The Massachusetts Highway Department, after a number of meetings with representatives of CIM, has recently issued new procedures for the handling of contractor claims. In the near future CIM will be participating in workshops with MHD to review the details of the SOP. Thereafter, the SOP will go into effect. The new SOP is intended to be coordinated with the existing claims procedure under the various sections of the Standard Specifications (the Blue Book). The Blue Book provisions concerning claims are not a model of clarity. The notice and written submission requirements are varied. The SOP creates a process for contractor claim submittal and review that begins after the contractor has complied with the entitlement, notice and written submission requirements contained in the particular section of the Blue Book or the Massachusetts statute that is applicable to the claim. Examples of applicable Blue Book and statutory claim sections are as follows:

4.02 – Alterations of work

4.03 – Extra work

4.04 – Differing site conditions

4.06 – Variation in quantities

5.05 – Impacts from 3rd parties

5.06 – Impacts from adjacent contracts

7.16 – “Other” claims

7.17 – Impacts from opening work to traffic

8.05 – Claims for delay

8.10 – Extensions of time

MGL c. 30 § 39N – Differing Site Conditions

MGL c. 30 § 39O – Delay damages

AFTER YOU HAVE DETERMINED YOU HAVE A CLAIM, WHAT PROVISIONS DO YOU FOLLOW?

If your claim is based on any of the Blue Book or statutory provisions, except § 7.16, you follow the written notice and claim submissions requirements contained in those provisions. After you have complied with those provisions, you then proceed under the SOP if your claim has not been resolved.

If your claim falls under § 7.16, then the SOP process requires that you follow the notice and written submission requirements of § 7.16. Section 7.16 of the Blue Book is somewhat confusing. In next month’s publication, I will discuss in detail the meaning and requirements of these Blue Book and statutory sections.

WHAT IS THE NEXT STEP AFTER COMPLYING WITH THE BLUE BOOK AND STATUTES?

The key time frame to remember is the 14-day clock. A “Claim Notice” must be filed within 14 days. From when? The 14 days run from the date of any one of three events:

• The date the underlying claim for time, money or other relief has been denied;
• The date the contractor rejects any proposed outcome proposed by the Engineer’s Authorized Representative;
• The date after which a reasonable time has elapsed with no decision or outcome proposed by the Engineer’s Authorized Representative.

These dates will not always be clearly recognized or understood. For example, there will be a difference of opinion as to when a “reasonable time” has passed under event #3 above. To avoid an unfair outcome, MHD has inserted a provision in the SOP which recognizes that there will be instances when reasonable differences may exist on when the 14-day clock starts under the three events listed above.

WHAT IS TO BE INCLUDED IN THE 14-DAY NOTICE?

The 14-day notice goes to the District Highway Director (“DHD”). Also an Itemized Statement of Claim must be filed. The SOP contains detailed procedures for these filings. In general, after the Claim Notice is filed, the Engineer’s Authorized Representative will, if a denial letter is not sent, notify the contractor when an Itemized Statement of Claim is to be submitted.

The Itemized Statement of Claim is to include the following:

• brief narrative including dates of disputed work and damages;
• relevant provisions of the plans, specifications, drawings or other contract documents, correspondence, project records and any other supporting documents;
• known dollar amount of compensation sought;
• known extension of time sought;
• schedule support for time extension and time related costs sought;
• certification as to accuracy of claim.

The SOP recognizes that at the time of submittal of the Itemized Statement of Claim, the contractor may not have in its possession all supporting information for its claims for time and money. The contractor is required to provide “its best available information and estimate of time and/or money.”

If the contractor’s itemized submission is deficient, the Engineer’s Authorized Representative must notify the contractor what additional information is needed and a reasonable date for resubmission.

WHAT IS THE ROLE OF THE CLAIMS MANAGER?

A key feature of the SOP is the introduction of the Claims Manager at MHD headquarters. The role of the Claims Manager at this stage is to “work with the District to proactively manage the claims process so as to achieve early resolution of claims.”(emphasis supplied)

POTENTIAL RESOLUTION OF CLAIM AT DISTRICT LEVEL

Within 14 days of submission of the Itemized Statement of Claim, the District is to schedule a Step 1 meeting or a preliminary Step 1 meeting (assuming the claim is ongoing). The purpose of this meeting is to review the claim, MHD’s response to the claim and “discuss resolution of the claim.”

If the claim cannot be resolved after the Step 1 meeting, the District issues a written decision within 14 days. This decision must set forth the reasons supporting it, relevant specification sections, and project records supporting the decision.

If the contractor disagrees with the District’s decision, it must request a Step 2 hearing. Failure to make this request will result in forfeiture of the claim.

STEP 2 HEARING – THE CLAIMS COMMITTEE

The Claims Committee at MHD headquarters gets involved when the Step 1 process is complete. No contact is to take place with the Claims Committee until then.

Both the contractor and MHD have obligations to make filings to the Claims Committee at this stage. Within 14 days of MHD’s receipt of the contractor’s request for a Step 2 hearing, the contractor is to submit additional information to support its claim “to enable understanding by a third party who has no knowledge of the dispute….”

Within 30 days of receipt of contractor’s enhanced claim, the District is to send its response which is to include:

• narrative to enable a third party without knowledge to understand what happened;
• description of efforts to resolve the claim;
• references to the applicable plans, specifications, correspondence, project records and other documents;
• response to each argument made by contractor and review of contractor’s costs and schedule documentation;
• any defenses, offsets and counterclaims with supporting documentation.

CLAIMS COMMITTEE HEARING PROCESS

The Claims Committee meets quarterly. Within seven days after the District submits its response, the Claims Manager is to schedule a hearing before the Claims Committee.

The contractor and any subcontractor (if it has a claim) may make presentations at the hearing and use experts, if appropriate.

Within 30 days after the Claims Committee hearing, it issues a written decision including its findings and basis of its decision.

APPEALS

If the claim is denied, the contractor may appeal within 30 days after the decision to the Administrative Law Judge. If part of a claim is accepted, MHD may, in its discretion, process an extra work order for the undisputed portion of the claim.

MEDIATION

The SOP contains an important provision which contemplates that the parties can agree to Alternate Dispute Resolution through nonbinding mediation.

CONCLUSION

This is an overview of the SOP for claims. The SOP contains more detail that needs to be studied. It is important to keep in mind that the SOP is not a Standard Specification. It is a procedure only. The Standard Specifications supersede the SOP in the event of a conflict.

The intent behind the SOP is to provide a process to reach early and fair resolution of claims. By requiring an exchange of positions with detailed backup, the parties can gain an understanding of their positions.

Resolution of claims is expressly included as part of the process. The Step 1 procedure and the involvement of the Claims Manager provide an important opportunity for the parties to resolve disputes.

In addition, in the event the Step 1 and Step 2 process fail to resolve the contractor’s claims, the SOP provides the parties with the opportunity to resolve the claim through nonbinding mediation.