Claims?

I been involved with several claims, which have involved intensive forensic examination, of progress vs basline programmes in P3.

Biggest problem I have always has is making a fair assesemnt of entitlement based on the information availible.

Disscussion arond this would be good.

What does entitlement mean?

Entitlement means the right a contractor has based on his contract to claim for an extension of time or additional cost or a combination of both.

As a claims forensic planner, I think that I will be able to help you. What claims assistance do you require ?

Analysis of Delay and Disruption, EOT Entitlement, Programming Expert Witness, Etc.

There’s a knowledge field entirely new to me that looks quite interesting.
I wonder how feasible is it to do forensic planning in contracts were formal planning and scheduling have been neglected or even ignored entirely.

Can you apply forensics to come up with an as-built schedule where there was no real schedule in the first place? If that is so, there’s a great tool to support claims, that opens oportunities I would like to eplore. Can you enlighten me?

Provided that you have good records it is very possible to recreate an as-built schedule to be used as the basis for a retrospective delay analysis, although this can be a time consuming task. There are a number of firms who specialise in this type of delay analysis.

Sadly, where schedules and formal planning have been neglected then record-keeping is often also poor.

Try the Society of Construction Law Protocol for EOT

Very briefly - Forensic Planning is a specialist field where Construction Planners are involved in the retrospective time-related analysis of Projects, analysing the delay and disruption that actually occurred, evaluating the programme effects and deterimining who was responsible.

It involves detective type work (hence forensic), ie, researching documents and interviewing key personnel that were involved in the project, etc.

I carry out forensic examination of projects for a living. Essentially I find out what actually happened, by building an as-built programme. Then I look at the delays and when they occurred in relation to the as-built. These delays can be removed to see when the project could have been completed if but for these delays. It is quite simple really. By the way, I am offering free help, after work for an hour only at 6pm in our Wanchai office, most weekdays.

I have heavily criticised the SCL EOT protocol document, see my messages on the bulletin board of the web site www.eotprotocol.com.

A contractor’s claim for an entitlement to an extension of time (EOT) could be based on actual or theoretical delay to the date for completion. It is quite common for a contractor to claim entitlement to an EOT for say 20 weeks when the date of completion was only 15 weeks late.

The entitlement to the 20 weeks EOT would be based on an impact analysis of delays upon the planned programme. This is then used to demonstrate acceleration, as the contractor would claim that he was entitled to finish 20 weeks late, but due to acceleration measures he only finished 15 weeks late.

However prolongation costs are always based on actual and not theorectical.

The most important thing with the analysis of claims is to establish what actually happened, just as you would if investigating a crime.

I wish I could make use of your generous offer, but it´s a bit far: I´m in Colombia, South America. From what you have told me, I'm sensing I could actually offer those services to contractors needing to support their claims. I have the planning and scheduling expertise to be able to perform such analysis. What additional background should I reinforce?

I have now read some of your comments and would agree with all of what I read. The issues are not black or white but a whole range of shades of grey. i.e. complex and variable according to each situation. The Protocol was a starting point for research, although like yourself do not agree with all of what they suggest, but there is a lot in it for serious consideration. You comments no doubt, hopefully, will be considered in the final?? document.

I am pleased that someone has read my comments and agreed with most of what I have said. I have only used common sense, my 25 years experience of planning and my understanding of Projects. Hopefully, the EOT debate will continue until some more appropriate guidelines can be developed.

I am tired of delays being portrayed in model network analyses showing that this activity was delayed by 3 days,this activity for 2 weeks, etc.
It is just not that simple!

Take one day in the life of a project –
Assuming that this organised site knows what it wants to achieve that day by planning and setting targets the day or week before, so -

The work force arrives on site to work over a period ranging from say 7am to 9.30 am depending The work force is not up to full strength as some have not turned up for many reasons, so say 92% of the currently employed work force turn up.

It rains for an hour or so at 9am, this will affect production, but this will be different for each trade and possibly different for labour in the same trade.

The contractor issues various RFI’s - some urgent, some required next week or whatever.

The RE issues various verbal instructions on his site walk about at between 11am and 12noon. These verbal instructions are not confirmed in writing this day, and so the contractor is left in limbo.
The Architect issues some instructions.

The RE changes a detail at 4pm a concrete pour is consequentially missed.

Some CVI’s arrive from last week, the drawings are not updated.

The contractor requests that the drawings incorporate these changes.

Some drawings arrive at 3pm picking up a batch of VO’s CVI’s etc and need checking.

Deliveries of certain materials are a problem, tradesmen work on other work until materials arrive.

The power goes off for 10 minutes affecting several of the labour force.
ETC, ETC, ETC.

The days result is that production was down on what was anticipated

Who’s fault was it and was the contract completion date put in jeopardy ?

