International Journal of Civil Engineering and Technology (IJCIET)

Volume 9, Issue 7, July 2018, pp. 1370–1377, Article ID: IJCIET_09_07_144

Available online at http://www.iaeme.com/ijciet/issues.asp?JType=IJCIET&VType=9&IType=7
ISSN Print: 0976-6308 and ISSN Online: 0976-6316

© IAEME Publication Scopus Indexed

DEVELOPMENT OF PROTOTYPE CLAIMS

MANAGEMENT SYSTEM TO MINIMIZE
DISPUTE IN INFRASTRUCTURE PROJECTS
WITH DESIGN BUILD CONTRACT
Kemala Hayati, Yusuf Latief, Ahmad Jaka Santos
Civil Engineering Department, Universitas Indonesia,
Depok - 16424, Jakarta, Indonesia

ABSTRACT
The success of a construction project depends on the cooperation among the
contractor, consultant, and project owner. Different perception among these parties
that leads to conflict will turn into dispute when it is not managed properly. Disputes
in the construction surely have a major impact on the project implementation such as
costs and time, while the problems and disputes may arise from conflicting opinions
among stakeholders on various aspects, both on the design and construction. It is
undoubtedly that without an efficient system in managing conflicts and claims,
disputes among parties will continue. Thus, it is necessary to have an integrated
claims management system consists several phases in the project implementation, i.e.
the phase in which the project has not been implemented, when the claim and dispute
has occurred, starting with risk allocation and its prevention, contract management
strategies, administrative processes and claim documentation, and dispute resolution.
The system is intended as a communication platform among owners, planners, and
contractors, to develop an automated and flexible mechanism based on the web that
will be used by practitioners, in this case the contractor and owner, as guidance in
implementing the project especially on infrastructure projects with design build
contract. The implementation of this claims management system will assist in reducing
the occurrence of disputes and thus improving the construction projects performance.
Key words: Claim, Dispute, Risk, Contract Management, Resolution, Web-based
system.
Cite this Article: Kemala Hayati, Yusuf Latief, Ahmad Jaka Santos, Development of
Prototype Claims Management System to Minimize Dispute in Infrastructure Projects
with Design Build Contract. International Journal of Civil Engineering and
Technology, 9(7), 2018, pp. 1370-1377.
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 Kemala Hayati, Yusuf Latief, Ahmad Jaka Santos

1. INTRODUCTION
Basically, a construction project has a binding contract that is created to minimize the
occurrence of a conflict and therefore a proper contract is required to allocate risk among
owner, contractor and consultant. Different perception among these parties that leads to
conflict will turn into dispute when it is not managed properly. Dispute is one of the main
factors that prevent the successful completion of a construction project hence requires a claim
process. As with the work change, construction claims can arise from various points. There
are many causes of claims, but mostly on the allegation of one party's actions in contracting
has caused the claimant to suffer a loss. Nevertheless, lack of knowledge and experience of
the owner in managing the contract, does not specify in details of project specification to be
carried out so that the service providers are not well informed about contract documents,
ambiguous or unclear contractual content, and claims that are not well received, all in all may
lead to a construction dispute [2]. The prevention and early detection of claims requires a
comprehensive management, thus improvement of irregular projects’ documentation and its
arrangement into regular systems will have a significant impact on the prevention and control
of claims. It can also however increase the awareness of all project members. Hence, a claim
management guideline is needed with which prevents the evolvement of claim to dispute [6].
Without a proper system, even a modest-small conflict can easily lead into a serious dispute
which simultaneously affects the other projects and thus one of the main factors preventing
the successful completion of construction projects [3]. Nevertheless, the success of a
construction project is also highly depends on effective claims resolution. The resolution
process is closely related to the success of a construction project and also to the relationship
among parties involved in the project [7]. Regarding to that, information technology (IT) is
now often applied in the construction industry as a tool to reduce problems that arise during
project implementation. The IT improves coordination and cooperation between companies
participating in construction projects leading to better communication practices. Other
advantages include improvement of the document quality and speeds of work, better financial
control and communication, simplicity and quick access [5]. The system is integrating the
formal qualitative model which further transferred into a computer simulation.

