Claims, disputes and termination: the costs you do not see

Three families of cost escape ordinary accounting. Riserve (formal claims), that is the financial claims the contractor enters in the accounting records for work, prices or charges it considers unrecognised. Disputes, in private work, which often have no codified form and live in the correspondence. And the cost of any exit from the contract, which is not a risk to suffer but an option to quantify.

Invisible item	Where it arises	When it becomes certain	How to enter it in the dashboard
Entered claim (public)	accounting register and accounting records	amicable settlement, compromise or decision	at its probable amount, "claims" line
Dispute (private)	letters, site records, disputed invoices	agreement or court decision	at its probable amount, "claims and disputes" line
Variation under discussion	unsigned form	signature or withdrawal	"variations under discussion" line
Termination	client's decision	notice of termination	not in the dashboard, but as an option in the decision note

Reading the accounting documents is the basis of everything. Measurement books, the accounting register and the SAL are described in the articles on the measurement book and accounting register and on progress payment certificates. What matters here is the effect on the budget.

The riserva is the tool by which the contractor preserves a claim. The public contracts code links it to the accounting records, and silence has a precise effect: for new rates, "where the contractor does not enter a claim in the accounting records, the prices are deemed definitively accepted" (Annex II.14 to Legislative Decree 36/2023, D.Lgs. 36/2023, art. 5(8); unofficial translation, as are all quotations in this article). For the stazione appaltante (the contracting authority), a new rate that is approved and not disputed stops being a risk and becomes a certain cost.

The reverse holds for claims that are entered. Every claim is a potential amount that the RUP (the official responsible for the project) must see and estimate. The rules on form and time limits for entering and updating claims are not covered on this page; the point, for the budget, is that a claim entered and not estimated turns a correct forecast into a foreseeable overrun.

When claims become substantial, the accordo bonario (amicable settlement) is triggered. The procedure applies when the claims entered may change the economic value of the work "by between 5 per cent and 15 per cent of the contract amount" (D.Lgs. 36/2023, art. 210(1)). The works director informs the RUP, who assesses whether the claims are admissible and not manifestly unfounded (paras. 3 and 4); the proposal, by the expert or by the RUP, is made within 90 days (para. 5) and the parties have 45 days to accept it (para. 6). Before the acceptance certificate or the certificate of satisfactory completion is approved, the RUP initiates the amicable settlement on the claims entered in any case, whatever their amount (para. 2).

For whoever holds the budget, the amicable settlement is a moment of truth. It forces the claims to be quantified, their merits to be assessed and a decision on how much to recognise. A contracting authority that has kept claims in the dashboard at their probable amount arrives at the settlement with funding already thought through; one that has kept them at zero has to find the funds late in the works.

In private work there is no codified claims procedure, but the logic is the same. The appaltatore (the contractor) who believes it is entitled to more payment asserts it, sooner or later, with a request; the client who disagrees must say so. The later the dispute is raised, the weaker it is.

The written form protects both parties. For variations, the codice civile (the Italian Civil Code) requires the client's authorisation to be proved in writing (art. 1659), as explained in the article on variations in a private contract. The client has an interest in applying the same discipline to every disagreement: dispute in writing an invoice that contains unauthorised work, have the site records note that a request remains under discussion, and never sign a SAL without comment if an item is not agreed.

The contract can do more. A clause requiring the contractor to give written notice, within a deadline, of every claim for additional payment, with its quantification, gives the client timely information and allows it to be entered in the dashboard. It is a contractual clause, not a rule of law, but it reproduces in private work the function claims have in public work.

The client can leave the contract, but pays to do so. In private work, "the client may withdraw from the contract, even if execution of the work has begun", provided they "indemnify the contractor for the expenses incurred, the work carried out and the loss of profit" (art. 1671 Civil Code). In public work, "the contracting authority may withdraw from the contract at any time provided it indemnifies the contractor" for the work carried out and the useful materials on site, "plus one tenth of the amount of the works, services or supplies not carried out", with at least 20 days' written notice (D.Lgs. 36/2023, art. 123(1) and (2)). The one tenth is calculated as set out in art. 11 of Annex II.14, not detailed here.

The true cost of termination is the sum of four items. What has been carried out, which is paid in any case; the expenses already incurred by the contractor, in private work, or the useful materials, in public work; the loss of profit, in private work, or the one tenth of the works not carried out, in public work; and the cost of the new contractor who will have to finish the work, with its price, its timescale and the interfaces with what has already been built. This last item appears in no article of law, and it is often the highest.

There are also withdrawals linked to variations. If the amount of necessary variations exceeds one sixth of the total agreed price, it is the contractor who may withdraw, with fair compensation; if the variations are of considerable size, the client may withdraw by paying fair compensation (art. 1660 Civil Code). A client who piles up variations without keeping count of the one sixth risks losing the contractor halfway through the works.

Termination should therefore be assessed as an option, not as a reaction. Before using it to escape a drifting budget, it should be quantified in the same note in which the other possibilities are compared: reducing the scope, renegotiating an item, accepting a higher forecast.

The examples are entirely fictional and simplified; their only purpose is to give an order of magnitude. The first concerns the amicable settlement threshold in public work: a works contract has a contract amount of 1,200,000 euros. The 5 per cent threshold corresponds to 60,000 euros, the 15 per cent threshold to 180,000 euros. If the claims entered may change the value of the work by 90,000 euros, the case falls within the range of art. 210 and the RUP initiates the amicable settlement. In the dashboard, the claims go in neither at 90,000 euros nor at zero, but at the amount the RUP, with the direttore dei lavori (the works director), considers it probable to recognise: for example 35,000 euros, to be covered by the sums available in the quadro economico (the project cost breakdown).

The second concerns the cost of termination in private work. A client has awarded works for a total price of 800,000 euros, excluding VAT. Halfway through the works, they consider termination in order to change contractor.

Item	Example assumption	Amount
Work carried out	measured and recorded	500,000 euros
Expenses incurred by the contractor	supplies already ordered, no longer usable	40,000 euros
Loss of profit	profit on the part not carried out, to be documented	30,000 euros
Completion by a new contractor	new quote for the remaining works	330,000 euros
Total cost with termination	500,000 + 40,000 + 30,000 + 330,000	900,000 euros
Total cost without termination	contract price	800,000 euros
Difference	900,000 - 800,000	100,000 euros

Termination costs 100,000 euros more, before any delay is counted. It may still be the right choice, for example if the contractor is no longer able to finish the work; but it should be taken knowing what it costs, not as a way of saving money.

The rule is simple: every amount claimed goes in at its probable value. Neither at the value the contractor asks for, which overstates the risk, nor at zero, which erases it. The probable value is justified in writing, with the opinion of the works director or the client's adviser, and updated at each SAL.

Three lines keep the picture complete. Variations under discussion, for requests not yet signed; claims and disputes, for contested demands; and a separate note on the exit options, updated only when the situation requires it. The full dashboard is described in the article on tracking the final cost during the works; in public work, the funding of variations and new rates is covered in the article on how the contracting authority funds variations during the works.