To Clive Holloway

I am a student attempting to write a critical appraisal of the SCL delay and disruption protocol. Your previous comments are no longer available on the SCL website. I would very much like to hear your views or anyone elses for that matter. You can e-mail me at dstabler@yearle.fsnet.co.uk. Thanks in anticipation.

Denise Stabler

I have recently joined this forum and enjoyed some of the discussions. Claims is one of the most demanding areas of Project Management I have experienced in my 25 years in this field. The overall skillset required includes knowledge of CPM systems but by no means stops there. It is possible to recreate the scenario based on host of documents, if they are available. In my experience the following documents have proven to be of great help:

Initial documents:
The Original Program in any format
Manpower and other histograms
Projected S-curves
Contract documents

During the project execution stage:
Daily reports
Monthly reports
Program updates
Actutal resource levels including manpower
Submittal & Approval Logs

Inspection Tickets on the site
Relevant Correspondence

These documents will generally provide enough data to resolve the issues.

Dear Clive if that’s what you do for living then you must be having really GOOD patience!

Sorry folks, saw this thread and thought it hadn’t been really fully answered. My answer is keep good records, more records and even some more records you never thought you’d need!!! Then you have the basis to make a claim or as I’d prefer to think - a valid entitlement to recover costs.

Andrew,

You are correct with your comment record keeping, but the basis of any claim are the facts - or factual documentation and the contract. The records only supplement and quantify the claim showing the effect in terms of time and money.

But I still agree with good record keeping.

Roger

I think this thread stinks, but will climb in tomorrow, and add my views

was enjoying my beers till you guys came along

I think claims are not the norm. try and plan without them

Roger,

Very true what you say, maybe I should have said - in the event of an entitlement arising.........

The point is that is why we are planners, ie to foresee problems, and to try and plan how to avoid them. Sometime delays cannot be avoided, then early warnings must be given and all corrective measures put in place. There should not be any unresolved issues at the end of the project, unless one or both of the parties is unreasonble.
I have been involved with a few serious claims, and found the amount of work/effort put into them out of proportion with the effort that should have been put into the projects in the first place to have avoided the claims. As for litigation or arbitration, I have never got that far. The claims was always settled as soon as the correct documentation was in place. What this tells me is that the claims could have been avoided in the first place.

Jonker

Refer to your statement that "Claims should have been avoided in the first place"

If a Contractor follows your statement but his Client is unreasonable to settle these Claims then where the Contractor go? He waves off his claims?

Claim is actually prerogative of the Contractor as per Contract as well as his profit so such submissions are made to the Client to get his genuine and contractual right either during execution or completion stage of the project.

There are very rare chances that claims have settled during execution whereas mostly the claims are settled in Final Account.

Hi Shahzad

So you use the method Price (Bid) very low and make your money on extra’s.Wrong attitude when pricing. You are one of the reason why we have so much problems in the industry with this attitude. This is unethical because you are not pricing as per the specification.

What will you do if one day you have to Turnkey a project. ????

Hi Jonker

I totally disagree with your reply and our approach to raise the Claims is not like that as you stated. Be acknowledge that those Contractors who adopt your stated way, not exist more in the Construction Industry. This is the fact.

The Claims are basically established by the Default of the Client and his additional instructions which are not envisioned by the Contractor at the time of Tender.

In addition to above the Contractor always raises his claims as per his contractual confines not over and above.

Yes, the settlement of claim may take time but there are rare chances that these are being settled during execution. Mostly claims are settled in Final Account.

Hi Shazhad,

How long have you been in this business? There is is always going to be a case for a claim, but the latest thinking in the industry is to try and avoid them where possible, by early warnings, and discussing things openly. The point being is that there has been companies who made a businees of it.

Dear all,

I am a contracts engineer in the construction industry. the situation of this discussion shows that both of you handled claims in defferent situations:

some times the Engineer as we call him here in jordan or the CA as you call him is a party that is concerned with his market reputation and causing costs that is the reason of poor drawings or defecte specs will render him non-professional, so he will keep rejecting the contractor’s claims and argue the contractor about his clear obligations and entitlements, to cover his failure hopping the arbitration later will not award the claim.

in other instances the under-estimation made by some contractors will make them try to recover some costs through claims.

this is evident and i have faced both situations

Don’t you have ongoing adjudication clauses in the contract just to prevent this Final Account problem

Peter,

I’ve been involved for contractors in lump sum EPC turnkeys for the past ten years, all of which have had bespoke contracts written for them. In only one of those contracts during that time has there been any provisions allowing arbitration to commence during the course of the project.

