FIDIC 2017 Employer's risk events and new claim terms

FIDIC 2017 - 15 Top Tips For Successful Construction Projects

The FIDIC 2017 red, yellow and silver forms of contract were introduced seven years ago. Similar to previous new editions, they have taken time to gain traction within the industry. However, they are becoming more widely used. We anticipate that within the next few years, they will have become the “go to” forms of contract, gradually replacing the old editions in many regions internationally. 

Before you start a project under FIDIC 2017, you might want to arm yourself with some practical knowledge. In this guide, we provide an introduction to the current FIDIC contracts. Read on, to discover our 15 FIDIC 2017 tips to help you with your contract administration and management. 

The 2017 editions of FIDIC have 71% more pages and 64% more words than the previous editions. That’s a lot of changes to get your head around!

Obviously then, the new contracts are more complicated. Good contract administration demands that users become familiar with the extra content. 

FIDIC realised that project participants were not following what was essentially advice in 1999, so the 2017 editions contain more procedures. Many of the new procedures include new obligations for the parties and the engineer. 

Use the form below to access our top 15 FIDIC 2017 tips for ensuring project success with the FIDIC 2017 contracts...

 


Impediment, delay and prevention - FIDIC

Cause and Effect: The Key to Successful Construction Delay Analysis

I’m sure that you have heard the advice that if an extension of time claim is going to succeed, the claim must demonstrate a link between cause and effect. The claim must demonstrate that the event(s) on which the claim is based affected the time for completion. Showing the impact and time involved is key.

Delayed activities may not be on the critical path. If this is the case, the delay event may consume float. In turn, this may cause subsequent activities to become closer to the critical path. But if the event does not affect the critical path and thus, the time for completion, there will be no extension of time.

Risk Allocation

The risk allocation of the contract may make the contractor responsible for the effects of some delays. If there is no entitlement to additional time in the contract there will be no extension of time.

Sometimes contractors realise towards the end of the project, that they will not complete on time. In such a case, delay penalties will likely be applied and they will incur overrun costs.

At this point, they might consider they need an extension of time. This is in contract to considering whether entitlement to an extension of time exists. Consequently, they hurriedly submit a claim for multiple delay events. They assert that all these delays entitle them to an extension of time up to the date that they completed. This is known as a global claim. In all but exceptional circumstances, it will be rejected by arbitrators and the courts and thus, by contract administrators. This is because such a claim does not demonstrate the effect of each event, either individually or cumulatively, on the time for completion.

How To Show Cause And Effect?

So how can we demonstrate a link between cause and effect in our claims? The answer is by carrying out a suitable form of delay analysis. The purpose of such an analysis is to illustrate the effect of the claimable delay event on the time for completion by using suitable programming techniques.

There are many forms of delay analysis. The selection of the most suitable method depends on several things, including:

  • The existence of suitable programmes.
  • The quality of the baseline programme.
  • The quality of the records.
  • Where the project is in terms of execution at the time the claim is being prepared.

Considering all factors is key to successful analysis. The Society of Construction Law’s Delay and Disruption Protocol gives excellent advice on this subject.

Necessary Knowledge

Delay analysis can be a complicated subject and demands suitable knowledge and skill. It is, therefore, necessary to have suitable resources available to prepare this very essential part of the claim.

If you are the person responsible for preparing the claim and you are using others to perform the delay analysis, you don't have to be a programming expert. However, you need a strong overview of the subject so that you understand the protocols, techniques and how to identify specific causes and their effects. This will enable you to check and demonstrate a number of things:

  • The accuracy of the analysis.
  • Why the particular form of delay analysis is suitable.
  • How the analysis was performed.
  • What the analysis demonstrates.

If this topic interests you, you'll be delighted to find that we now offer delay analysis e-courses. Take a look and join us to bring your knowledge up to speed.


interim claims

10 Things Construction Gets Wrong When it Comes to Claims

Inadequately expressed claims are one of the leading causes of time-consuming and costly disputes. Avoid common mistakes to ensure acceptance of claims.

In this post, we set out ten common reasons that claims end up as disputes and offer best practice tips so you can ensure you do better. Take a look at the following, have you fallen foul of them? Are you constantly looking out for them so you can avoid them?

Common Mistakes

  1. Contractors wait until the end of the project to submit claims, instead of submitting claims when entitled to, as the project progresses.
  2. Contractors include several delay events into a single consolidated claim instead of preparing separate claims for each delay event.
  3. Contractors do not give notices of claim within contractual timeframes, and notices do not contain necessary information.
  4. Claims do not contain an adequate examination of cause, effect, and entitlement to justify the claim.
  5. Claims are not adequately substantiated to prove that the claim is just.
  6. Engineers and contract administrators do not follow their contractual obligations to respond to claims and attempt to reach agreement.
  7. Both claims and responses to claims are poorly expressed, so the recipient has difficulty in understanding the claimant or respondent’s positions.
  8. Delay analyses to demonstrate extensions of time are not performed following good practice.
  9. Cost claims are poorly demonstrated and substantiated.
  10. Those tasked with preparing and responding to claims are inadequately trained and qualified.

Whilst very common mistakes, these are all avoidable. They are all things you can keep an eye out for and minimise or even eliminate to ensure project success.

