Claims · Contract Management

Construction Claims: Types, Management and Resolution

A practical guide to understanding construction claims, managing entitlements, and resolving disputes in UAE and GCC projects.

8 min read · Updated 24/04/2026

In this article

1. Understanding Construction Claims and Claim Management
2. Classification of Construction Claims
3. Time-Related Claims: Delay and Extension of Time
4. Cost-Related Claims: Variations, Acceleration, and Site Conditions
5. Damage and Defect Claims
6. Preventative Strategies and Best Practice Management
7. Resolution and Expert Support

Key takeaway

Construction claims are inevitable in large projects. The difference between costly disputes and fair resolutions lies in proactive management: clear contracts, aligned documentation, early identification of risks, and business-like negotiation when issues arise.

1. Understanding Construction Claims and Claim Management

A construction claim is a formal request by one party to the contract—typically the contractor—for compensation or relief (usually time, cost, or both) resulting from the other party’s failure to perform its contractual obligations. Under FIDIC contracts and UAE law, such claims are a recognised and legitimate mechanism for addressing entitlements that arise during a project’s execution.

Claim management is not optional—it is an integral part of professional project management. The objective is not to maximise disputes but to minimise them through early identification of potential issues, clear communication, and business-like resolution. This requires alignment of contractual documentation, proactive risk management, and structured entitlement processes.

The Three Pillars of Effective Claim Management

• Risk Identification and Prevention: Address breeding grounds for claims—ambiguous specifications, incomplete drawings, undefined interfaces—before work begins. Early identification of site conditions, resource constraints, and interface dependencies reduces claims significantly.
• Document Alignment: Ensure all parties work from a single source of truth: contract, specifications, bills of quantities, drawings, and schedules must be internally consistent and issued under formal control. Misalignments are the largest single cause of claims.
• Entitlement Management: When issues arise, address them promptly and formally. Establish a procedure for evaluating entitlements (notice, cause, impact, quantum) and seek early settlement where legally and commercially justified. Avoidance of protracted disputes reduces costs for all parties.

2. Classification of Construction Claims

Construction claims fall into broad categories based on the relief sought and the cause of loss:

• Time Claims: Requests for extension of time (EOT) arising from excusable, compensable, or concurrent delays.
• Cost Claims: Requests for additional payment due to delays, variations in scope, site conditions, or acceleration.
• Delay-Related Claims: Quantum claims for the cost of prolongation (standing time, overhead, financing costs).
• Disruption Claims: Loss of efficiency and productivity resulting from interference with planned work sequences, often concurrent with delay.
• Defect and Damage Claims: Claims arising from poor workmanship, substandard materials, or damage to third-party property.

Each category has distinct contractual entitlements, notice requirements, and calculation methodologies. Conflating time and cost, or failing to separate excusable from compensable delay, is a common source of dispute.

3. Time-Related Claims: Delay and Extension of Time

Delay claims arise when a project exceeds the contractually agreed time for completion. Under FIDIC, extension of time is determined by Clause 20.1 (FIDIC 1999 Red Book) or Clause 17.1 (FIDIC 2017), and is triggered by listed delay events for which the contractor is not responsible.

Extension of Time (EOT): The Calculation

The basic formula for delay analysis is:

Prolongation Costs (Delay Damages)

EOT establishes the contractor’s right to additional time; cost relief for prolongation is a separate claim. The contractor must prove:

• The delay event was compensable under the contract (e.g. Employer’s variations, Employer-caused delays).
• The delay was on the critical path and directly caused prolongation.
• The standing-time costs (site staff, equipment, preliminary items) were actually incurred.
• The costs were not recoverable through other contract provisions (e.g. variation orders, claims for disruption).

Liquidated Damages (LD) Liability: If the contractor fails to achieve Practical Completion by the agreed date, the Employer may be entitled to deduct or claim LD at a daily rate specified in the contract. The formula used to calculate exposure is:

4. Cost-Related Claims: Variations, Acceleration, and Site Conditions

Change Order and Variation Claims

When the Employer or Engineer issues an instruction to change the scope of work, the contractor is entitled to claim for the direct and indirect costs of that change. Under FIDIC Clause 13 (1999) or Clause 13 (2017), variations are issued as Variation Orders (VOs) and must include fair valuation of the additional work.