2. INFORMATION AND COMMUNICATION TECHNOLOGY

SUPPORT FOR CLAIMS MANAGEMENT
To develop a web-based claims management system, a system framework and prototype is
designed as the initial step of the system development. The internet in this regard is the best
technology that facilitates collaborative work in the construction projects as well as the key
for improvement in the global construction business and it is applicable as a communication
platform that helps for faster and more effective information transfer enables new
opportunities for its development [8]. The development of information and communication
technology (ICT) provides construction claims management the solutions to develop a web-
based system, which allows users to access information in the form of conceptual framework,
prototype and end user requirement but literally does not explain the stages of the claim
management process in details [9]. [1] Developed a Microsoft Access database management
system documenting and analysing claims for additional payments and time for completion of
construction projects. However, there is no function-feature available for supporting
documents that can be accessed in the systems that is critical for claim substance. In addition,
the data base system application is limited to a place/office where it is installed because it
does not support access over the internet. In the other words it does not support web-based
capabilities. Related to this, there have been techniques developed to manage claims by
utilising information and communication technologies (ICT) which discusses in details the

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 Development Of Prototype Claims Management System To Minimize Dispute In Infrastructure
Projects With Design Build Contract

findings about web-based claims management system design [9]. [4] introduced a very
systematic approach in preparing claim using cause mapping and dynamic systems.

3. RESEARCH METHODOLOGY
In generating the idea to an information system, some research questions were formulated.
Methodology applied in this research begins with primary and secondary data collection in the
form of questionnaires and infrastructure project data with the design build contract. Based on
literature study, expert validation involves representatives of experts, or experts in the field of
legal and project management experts and contractors both from practitioners, government
and academia. Furthermore, the questionnaires distributed to respondents from several
construction service companies. The findings analysed using Homogeneity Test, Validity
Test, Reliability Test, Chi Square Test, Relative Importance Index (RII) Analysis, Descriptive
Analysis, ISM Analysis (Interpretative Structural Model) - Pair-Wise Comparison. The results
of the study suggested risks register, risks management plan, standard operating procedures,
and checklists and database of project data to support in running the system. Furthermore, it
will be integrated and developed into a web-based information system.

3.1. Conceptual Framework of Claims Management System

This study tries to develop a claim management system into an information system as
guidance for contractors in preventing claims and disputes based on risk management,
contract management strategies, administrative processes and documentation and resolution
that are efficient and effective. It started with the identification of risks in the process of
planning (design) and the process of implementation (build) considered as the root of the
problem of claims management applied. A comprehensive approach literally will be helpful in
the process of problem solving towards solutions of dispute. Based on the theoretical review,
research applied, investigation to the real phenomena occurred, and case studies which can be
consolidated to the concept of claims management and verification of data to be generated
and analysed, it then generated to a conceptual framework that will be explored further into a
system.

Figure 1 Schematic Design for Claim Management System

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 Kemala Hayati, Yusuf Latief, Ahmad Jaka Santos

The content of this information system features checklist, data information, procedures
and communication flow which consist of claims management system that is developed from
the phase before the claim, the phase when the claim occurred and when the claim become a
dispute. The information system framework is designed to manage construction claims,
improve efficiency of contractors’ claims, and support project success, as well as lead to
sustainable development of the construction industry by developing web-based system that
can be accessed online via the internet. Hence, the information flows among parties involved
in the project can be updated in timely manner. The scenarios of the conceptual framework of
the system shown in Figure 1.

4. RESULTS AND DISCUSSION

The issue of claim and dispute in the construction project requires an effective information
system which applicable and efficient as its answer to the problems. Disputes literally arise if
the proposed claim cannot be resolved, while claim occurs due to ineffective management of
conflict, and conflict emerges when construction risks are not shared equally. The prevention
and early detection of claims requires a comprehensive management, thus improvement of
irregular projects’ documentation and its arrangement into regular systems will have a
significant impact on the prevention and control of claims. It nevertheless can also increase
the awareness of all project members. Filling claims also requires some supporting evidence,
certain details to be attached, procedures to follow, and needs to be submitted within
prescribed time frame. This is often unrealised due to inefficient document management
system and incompetent managers in overseeing the entire process. Implementation of proper
administrative system and claim documentation will ease the claim process and the claim is
expected to be accepted by service users without dispute. The result of this research is a
system prototype of an integrated claims management system in managing claims with the
help of information system to design a web-based construction claim management system,
which further will be used by practitioners. In this regard the contractors and owners as
guidance in executing the construction project, particularly on infrastructure projects with the
design build contract.