Prior to EPC turnkey, I was involved for contractors working in the traditional procurement system (design-bid-build). Without exception, all the clients that I came across under that system came up with any excuse in the book (and some not even in the book) to delay or prevent entitlement to the contractor, whether for extension of time, or payment for extras or claims.

With clients having the balance of power (client-friendly contract docs; contractors working on credit is a big help!) it stands to reason that they will do that - it’s just human nature. Everybody wants something for nothing.

I have not yet had the pleasure of being involved in this brave new world where both sides are in a "partnership" and talk openly about their problems. It all seems a bit touchy-feely and Dave Cameronish to me, somehow. Either that or maybe I’ve just had a hard life!


John

John
You have had a hard life

Hi Guys,

I have worked on a substantial number of projects, with some serious claims in a few instances. I have also worked on both sides of the fence. My opinion is that claims are negative for all the parties concerned. In other words, clients that have a track record of claims against them are inviting higher tender prices as they are obviously have a track record of bad information, and as such a risk to work for. Contractors with a claims record, are seen as opportunists. Managing contractors with claims against them obviously are not managing as they should.

In the recent past I have done two projects under the NEC, and have found that it brings some sanity to the problem of claims. It solves the problem of claims, being produced towards the end of the project, and issues that could have been resolved at the time of the incident, being piled up, into some massive sum, and this leads the all kinds of arguments, and as a result arbitration and litigation, which ends up in massive escalation of the original amounts involved.

The NEC allows for a constant flow of discussions, and provides many ways to resolve issues on an ongoing basis. How do you eat an elephant? One bite at a time.

Regards

Phil,
I agree. Its also I find very much industry specific. They all have different business drivers. Too many good contractors have gone bust on one or two bad contracts due to cash flow problems awaiting around for clients. They probably thought they had good arguments but in the end the banks don’t want to know.

Hi Richard,

I do not miss points, as I have been through the mill, and find claims longwinded and frustrating, never the mind I enjoy the challenge. What I am trying to say is that in my mind they are destructive to the companies that partake in them. It is much simpler to resolve issues on an ongoing basis than at the end of the project.
Like Richard says, why bankrupt contractors, when you can use them in the future, Not exactly his words, but I believe that is what he was inferring to. You answer that one yourself Richard.

Regards

Philip

I don’t agree with you Richard Rush. I think you are just trying to be controversial.
Philip Jonker is correct when he says that the NEC brings some sanity to the situation of claims. I have worked on a couple of Civils contracts under the NEC form of contract and it is the more intelligent approach to contracting, by sorting out the issues as you progress and high lighting early warnings before it becomes impossible to recover from.
Daya

I think thats why for the last 25 years the construction industry has been trying to change through a number of mechanism - better contracts being one. You could argue that it was in response to Clients perceptions, real or not of the industry rather than from any inherent sense that the industry was doing anything wrong.
I would still like some proof that the new strategies have lead to less legal involvement in the industry or have the lawyers just shifted their fee income from the back end to the front end of projects?
You must always bear in mind that Oil / Gas / Petrochemicals / Building etc industries have not gone through this sole searching and still quite like the hard nose attitudes.

I propose that a good contract is one that a competent Client make with a competent Contractor; and where one is not trying to out do the other. Each party knows what is justly expected of them and also is responsible enough to shoulder their own mistakes.
Perhaps too much to expect hey !!!!!!!!!!!!!!!!!!!
Daya

Hi guys,

My experience, over the last couple of years, suggest that claims are on the decline, and moere so where NEC is used. The point is they are an unnecessary cost to the project. It was a 90’s thing, but the last time I saw a serious claim was at least 5 years ago, and it was resolved in camera by the client and contactor without litigation.

Regards

Peter,

I agree. Working in the building and (more recently) the turnkey power plant business for the past 20 years, there are still many hard-nosed attitudes in evidence, and nothing like the NEC contract on the horizon.

I also agree that the lawyers are now increasingly infesting the front end of jobs. When negotiating terms and conditions in the US, often we see more lawyers at the table than engineers and managers - and those lawyers will almost all be representing the client side! Indeed, there is often a reluctance for contractors to bring any lawyers into pre-contract discussions, for fear of appearing too confrontational.

Certainly in the business I work in, the odds are still well stacked against the contractor.

Regards,

John

Philip,
can’t be doing too well cause the Claims Consultants and Construction Lawyers are still in business.
I think the NEC works cause you have knowledgeable clients who have a long term business interest in having a heathly industry over which they can exercise some direction. So they sacrifice any short term gains for longer term goals. If however the business climate turns the other way then would they stick to it?
Collectively this set up does produce some of the most expensive (UK) infrastructure in the world.

Hi Guys,

The project I am involved at this time does not involve the NEC, but I try and apply the same principles of transparancy, and it has an effect of settling things.

