeholder predisposition towards the claims culture results in a bias in their attitude and approach towards the management of claims. Further, this also influences the relationship between stakeholders, a key element in successfully managing claims.
The success of a project depends on the management of stakeholders (Jergeas et al. Citation2000); thus, the relationship among stakeholders is critical whether it is temporary or long-term (Seo and Kang Citation2020). While Badger and Gay (Citation1996) stressed the development of good professional relationships among project stakeholders based on mutual trust and respect, studies have shown that most relationships turn adversarial due to opportunistic behavior and a lack of confidence (Elhag et al. Citation2019). A highly competitive industry propels organizations to tilt more towards a profit culture (Rooke et al. Citation 2003). On the flip side, the contractor, in an effort to appease the client, prefers to forgo claims, especially in countries where the bias is towards the client (Hassanein and El Nemr Citation2008). However, Hassanein and El Nemr (Citation2008) term this as a “fear of consultant phenomenon.” Maintaining good relationships helps in the negotiation of claims, which incidentally is also a behavioral process affected by the perceptions of the negotiating parties (Hansen and Rostiyanti Citation2019). Studies indicate that personal prejudices result in adversarial relationships which impede the negotiation process, meaning the situation can escalate to a dispute (Enshassi, Mohamed et al. Citation2009; Bakhary et al. Citation2015; Hai Citation2019).
The relationship among stakeholders is also governed by the attitude of stakeholders, which in turn determines the approach of the opposing parties towards the claims process. A confrontational attitude, either by the claimant or the defendant, forces a rigid position and exhibits a win-lose attitude, thus making mitigation of the claim a challenging prospect (Elhag et al. Citation2019; Asuquo et al. Citation2020). Another attitude that poses a challenge in managing claims is the intentional exaggeration of claims (Ali et al. Citation 2020), which results from the perception that the claim amount will invariably be reduced (Seo and Kang Citation 2020). While this attitude achieves short-term success, in the long run, it creates a negative perception that all claims are overestimated. Though partnering is suggested as a possible measure for such an attitude, there is an inherent reluctance to commit to such an arrangement fully, especially from the client (Elhag et al. Citation 2019).
The attitude of the stakeholders within the organization is also cited as a concern. Often, site staff may take a casual approach toward claims management, focusing predominantly on completing the project. They can be negligent in managing claims, citing that this does not fall within their remit (Seo and Kang Citation 2020). This negligence, which includes being unaware of contractual provisions and not making an effort to understand them, can result in claims being overlooked (Bakhary et al. Citation 2015; Shaikh et al. Citation 2020). Additionally, the organization’s reluctance to provide sufficient resources to manage claims and a lack of communication of information also poses a challenge (Tan et al. Citation2018). Coupled with a lack of support, constant interference, and micro-management of staff, this can result in a lack of trust and a reluctance to share information critical to managing claims (Seo and Kang Citation 2020).
The contract administrator or the lead consultant, being the adjudicator of claims at the project level, is expected to maintain impartiality (Aibinu Citation 2010; Tochaiwat and Chovichien Citation 2020). However, it has been observed that being their representative, they exhibit a bias towards the client (Tan et al. Citation2018), especially when the clients are the cause of the claim (Danuri et al. Citation2006; Tochaiwat and Chovichien Citation2020). This also gives the clients the power to interfere in decisions, a power which is very commonly exercised (Tan et al. Citation2018). Further, they are also inclined to safeguard their interest, where they might also be one of the sources of claims (Hansen and Rostiyanti Citation2019).
Insufficient resources allocated for claims management
Resources such as people, tools and systems, time, and cost are critical for any process, and the same goes for managing claims. While studies have illustrated the importance of effective claims management, in practice, it is accorded an ancillary status, and resources are disbursed only towards the end of the project (Vidogah and Ndekugri Citation 1997). Thus, managing claims becomes a challenge due to poor human resource management, lack of systems, lack of time, and lack of financial resources ( Table 2 ).
Table 2. Challenges in claims management – summary of the result.
Studies have consistently shown that the lack of availability of staff, in particular skilled staff, for assessing, analyzing, calculating, and preparing a claim poses a challenge (Hai Citation2019; Hansen and Rostiyanti Citation2019; Hayati et al. Citation2019; Ali et al. Citation2020). Further, organizations tend to deploy shared resources for claims management, which increases the workload on staff and can result in poor quality of work. Additionally, the attrition of staff, especially those involved in claims management, midway through a project compounds the problem in terms of presenting a break in information flow and loss of information voluntarily or involuntarily (Tan et al. Citation2018). Added to this, poor assignment of responsibility with no clear instructions makes claims management challenging (Vidogah and Ndekugri Citation 1998; Seo and Kang Citation 2020). Enshassi, Mohamed, et al. (Citation2009) cite poor delegation of responsibility as one of the top three challenges in claims management in the Palestine construction industry.
Time is of the essence in a construction project; consequently, all forms of contracts stipulate rigid timelines for various activities. However, studies show that adherence to timelines seems to be problematic, with stakeholders complaining about a lack of time to effectively manage claims (Enshassi, Choudhry, et al. Citation2009; Sibanyama et al. Citation2012; Bakhary et al. Citation2015; Hai Citation2019; Hansen and Rostiyanti Citation2019; Hayati et al. Citation2019). Stakeholders feel that contract provisions could be more liberal with timelines. However, some studies show that the overloading of staff with multiple tasks is the main cause of the delay (Enshassi, Mohamed, et al. Citation 2009; Bakhary et al. Citation 2015; Hai Citation 2019).
The challenge of shortage of time could be overcome if organizations adopt proper tools and systems for managing claims. However, studies consistently indicate the lack of appropriate management tools and poor or non-existent systems as a major cause for this challenge, and the problem persists even today (Vidogah and Ndekugri Citation1997; Ren et al. Citation2001; Hai Citation2019; Ali et al. Citation2020; Wang Citation2020). The haphazard storage and archiving of information presents a challenge in the retrieval of the same at a later date (Carmichael and Murray Citation 2006). Despite the availability of technology, the organization’s reluctance to adopt the same seems to be a cause of concern, especially in developing countries (Enshassi, Mohamed, et al. Citation2009; Bakhary et al. Citation2015; Hayati et al. Citation2019). Though perceived as less expensive, manual processes pave the way for errors and delays and become costly in the long run. While there could be a misuse of technology with respect to data manipulation and misinformation, overall, it is beneficial in effective claims management (Sandlin et al. Citation2004; Christian et al. Citation2020).
Organizations often deploy shared resources for claims management to reduce cost (Vidogah and Ndekugri Citation1997; Ali et al. Citation2020). However, this specialized activity needs skill and expertise (Tan et al. Citation2018). Hiring experts is expensive, and in some cases, it exceeds the claims recovery such that it is better to forgo the claim than pursue it. The expense of hiring experts increases further if they are hired unproductively (Sandlin et al. Citation2004), which is brought about by the delay in retrieval of documents for their evaluation, with studies finding it as one of the major expenses (Enshassi, Mohamed et al. Citation2009; Hai Citation2019). Further, in long-term projects, the quantum of documents and information is large and requires considerable storage space (Bjork Citation 2006), and manual retrieval is labor-intensive and time-consuming (Vidogah and Ndekugri Citation 1997). The lack of a proper archiving system and process hence compounds the problem of storage and retrieval of documents and information when required (Barber Citation1990; Hai Citation2019).