4.1. System Architecture and Operation of the Prototype System of the Web-
Based Construction Claims Management System
4.1.1. Risk Identification and Prevention
A preventive guidance is useful to help service providers prevent the escalation of claims to
disputes. The preventive guidelines can be prepared through stages of: (i) Identifying potential
risks that may occur at each stages of the project; (ii) Determining the cause of each of the
potential risks based on prior experiences, if the risk has not occurred or finding the root
causes of the risks when it has or will occur; and (iii) Make a list of preventive actions that is
possible to apply to reduce or eliminate the causes of the claim. Project managers, owners and
engineers will check the system against risks that will occur during project implementation.
Should there is possibility of a risk to be occurred then the system will notify for prevention.
At the project implementation starts, practitioners can identify risks that might arise in the
future and how to avoid the risk. They can also review the standard operating procedures
(SOPs) during the design and construction phase of a project which will be and is being
implemented, hence to be prepared for risk management plan and risk registers. This feature
also discuss about design build contractual checklist, list of field investigation, and
contractor’s project review checklist. All of these forms are to be filled by contractors.

4.1.2. Contract Management Strategy

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 Development Of Prototype Claims Management System To Minimize Dispute In Infrastructure
Projects With Design Build Contract

In identifying claims, it is however necessary to understand the scope of the contract and
terms of the contract, hence acknowledged when some activity arises that lead to changes in
scope or terms which require contractual adjustment. In this information system, the contract
management strategy provides a guideline and checklist of each stage in terms of contract,
namely: (i) Contract planning; (ii) Contract formation; (iii) Contract administration; and (iv)
Contract monitoring, whereas each of that has its own risks in each sub activity in the
contract. Based on the research findings, there are four high risk factors from the most
influential sub-activities to the dispute: (i) Prepare Detail Engineering Design (DED); (ii)
Signing contract; (iii) Arrange price quotation; and (iv) Obtain early information about the
project. From the point of these four high risks factors then determined the follow-up of its
causes, preventive action, impact and corrective action. The system will provide overview in
the form of inputs, processes and outputs that must be executed by stakeholders to follow
including items to be completed to avoid the risks and dispute in the project. The system also
provides the communication flow in performing contract management.
4.1.3. Claim Administration and Documentation
To avoid disputes that may occur due to the changes, it is literally important for the
contractors to file a claim in accordance with the specified steps and under contract
conditions. The documented and in written procedures of the claim management system is
crucial to the process of the construction project implementation, especially on a complex
project (Chovichien and Tochaiwat, 2006). There are five indicators that must be considered
by the contractor in making project claims to the owner, namely: (i) Claim identification; (ii)
Claim preparation, (iii) Claim presentation; (iv) Claim administration; and (v) Claim
documentation. Claims administration strategy is determined by a managed information
system that can provide access to the necessary documents. Documenting and evaluating
claims, and preparing documentation strategies thus having a good documentation system is
hence crucial to be done by contractors in terms of claims administration. This nevertheless
can be realised by storing the relevant information/instructions in writing and accurately.
Thus, the contractor must have a standardised information and instruction to follow during the
construction period. In the claim documentation strategy, the contractor is must have and hold
the tender and contract documents on which provides information for them prior to project
implementation. The contract document is then to be of the utmost importance document that
the contractor must have as it explain and justify the rights and obligations of parties
involved, the general terms of the contract that describe the contents of the contract, the
contractual terms specifying the contract details. In this administration-related information
system, the system will then contribute to the standard operating procedures (SOPs) that must
be fulfilled by the contractor when filling claims to the owner. The documents that have to be
stored in the database so that claims can be accepted by the owner such as: outgoing mail and
project entry, conditions and specifications in the contract, initial and updated project
schedules, field notes on labour, materials and equipment, photographs and videos of work
progress. It is also can be added with comments and meetings documentations.
4.1.4. Dispute Resolution
Broadly speaking, the success of a construction project is also highly depends on effective
claims resolution. Alternative dispute resolution can be executed with several methods
including negotiation, mediation, consolidation, arbitration, litigation, and through Dispute
Board. This study tries to provide procedures at the level of arbitration and litigation.
Arbitration is the settlement of disputes in which the disputing parties should appoint the
arbitrator of the arbitrator body through a form of contract. There are 14 stages in the
arbitration body with three processes that considered have the dominant risks, namely:
decision, examination, and arbitration request, that will be improved on the preparation of

