Letters Abbreviations

When Should You Use Abbreviations and Acronyms?

I have one piece of simple advice about using abbreviations and acronyms. Whether in claims, responses, contractual letters, reports or any important communications on your project:

Do not use them….

at all…

ever!

Let’s look at a real-life example of why this is so important.

Our consultancy business, Hewitt Decipher Partnership, was recently appointed by a contractor. Our job was to prepare claims on behalf of the contractor for an extension of time and additional payment on a large project.

Part of our process is to examine the project records for evidence of what happened. We select certain documents to include in the claims as substantiation of the facts.

The Problem

We soon realised we had a problem. It was extremely hard to understand the letters, meeting minutes, progress reports, etc. The reason? They contained so many abbreviations and acronyms, it was like reading documents written in code.

Even responses to our requests for information from the contractor were confusing because of this same problem. Maybethe contractor was encouraged in this. Because, at the beginning of the Employer’s Requirements, there was a list of no less than 271 abbreviations used in the document.

I was very disappointed to note and surprised that even an organisation such as FIDIC, who purport to draft contract conditions that are easily and clearly understood by engineers, has slipped into this unprofessional practice. The 2017 editions of the various FIDIC contracts use several abbreviations including “DAAB”, “EOT”, “FPC”, “IPC”, “NOD” and “QM”. Do you know what all of these terms mean?

No?

Well, neither did I until I looked them up in the Definitions section.

Comprehension is Key

It’s so important to remember that, when drafting formal documents, firstly they should be fully understood by your opposite number on the project when he or she receives the communication in a couple of days’ time. But also, by someone such as a person in the addressee’s head office, an adjudicator, an arbitrator or a judge. These people have no prior knowledge of the project and in some cases may not be experienced in the subject matter. Peppering a document with abbreviations and acronyms that only the personnel who are intimate with the project can understand is not going to achieve the necessary clarity.

Some people, including the drafters of the FIDIC 2017 editions, mistakenly think that including a list of abbreviations and acronyms at the front-end of the document is acceptable.

I disagree. Why?

Because people tend not to read all documents from front to back like a novel, but often only need to refer and understand isolated sections. Therefore, if they come across something referred to as “PL3” in the document they will have to break off from what they are reading to search for a meaning. This does not make the reader’s job easy. It may lead to confusion or misunderstanding, which is exactly the opposite of what we should be trying to achieve.

Why Is This Happening?

So, why do the drafters of documents think that the use of abbreviations and acronyms is a good thing? I can only think that typing “PL3” instead of “Podium Level 3” saves around two seconds of typing time. The authors give their two seconds a higher level of importance than a reader being able to understand what they have typed. Well, here is a top tip for lazy typists:

If you have to refer to “Podium Level 3” many times in your document, type “PL3” in your draft. Then, use the MS Word, sorry, Microsoft Word “find and replace” function to change “PL3” to Podium Level 3” throughout the document.

For the sake of clear understanding, I will repeat the advice that I gave a the beginning of this blog:

Do not use abbreviations or acronyms - at all! - ever!

If you'd like to learn more about how to write effective documents and achieve success with your claims, check out our Construction Claims E-courses.

 


Payment for Work Not in Accordance with the Contract

A former Claims Class student asked my advice on a matter which I thought would be an interesting case study to share. The Contract conditions are FIDIC and the question around non-payment of work which was not in accordance with the contract.

Background

Each month the Engineer makes deductions in the payment certificate for Non-Conformance Reports under Sub-Clause 14.6 (Issue of Interim Payment Certificates), sub-paragraphs (a) & (b).

The Contractor does not contest the Non-Conformance Reports. They state that the defects will be rectified. A problem being that this is likely to take some time to achieve.

The Contractor is contesting the Engineers right to deduct for defects in interim certificates. These deductions are for works not in accordance with the Contract. The Employer has performance security and 5% retention, so the Contractor claims they would be put at a further disadvantage of the deductions for NCRs.

My Advice

Sub-Clause 7.5 (Rejection) provides that the Engineer may reject work not in accordance with the Contract by giving notice. Hopefully, the Engineer has issued the NCRs as notices under the provisions of this clause. If not, you may want to take a look at this blog which answers the question, "what to do if you have not submitted a notice?". For the purpose of this article, we will assume they were.

