5 Reasons Why Owners and Primes Reject Claims - And What You Can Do About It

It's a struggle that so many construction companies encounter on a weekly basis. Turning in claims, whether for delays, extended overhead, extra work, weather or anything else is a revenue stream that construction companies, and particularly small and medium-sized construction companies can't ignore. Call it a necessary evil, if you will. We're going to talk a little bit about why claims get rejected, modified, or disputed at all.

There's one thing that should be paramount to everything else we're going to talk about here - claims must be truthful and factual. That is, every single number in your claim needs to be substantiated and based on undeniable truth and fact. This means knowing your contract - what's allowable and what's not.

Now  let's get into some other items you can keep and eye on to make sure this puppy is going to get signed & paid.

The numbers. Please check the math. I can't emphasize enough that this is the 'low hanging fruit' that can quickly make the first round reviewer (because there are likely many) kick it back without even making it to the second page. Where there's smoke there's fire. And the easy smoke to find is numbers that don't add up, quite literally.

The proof. Why should Mr. Client pay you more money? You’re just a contractor like everyone talks about, with your hand out for more money all the time. Provide information that will prove your case. Emails, letters, extra work tickets and daily reports are great for this. The home run - get acknowledgement from the client's representative that your firm is owed for this or that it is considered extra work beyond the contract. This is your golden gun.

The support. Where did your numbers come from? They seem awfully high, and very round. Did you make them up? Of course not. Include supporting documents for how your arrived to certain rates, quantity takeoffs, photos of the work, drawings that changed, etc. The is probably the most common reason, in my experience, that claims get rejected. Back. It. Up. With. Proof.

The history. Often times the Change Manager isn't a field guy. Often times they don't have the full story on an issue, maybe just what they've heard at the water cooler. As part of the included supporting documents, make sure to include the background. Emails, photos, and past and current drawings make great storyboards. Make it so clear that someone who arrived on the job yesterday can figure it out.

The package. Take an extra minute and give your full claim package a review. Check it for supporting documents (drawings, certified payroll, photos, worksheets, specifications, daily reports, timecards, etc) and everything we've discussed here. If it's missing, get it in there. Remember, you want to make it as easy as possible for someone to grab this package, review it, and pay it. Why make them scrounge around to find the photos, specs and drawings? Make it easy for them to say 'yes'.

Let that last part sink in for a minute. That should resonate. Why should all this stuff be a part of your claim? Everything points toward one common goal - Make it easy for them to say yes. The easier you make it, the quicker it will get paid. No joke.

 

"Make it easy for the Contracts Manager to say yes!"

 

Pro Tip!
Put yourself in the reviewer's shoes. What would you look for? What are your red flags? What have you seen in the past, that preceded this claim? How much background do you have on the issue? What would help you move this claim through quickly? We get so caught up in getting the package turned in and signed that we often forget this little tip. Classic Golden Rule stuff, here.

The ability to place yourself, as the preparer, in the reviewer's mindset is the secret sauce that can set your claims apart (in a good way!). Just do this: Imagine you're handing in your claim. You hand it to the Prime's Contracts Manager. After taking it, he says, "before I take the time to review this, have you checked it, reviewed the quantities/rates/addons/wages/drawigns/RFI's/etc/etc?". Go through this exercise over and over. If you can't emphatically answer with a "yes!", you're not ready to turn it in. And just to be safe, you might put a cover letter on it with verbiage of the sort, saying that you have reviewed if for all those things.

Claims are, quite honestly, an unpleasant part of the construction industry. I honestly don't think anyone likes processing claims. This is a list that, if implemented, will make it at least as painless as possible. It does take time. Time that you probably didn't count on and time that you probably don't want to spend. The claim preparation time is an investment. Reviews can drag on for months and months (no joke) if the entitlement is not clear, if the backup is not present, etc. Take the extra time to do it right and you won't be sorry. Chances are, someone in your office is going to spend the time doing it all in the long run anyways, might as well do it up front.

 

Someone on your team is going to spend time doing all of this anyways. So do it up front.

 

We'd love to hear what you've seen work on your own projects. What claim prep techniques have you used? What worked and what didn't? Leave a note in the comments.