How to prepare for those claims

by Michelle Nelson
 
As we come into 2007, a large number of projects are nearing completion and it seems that many contractors are starting to think about how well or badly they will have done when the money is balanced in the final account. It is also often the time when contractors think more seriously about whether to pursue any claims under the contract – be it for additional works, extensions of time, or prolongation costs.
 
However, as we have said on many occasions, this is really not the best time to start thinking about this issue. Proper thought should always be given to proper claims procedures at the outset of a project and then followed as the project progresses. We are often asked to give advice in relation to the question of what can be done in circumstances where a contractor has missed the various deadlines in the contract for giving notices of claims or providing subsequent particulars.
 
Clearly, there are ways to improve a contractor’s position where he has not complied with the requirements of the contract for bringing and substantiating claims. But of course, the easy answer is to ensure that contractors get their practices and procedures in place from the outset to ensure that notices and particulars are submitted at the appropriate time and in the appropriate form.
 
In this article I will set out a few tips on ensuring your procedures are in place to maximise recovery in the claims process.
 
The first task on any project should be for somebody to take the contract and review it carefully to see what events and matters give rise to a potential right to claim under the contract and what the various requirements/triggers are in making a claim.
 
We generally recommend that clients create a system for dealing with claims, progress and costs. We find that it can be very helpful to set out in table form the various matters which give rise to a potential claim and then the various contractual requirements for making those claims and also pinpoints who on the project is responsible for ensuring that it is done.
 
Procedures should then be put in place to ensure that all issues are followed up properly for bringing notices for delays, additional costs, keeping and submitting particulars of delay and cost updates, progress reporting and updated programme requirements.
 
We also recommend to clients that they create pro-forma letters for notices and provision of particulars, which can simply be copied and pasted onto a new document each time you need to send a notice. At the same time, it is important to make sure that those working on the project know what types of records should be maintained in order to make a convincing claim for additional time or money.
 
Before any of this, however, it is crucial to understand the types of events and matters which could give rise to a claim under the contract – late provision of design information, designs, late possession of the site, additional works and unforeseen ground conditions, for example. It is important to ensure that those involved in the project recognise when such events occur and then ensure that the triggers are acted upon.
 
In terms of time claims the first thing to ask is whether the event in question actually delays completion of the project. If not, the event may entitle the contractor to additional payment but not to an extension of time. Likewise, some events may have a delaying effect on completion of the project but will not necessarily entitle the contractor to additional payment – for example, where there are other concurrent delays that are the responsibility of the contractor. Equally, some events may disrupt the contractor’s ability to carry out the work in question in as efficient a manner as he anticipated at the time of tender – perhaps making it more costly than he thought – but don’t actually delay the works. This would be a disruption claim. It is therefore crucial to understand the nature of the claim that is being made to ensure that it is properly brought under the contract and the proper requirements are met.
 
In terms of records for time claims, it is important to ensure that as many of the following as possible are kept in relation to each project in order that they can be used to substantiate any claims to be brought – dated photographs, site diaries, updated programmes, record sheets showing who was doing what, where and when, minutes of meetings, full details of any instructed variations, not to mention full correspondence.
 
Claims for time-related costs tend to be both harder to substantiate and also easier to knock-down than claims for costs arising out of additional works. In essence, a claim for prolongation costs will comprise the additional costs incurred as a result of having to be on site for longer as a result of delays caused by others. These could be for the project as a whole or could be for specific activities/paths in the works. It is therefore essential to ensure that such costs are capable of being broken down on an individual activity basis as far as possible to ensure that they can be tailored accordingly depending upon the nature of any claim being made.
 
Finally, and whilst this might appear rather onerous when after all any contractor’s priority is to get the job done, it is important to remember that if a contractor’s records are better than those of the employer, or the project management team, (and they know it) you are less likely to end in dispute. In circumstances where a contractor has clear and convincing claims based upon easy to follow documentary evidence, it is difficult for an employer to comfortably reject a valid claim for cash or time. And above all, remember – if you don’t ask, you don’t get!

Construction Week