Sub-Clause 14.6 (Issue of Interim Payment Certificates), sub-paragraph (a) states that if anything supplied or work done by the Contractor is not in accordance with the Contract, the cost of rectification or replacement may be withheld until rectification or replacement has been completed.

This allows the Engineer to withhold payment for anything not in accordance with the Contract, plus the cost of rectification. Subject to the issue of non-conformance reports, the work is not in accordance with the Contract.

The Contractor's argument that he is at a disadvantage is not sustainable. They are the party at fault by giving rise to the items of non-conformance.

The retention and performance bonds are there to provide money for the Employer to complete the works if the Contract is terminated. Not to provide security against defective works.

If this topic was of interest, you may find our Understanding Claims Under FIDIC E-course useful. Click here to find out more.


Avoid Construction Disputes

How Education and Training Avoids Disputes

I don't usually have much to say about education and training or attempt to promote our Claims Class courses through our blogs. But, this month I am going to make an exception and for good reason. Recent reports demonstrate that education and training will avoid time-consuming and costly construction disputes.

HKA’s report, Claims and Dispute Causation – a Global Market Sector Analysis and ARCADIS’s Global Construction Disputes Report 2019 are both pretty scathing. Both point to a lack level of knowledge exhibit when it comes down to contractual matters and claims.

Between them, HKA and ARCADIS cite the following as major causes of disputes:

  1. Contract requirements were poorly drafted.
  2. Errors or omission in the contract documents.
  3. Contract management and/or administration failure.
  4. Failure to serve appropriate notice under the contract.
  5. Parties failing to understand and/or comply with its contractual obligations.
  6. Claims were spurious, overinflated, opportunistic and/or unsubstantiated.
  7. Level of skill and/or experience.

ARCADIS say that the average dispute value globally in 2018 was around US$20M and the average length was 17 months. Dr. Nael Bunni advised at the FIDIC conference that the cost of arbitration is between $150,000 and $200,000 per day. So if an average arbitration lasts 10 days, we are looking at a cost of  $1.5M to $2M to resolve the dispute. The Dispute Review Board Foundation calculate that this may be 10-15% of project value. It doesn't take a genius to work out that if a project ends up in dispute, any profit margins will be eaten up by the dispute itself.

If we revisit the 7 major causes of disputes listed above, we can see that none of these relate to design, engineering or construction problems. All seven relate to poor contract management and administration. In fact, ACADIS’ report says that “Owners/Contractor/Subcontractors’ failure to understand and/or comply with contractual obligations became the top cause of construction disputes for 2018”.

So, what can companies and individuals do to fix this problem?

Well, I would suggest that addressing the last item on the list i.e. “Level of skill and/or experience” would fix all the other problems.

How can we ensure then, that companies and individuals increase their levels of skill and experience? Well, that's where investing a small amount of money in staff education and training will pay dividends. It doesn't take long for increased skills and experience to lead to increased efficiency. This in turn will show up on the bottom line of a project. Individuals who can demonstrate to a company that they have a high level of skill and experience are assets. Individuals will command more senior positions and higher salaries than those without such skills.

Now for the Claims Class promotion that I promised earlier. If you are looking for training for yourself or your team, there are a number of ways we can support you:

  • delivering education and training to companies and individuals:
  • training on the FIDIC forms of contract, claims, contract management and contract administration:
  • training through in-house training workshops, public workshops and self-study e-courses;
  • deliver courses that are created, presented and tutored by experts, not only in their specialist fields, but in training and education;
  • have courses to suit all levels at prices to suit all pockets and budgets;

We have trained hundreds of satisfied construction professionals. If you want to become one of them, take a look at our e-courses or in-house training options or get in touch today to find out more about our personalised courses.


COVID-19

COVID-19: Options for Contractors, Engineers and Employers

In my last blog, I discussed the effects of COVID-19 under the FIDIC Red and Yellow Books. Particularly whether contractors are entitled to claim for an extension of time and/or costs.