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 Kemala Hayati, Yusuf Latief, Ahmad Jaka Santos

procedures and communication flow, as well as the risks that may occur in each phase of
arbitration. The arbitral decision is highly depends on the competence of the arbitrators. Lack
of evidence in the documentation form may alter the outcome of the decision. Thus, the
system database should incorporate the relevant data of the project. A preventive action
checklist to be taken to reduce the risk of the construction disputes in Arbitrage will also be
included in the system. The whole system will improve institutional performance by
accelerating the trial process and will not bring impact to the project by reducing costs and
time for the disputing parties. In the process of dispute settlement through litigation, the
system is designed in order to minimise the time and costs. The system will be designed in the
form of a communication flow and its procedure will be applicable at every stage of the trial,
covering: (i) Preparation stages of registration, filing and invocations electronically; (ii)
Stages of the trial, in which parties involved can access the file discussed through available
electronic devices; (iii) Post-trial stages, that is the process for further legal process and or
submitting a copy of the decision. The system will be integrated with all parties, such as
judges, clerks/substitute clerks, bailiffs/substitutes, and the litigants along with their
respective legal counsels, as well as to provide notice and reminder to either party on the date
of hearing or other important matters. With regard to the Civil Procedure in its preparation or
trial registration begins with the plaintiffs register through the website. After obtaining an
account, the plaintiff will be guided by the system regarding the legal counsel and suit
registration. The plaintiff will then be able to upload the required supporting documents to the
system.

4.2. Operation of the System Prototype

The prototype of the web-based construction claim management system is developed based
on end-user requirements identified based on the analysis and research results. Furthermore,
the display for its interface is designed afterwards. The results of the analysis and software
development are then stored in the computer server to be available for further access. The
result of the development in the claim management information system is to identify the claim
based on the risk of the prevention measures, to review the contract management strategy
starting from contract planning stage, contract formation, administration contract and contract
closure. This information system also presents how the claim process in the form of
administration and documentation of claims and its procedures (SOPs). With regard to the
claims that have been disputed, there will be procedures (SOPs) available at the level of
Arbitration and Litigation. The content and features of this information system is the
checklist, information of data and procedures, and communication flow consisting risk
identification, contract management (contract management strategy), documentation and
administration of claims and dispute settlement process. This web-based information system
can be accessed online via the internet so that the information provided for the parties
involved in the project will be available on time. The development of the project management
information system uses the most common waterfall model. While the developed web-based
application is using HTML and PHP as its programming, the MySQL is used as the database
server. The feedback from potential users utilised as contribution of improvement and
development of the information system, thus applicable in the system realisation. Figures
below in the form of screenshots show the interface of the system application inside the
network browser. This will be explained in detail in subsequent section.

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 Development Of Prototype Claims Management System To Minimize Dispute In Infrastructure
Projects With Design Build Contract

Figure 2 Screenshot of the page for Risk Register and Prevention of Claim

Figure 3 Screenshot of the page for Contract Management Strategy

5. CONCLUSIONS
The construction industry is literally very vulnerable to changes and claims. At the
circumstances where the contract conditions as mentioned above; the phase of project
implementation has started at the time of the project design is still on-going, there are frequent
substance changes in the phase of project implementation or different interpretations/point of
view which previously agreed by the parties that may cause disputes which then lead to the
project claim. Web-based construction claims management system is basically a development
and improvement of the knowledge management into an application system based on research
processes and the needs for positive contribution to the current problems and to ease the
management of the construction contracts in a more systematic ways, hence helps in reducing
human errors. To sum up, the system is designed to support claims management among
contractors and owners to avoid the possibility of dispute in the project implementation. To
prevent disputes that may occur due to project changes, it is crucial for the contractor to file a

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 Kemala Hayati, Yusuf Latief, Ahmad Jaka Santos

claim as the specified steps accordingly, and under the contract conditions. All of this can be
managed properly through this web-based claim management system compared to the
conventional method. Hence, the system improves efficiency and effectiveness of claims
management. All the documents will be well-contained in the developed administration and
documentation system. The developed system in its application nevertheless is not limited to
projects with the design build contracts type only. Whereas it is potential to be developed for
the projects with conventional contracts such as in (i) Documentation and claims
administration; and (ii) Dispute resolution process, however, in the (iii) Risk identification;
and (iv) Contract management, may be slightly different thus needs further studies and
adjustment. The developed system is believe to has major contributions to the construction
industry for the purpose of minimising disputes, hence prevents significant bad impacts to the
project such as time and costs overrun, thus improves project performance and future
employment relationships (Hossam, 2014). Other advantages of the developed system it can
also reduce human errors with regard to claims administration, transparency, concise and
systematic records keeping, guideline and media training for owners, consultants and
contractors, as well as other features incorporated in the system.

ACKNOWLEDGMENTS
The authors would like to thank to Research Grant of Doctoral Dissertation (TADOK) of
Universitas Indonesia for the funding in this research with contract No.
1370/UN2.R3.1/HKP.05.00/2018.

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