Claims Management: Protect Revenue & Reduce Risk
Claims Management: Protecting Value in Contracts and Projects
Claims Management is the structured process of identifying, preparing, submitting, evaluating, and resolving contractual claims arising during project execution. It plays a critical role in protecting revenue, maintaining contractual rights, and minimizing financial losses.
In industries such as construction, infrastructure, engineering, insurance, and procurement, effective claims management ensures that additional costs, delays, variations, or unforeseen events are properly documented and compensated.
What is Claims Management?
Claims Management refers to the systematic handling of claims made under a contract due to changes in scope, delays, disruptions, unforeseen conditions, or breaches of agreement.
Claims may arise from:
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Variation orders
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Extension of time (EOT) requests
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Cost escalations
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Force majeure events
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Design changes
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Delays caused by clients or contractors
Proper ensures that entitlements are preserved and disputes are minimized.
Importance of Claims Management
Strong directly impacts profitability and risk control. Without structured processes, organizations may lose legitimate entitlements or face unnecessary legal disputes.
Effective helps:
Protect Revenue
Ensures compensation for additional work or delays.
Maintain Contractual Rights
Preserves legal entitlements under the contract.
Reduce Disputes
Early documentation prevents escalation.
Improve Cash Flow
Timely claim submissions support financial stability.
Claims Management in Construction & Infrastructure
In large infrastructure projects is particularly important due to project complexity and long durations.
Standard contract frameworks such as those published by the International Federation of Consulting Engineers (FIDIC) provide detailed procedures for claims submission and evaluation. Contractors must comply with strict notice requirements and timelines to maintain entitlement.
Major infrastructure companies like Larsen & Toubro implement structured systems to manage risks in large-scale projects.
Key Stages of Claims Management
1. Identification of Claim Event
The first step in recognizing events that may lead to additional time or cost entitlements.
2. Notice Submission
Timely notice to the other party is critical. Many contracts require written notice within a specific timeframe.
3. Documentation & Evidence Collection
Comprehensive records—site reports, correspondence, cost records, and schedules—are essential for strong.
4. Claim Preparation
A detailed claim submission should include:
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Description of the event
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Contractual basis
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Impact analysis (time and cost)
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Supporting documentation
5. Negotiation & Resolution
Claims are typically resolved through negotiation, mediation, arbitration, or litigation if necessary.
In India, dispute resolution may be governed by the Arbitration and Conciliation Act, 1996.
Common Challenges in Claims Management
Organizations often face:
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Delayed claim notifications
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Insufficient documentation
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Poor contract understanding
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Weak impact analysis
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Escalation to costly disputes
Implementing a proactive system reduces these risks.
Best Practices for Effective Claims Management
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Maintain detailed project documentation.
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Train project teams on contract conditions.
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Monitor potential claim events proactively.
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Submit notices within contractual deadlines.
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Engage commercial and legal experts early.
Strong begins at project initiation—not after disputes arise.
Benefits of Structured Claims Management
Financial Protection
Recovers additional costs and prevents losses.
Risk Mitigation
Minimizes exposure to legal disputes.
Better Contract Compliance
Ensures adherence to notice and procedural requirements.
Stronger Negotiation Position
Well-documented claims increase credibility.
Conclusion
Claims Management is a vital commercial function that protects revenue, manages risk, and preserves contractual rights. In complex projects, proactive ensures that organizations are fairly compensated for changes, delays, and unforeseen events.
By implementing structured processes, maintaining strong documentation, and aligning with contractual frameworks, businesses can reduce disputes and improve overall project profitability.
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