My advice was just a few weeks ago. At that time, some contractors were anticipating delays. Firstly caused by supply chain problems associated with plant, goods or materials sourced from China. Secondly by the travel restrictions which were in place. My thoughts were that,  the Contractor will be entitled to an extension of time provided he can demonstrate delay to the Time for Completion and/or the incurrence of Cost. He may also be entitled to claim for additional payment for Cost incurred.

But since then things have changed drastically. Some countries are on total lockdown with people having to stay at home. Many countries have imposed travel bans. So the effects of COVID-19 are now extreme and likely to last for a long time.

Reconsidered Options

As a consequence, I thought it would be sensible to examine the options available to the Parties as the situation  develops further. Again, I shall look at the provisions of the FIDIC Red and Yellow Books.

Suspension

The Employer may consider that if the Contractor is not able to proceed with the Works for the foreseeable future, it may be sensible to suspend the Works. This may minimise any cost which may become due to the Contractor. Sub-Clause 8.8 (Suspension of Work) allows the Engineer to issue a suspension instruction. The Contractor would then be obliged to protect, store and secure the Works against deterioration, loss or damage. This would effectively ‘mothball’ the project until the Employer decides to lift the suspension. In a case of suspension, the Contractor would be entitled under Sub-Clause 8.9 (Consequences of Suspension) to an extension of time and the payment of Costs including mobilisation and demobilisation costs. The Employer must weigh up the options here.

However, sub-Clause 8.11 (Prolonged Suspension) allows the Contractor to terminate the Contract if the suspension affects the whole of the works and the suspension period continues for more than 84 days. We are unsure how contractors will react as and when things return to normal and operations may be resumed. Presumably, many of them will be willing to pick up where they left off.

FIDIC does not provide any options for the Contractor to suspend the Works under the circumstances arising from COVID-19.

Termination

There are two clauses in FIDIC which give the Employer entitlement to terminate the Contract. Sub-Clause 15.2 (Termination by Employer) allows the Employer to terminate because of various acts of default by the Contractor. In my opinion, it cannot be said that inability to progress the works in the circumstances of COVID-19 is a default of the Contractor. This is therefore inapplicable.

Sub-Clause 15.5 (Employer‘s Entitlement to Termination) however, allows the Employer to terminate for his own convenience by giving 28 days’ notice. Nothing can be sensibly predicted at the moment. But as things progress, some employers will simply decide not to proceed further with the project, or at least not for some considerable time.

My earlier blog suggested that it is uncertain whether COVID-19 constitutes a Force Majeure event under FIDIC. If the Parties agree that it does, Sub-Clause 19.6 (Optional Termination, Payment and Release) provides that if the Works are prevented from progressing for a period of 84 days or for multiple periods of 140 days by reasons of Force Majeure, then either party may terminate the Contract.

Sub-Clause 19.7(Release from Performance Under the Law) provides that ‘if any event or circumstance outside the control of the Parties arises under the Law which makes it impossible or unlawful for either or both Parties to fulfil its or their contractual obligations … the Parties shall be discharged from further performance…’.  This may become applicable in circumstances whereby governments have introduced measures  which havemade further performance impossible. It then becomes a further reason for termination by either party.

Finally

The circumstances arising from COVID-19 have never been experienced before, or at least not within my - long! - lifetime. They are drastic and far reaching. Whilst I have given my opinion on the applications of the FIDIC contracts to the situation, this has been from a purely contractual point of view. In my opinion, the FIDIC contracts do not really envisage such a situation.

That said, in a situation as serious as this, the Parties must think outside the box of the contract. It is important to find ways to work together to safeguard the personnel involved. Comply with government rules and regulations and seek ways to manage the project to the best abilities of both Parties. The ability to maintain progress and complete on time may well be out of the control of both Parties. Contractors may be expending substantial additional costs. They no doubt will suffer from cash flow problems and will be powerless to control this. In short – both sides of the contracting fence will undoubtedly suffer. In my opinion, it would be unfair for either Party to attempt to gain any advantage from the situation.

Don’t forget that, provided both parties are in agreement, contracts may be amended at any time. Despite what the contracts say, I would encourage all involved to seek to reach agreement on a course of action. Ideally one which will be the least harmful to the parties and the project.