If the Employer issues oral or undocumented change instructions, the contractor should demand a formal VO in writing before commencing work. Many disputes arise from the absence of documented instruction or disagreement over the scope of the variation.

Price Acceleration and Cost Escalation

Price acceleration claims arise when the cost of materials or labour increases significantly above forecast rates, and the contract does not adequately protect the contractor. This is common in projects with long procurement lead times or during periods of market volatility.

If the contract includes a price variation clause (e.g. based on published indices for labour and materials), claims should be quantified using the agreed indices. If no mechanism exists, the contractor may seek relief under the change of law or frustration doctrines, though success varies by jurisdiction.

Differing and Changed Site Conditions

Site condition claims are frequent in construction and fall into two categories:

• Differing Site Conditions (DSC): Physical conditions actually encountered on site differ materially from those indicated or reasonably inferred from the contract documents. The contractor must prove the conditions were unforeseeable and not the result of contractor negligence.
• Changed Site Conditions (CSC): Site conditions change during construction as a result of third-party acts, natural events, or government action (e.g. flooding, new regulations). The contractor must show the change was not reasonably foreseeable and materially impacts cost, schedule, or safety.

5. Damage and Defect Claims

Damage claims arise when the contractor (or a subcontractor) causes loss or injury to third-party property or persons during construction. Defect claims arise when the contractor fails to meet workmanship standards or uses substandard materials, compromising quality or functionality.

Establishing Damage Liability

To succeed in a damage claim, the claimant must prove:

• The contractor (or its agent) caused the damage through negligence or breach of duty.
• The damage resulted in quantifiable loss (repair cost, replacement cost, loss of use).
• The loss was not contributory to the claimant’s own negligence or failure to mitigate.

Contractors mitigate exposure through comprehensive insurance (Public Liability and Contractor’s All-Risk policies), site safety protocols, and photographic documentation of existing conditions before and after work.

Defect Claims and Snagging

Under FIDIC, the contractor must correct defects identified during the Defects Notification Period (typically 12 months post-Practical Completion). If the contractor fails or delays in correcting, the Employer may employ others to do the work and claim the cost from the contractor’s retention or as liquidated damages for breach.

Disputes often arise over whether an item is a defect (failure to meet contract spec) or a design insufficiency (Employer’s responsibility). Clear definitions in the contract and photographic/technical records prevent most snagging disputes.

6. Preventative Strategies and Best Practice Management

The best resolution to disputes is prevention. The following practices minimise the risk and cost of claims:

The Partnership Approach

The most effective projects foster a relationship of trust and transparency between Employer, Engineer, and Contractor. When issues arise, all parties should seek to resolve them collaboratively, with focus on the project’s success rather than blame. Early acknowledgment of entitlements—whether time, cost, or both—and timely settlement demonstrates good faith and preserves professional relationships.

7. Resolution and Expert Support

When claims cannot be resolved through negotiation, parties typically proceed through mediation, expert determination, or arbitration. The choice of process depends on the contract, the scale of the dispute, and the relationship between parties.

Under DIAC Rules (2022) and UAE law, arbitration is the standard dispute resolution mechanism for construction contracts. Arbitrators are empowered to assess entitlements, quantify damages, and award relief for delay, cost overruns, defects, and other breaches. An experienced construction claims consultant can assess your position early, prepare substantive submissions, and instruct technical experts to support your case.

Expert witness evidence is critical in construction disputes. Independent technical experts—engineers, quantity surveyors, schedulers—assess delay causation, quantum, and breach of contractual obligations. Their opinions, if credible and objective, carry significant weight with arbitrators.

The cost and duration of arbitration depend on the complexity of the dispute, the number of parties, and the volume of evidence. Well-managed claims with clear documentation and realistic positions often settle before or during early hearing stages, avoiding prolonged proceedings and substantial legal costs.

Protect Your Project from Claims Disputes

Construction claims are costly, stressful, and time-consuming. Whether you are facing a delay, a variation dispute, or a defect claim, early expert advice can mean the difference between fair settlement and prolonged arbitration. Our team of experienced consultants and arbitrators can assess your entitlements, prepare submissions, and guide you to resolution.

Book a 30-Minute Case Assessment →

Offices in Dubai · Available for instructions across the UAE and GCC