My opinion of the NEC, after having used it it on two previous projects, is that it takes some education, and re-education in a lot of cases, but in eesence it sets the baselines for non-confrontational project management. You have to be fair and understand all the issues involved.

Regards

Philip

Hi everyone, this is an intersting discussion regarding claims and their morality; it is worth remembering that in reality most projects do not end up in a dispute and an amicable conclusion is reached. I also note your comments regarding the management of projects and the use of the NEC and so on, however what happens to the contractor who receives his information late from the architect and suffers genuine delay to the project because of it. To make matters worse, the architect refuses to discuss the matter let alone award an EoT? Or the case of a gas pipeline being constructed under the NEC where due to a lack of resources, both sides agree to review the effect of the Change Orders when the job is finished; except at the end the CA/Engineer refuses any such review leaving the contractor out of pocket?

These are 2 actual scenarios under 2 different forms of contract and both featured respectable well know businesses - so what is one to do?

Fact is claims and disputes do exist and are as prevelant as they always were, they aren’t invented to keep the lawyers in the lifestyle to which they very quickly become accustomed...

David,

You are right when you say that in reality only a very small percentage of contracts end up in serious dispute.

You are even more right to point out that many disputes arise because of an unexpected action of one of the parties. The contractor contracts on the basis that the Contract Administrator will act impartially but this seem to be forgotten by many Contract Administrators!!!!!!

That leaves those where the parties actually believe that the position they’ve adopted is guenuinely right.

It woud be interesting to know what the actual percentage split between the two types was. Any suggestions?

Hi Andrew,

Interesting in deed, my personal experience is that there is probably a 60/40 split. 60% in favour of those who do not believe they caused a problem, often hiding behind the "design development" and "you were late/underperforming in any case" arguments. [As a side discussion, is it right for one party to benefit from anothers culpable delays?]

The remaining 40% tend to be those who are waiting for the contractor to actually demonstrate their case (something that many contractors forget to do) or they are waiting for a 3rd party such as an adjudicator or arbitrator to tell them to pay the contractor. This latter point is often due to the fact that the CA is dealing with public money so he doesn’t want to be seen to ’just give it away’.

What are your thoughts?

David

David,

Your side discussion was covered 35 years ago in the following quotation.

Salmon LJ, in Peak v McKinney CA 1970, held “The liquidated damages and extension of time clauses in printed forms of contract must be construed strictly contra proferentum. If the employer wishes to recover liquidated damages for failure by the contractors to complete on time in spite of the fact that some of the delay is due to the employers’ own fault or breach of contract, then the extension of time clause should provide, expressly or by necessary inference, for an extension of on account of such a fault or breach on the part of the employer. ….There had clearly been some delay on the part of the corporation. Accordingly, as the architect has not made ‘by writing under his hand such an extension of time’, there is no date under the contract from which the defendants’ liability to pay liquidated damages for delay could be measured. And therefore none can be recovered.”

Best Regards

Bryan you are correct but David is also correct.

We need to try and avoid having to thrash it out in the courts as the only sure winner are the Lawyers

But if one party to the contract justly or unjustly think they are not to blame then it ends up in Court.

Sadly, however, quite often one party to the contract may try and get away from paying for their own mistakes.

It is therefore very important to keep good records of progress through out the contract.

Some Contracts are better then others and facilitate the need to give Early Warnings of Consequential Delays when memories are fresh.

Regards

Daya

David,

The public authority point is well made. We can’t do a commercial deal with the contractor as the auditors will not like it excuse - one that is often heard. Therefore we have to have a third party decision/award - right or wrong I’m not sure, but it keeps the adjudicators busy in the UK if nothing else.

The contractor hasn’t provided us with the information!!!! Another excuse often put forward, but also often missing the point, (and sometimes the contractual obligation) that in the absence of the information the CA should still make his/her own assessment on the facts he/she has. If the contractor is then unhappy with the decision, tough, the contractor should have provided the information and only has himself to blame.

As for the side issue, it is certainly a well settled legal princple that a party should not benefit from his OWN default or breach, whether a party should be able to benefit from the OTHER parties default is alittle more complicated.

I’m thinking of condition precedent EoT notices and Employer caused delay - the contractor fails to give notice but the event leading to the delay was the Employers default and the remedy (award of EoT, etc) is covered under the contract.

The contractor is in breach of contract for not giving the notice, the Employers default caused the delay and which there would be an EoT awarded if notice had been given.

Can the Employer not give an EoT and charge LD’s even though he caused the delay or is it stalemate? Two wrongs don’t make a right as the saying goes however.

hello all

Yesterday I saw a documentary about the construction of the link between Sweden and Norway in National Geographic channel, the Project manager was happy to say that during the nine years of the project he never saw a lawyer!!!!!!


mimoune