Enjoying articles from Claims Class? Join our mailing list and receive new articles straight to your inbox or learn more through our e-courses, available at basic, intermediate and premium levels.


Coronavirus and Construction - Is the Contractor Entitled to Claim?

 

The global hot topic this month is definitely the coronavirus. It's affecting many construction projects.  Labour, materials, plant or equipment are coming from China (or other affected countries) and supply has been delayed. So what do you do if you're a contractor in this situation? Are you entitled to make a claim?

Well...it depends on your particular contract, but possibly.

I know that this is a bit of a lawyer’s answer, but it really does depend on several things. Let’s however, have a look at what the FIDIC Red and Yellow Books, 1999 Editions, have to say on the subject.Read more


FIDIC Amendments and The Golden Principles

We have all seen it. We receive what we assume is a FIDIC form of contract. But when we examine its contents or the Particular Conditions, we find it has been subject to amendments and changed considerably. FIDIC amendments we often see include:

  • Clauses struck out, usually those that give the contractor rights and remedies.
  • New clauses appear which are often punitive toward the contractor.
  • The remeasurable Red Book changes to a lump-sum contract.
  • Time-frames may have been reduced for the Contractor’s actions and extended. Alternatively, time-frames vanish altogether for the Engineer and Employer’s obligations.

Added to this, the changes and amendments are often poorly drafted and the final version contains ambiguities and conflicts.

So what we end up with is not what FIDIC intended. In short, it does not do what it says on the tin.

Employers and Engineer’s make these changes in an attempt toRead more


Case Study: In-House Training for Government Employees in Africa

As well as delivering online e-courses, we offer in-house training for companies. We were approached by the government department responsible for roads and highways in an African country. The department was experiencing several problems related to claims and wanted to train their in-house staff on how claims should be managed effectively. The problems were:Read more


Claims Class

How to Manage and Minimise the Submission of Spurious Claims

The Claims Class blog has attracted loyal readers over the years. We get lots of comments as well as questions on issues that our readers are dealing with on their projects. And this often gives me inspiration for new articles. A reader recently told us that he spent a lot of time dealing with inadequate claims. He asked how he could effectively manage and minimise the submission of spurious contractor's claims. So here are my thoughts...

Consultants need to spend a lot of time and effort to manage and respond to contractor's claims. So it's worth making sure that you spend this time working on justifiable claims. Don't waste time reviewing and responding to claims where the contractor has no entitlement, or to those that have not been submitted in an appropriate manner.

Remember that the onus is on the claimant to prove the case. Most contracts require consultants toRead more


Top 10 Tips for Effective Letter Writing

One of the things I notice when I review the records to prepare a claim, review claims on behalf of the respondent, or review particulars put forward in a dispute, is the poor standard of letter writing. This ranges from “could have been better” right through to “I have no idea what this letter means”. If your letters fall into these categories, you are not doing yourself or your company any favours. In fact, you could be doing considerable harm. This blog, therefore, contains my Top 10 Tips for effective letter writing.

Read more


construction claims responses and determinations

The Engineer's Responses and Determinations: What Should be Included?

Earlier this year I presented a CPD talk to RICS members in Dubai on the topic of Engineer’s Responses and Determinations. I usually like to kick things of with a poll and I asked the group the following questions:

How many people have experienced a situation where the Engineer does not respond to a claim within the contractual time-frame? Almost everyone confirmed that they had.

How many people have experienced a situation where the Engineer’s response has done little to resolve the claim? Again, almost everyone confirmed that they had.

How many people have experienced a situation where the Engineer’s response has caused the matter to escalate to a dispute? Over 50% of attendees confirmed that they had.

How many think that failures of the Engineer to carry out their contractual obligations on claims is helpful to projects? No one thought that this helped projects.

This is clear feedback from RICS members that the Engineers often do not perform their obligations. This has a detrimental effect on projects.

So, what should Engineers be doing to help projects when responding to claims? Well, as usual, the contract provides the answers, so let’s have a look at what the FIDIC Red Book has to say on the subject.Read more