If you would like to learn how to submit successful claims and achieve quick resolution on projects, take a look at our e-courses.


contactor claim strategy

Claim Strategy: 6 Tips for Contractors

If you find yourself in a position where you need to prepare a claim, you will also need a claim strategy. Good news: Our involvement in countless claims over the years means we have a long list of key things you need to think about before you decide the way forward:

The Value of the Claim

Firstly, are you entitled to additional payment? Secondly, does the amount justify the time and effort needed to prepare and submit the claim? And finally, will the submission of small claims for each and every event on the project affect business relationships?

The Strength of the Claim

Is the contractor’s contractual entitlement clear-cut? Or is the event open to interpretation by the other side? If the claim could be contested, it may only be worth submitting it if it's a high-value claim.

Negotiation Margin

In some cultures and regions, no one ever pays the first price received. Negotiation may be expected. In others, it is more appropriate to submit a strong claim based on the contractor's view of their entitlement, with little negotiation margin. You need to decide which approach to take, depending on the environment you're working in.

The Person Responsible for Responding to the Claim

Does the responding party have well-qualified and experienced resources to deal with claims? Or will the claim be examined by someone with little experience? Both scenarios will come with their own challenges. An experienced professional will quickly highlight weaknesses in the claim. They may reject or reduce the value of the claim fairly easily. In such a case, it will be necessary to produce a robust submission to a good professional standard.

A less experienced professional is likely to look for excuses to reject the claim. They may not have the confidence to make an award. You may need to force their hand by giving no opportunity for rejection. Contractors should also bear in mind that the employer may bring in experts to examine high-value claims.

Suitable Resources to Prepare the Claim

Do you have experienced resources available to prepare the claim? If not, and if it's a high-value claim, consider bringing in additional support.

Client Relationship

Claims are usually bad news to clients. As a result, it's prudent to keep your relationship in mind and how you can maintain it. This applies both to your current project and in future. Would it be a good idea to submit low-value claims? Or, would it be better to restrict claims to serious issues and ensure you only claim a fair and reasonable amount? Above all, you must convince the employer that you are only asking for what you are entitled to. Ensure you can justify and substantiate your claim.

Want to learn more about construction claims? Join one of our e-courses


FIDIC 2017 Employer's risk events and new claim terms

The Importance of Correctly Identifying Claims

For contractors, it is their responsibility to identify situations in which there is an entitlement to a claim for additional time or payment. On the employers side, identifying these situations early means they can take steps to avoid claims and make provisions for the additional costs. Consequently, it is essential for good management of projects that we are able to look at what is happening on the project and identify claims as early as possible.

So, what should we be looking for? The most frequent causes of claims are as follows:

Payment for Additional or Changed Work

On a remeasureable contract, the work is valued against agreed rates. The contractor will be paid for the work actually carried out, including any variations to the original scope of work. However, we must consider circumstances resulting in abortive work, rework or additional mobilisation of resources. The remeasurement does not compensate for these.

On a lump sum contract, a single price for the work is agreed in advance. Variation will need to be evaluated separately in order to calculate the change to the contract price. Sometimes a variation is formally acknowledged so a claim does not have to be made, but frequently, changes are introduced by instruction without acknowledgement of a variation. Consequently, submit the required notices and follow up with a claim for additional payment.

Extensions of Time

If a delay affects the agreed time of completion, contractors need to consider an extension of time. Monitoring of actual progress against planned progress is essential. As is identifying events which may have an effect on the time of completion. In either case, we must check whether the event leading to the delay is something for which the contract allows an extension of time for. If so, submit the necessary notices and follow up with a claim.

The contractor should submit extension of time claims based on when they are entitled to an extension of time. Not when they need an extension of time to avoid delay damages. Hence, identifying claims early is essential.

Prolongation Costs

Circumstances giving rise to an extension of time will often carry an entitlement to claim for additional costs of loss and expense. Submit claims for prolongation costs either with the extension of time claim or as an associated, separate claim. Put them forward as soon as possible and don't leave them until the end of the project.

Acceleration Costs

Circumstances giving rise to an extension of time will usually carry an entitlement to claim for additional costs of loss and expense. This arises from the extended period for which the contractor is obliged to maintain time-related site resources and head office overheads.

The engineer will often attempt to pressure the contractor into undertaking acceleration measures without agreeing to the increased cost. In such a case, the contractor must make their position clear. Agree the acceleration measures and the nature of the costs before undertaking any acceleration measures. Otherwise, it may prove difficult to have a subsequent claim agreed.

Disruption Delay and Costs

Disruption occurs when an event for which the employer is responsible causes the contractor to work less efficiently. This may manifest itself in the requirement for additional resources or time in order to achieve a target. The latter situation would cause delay, which could also affect the time of completion. In this situation, an extension of time would be warranted. Identifying claims like these as they occur will give the claim a greater chance of success.

When to Submit the Claim

When a claim situation has been identified, the contractor needs to submit the claim within the time period specified by the contract. This is not usually an onerous task, provided that the contractor has sufficiently qualified and experienced resources available to prepare the claim.

Don't leave claims until the end of the project and don't comprise consolidated claims for more than one event. The longer you leave a claim the less likely it is that it will be accepted.

If you're looking to know more about whether to submit your claim, check out this article. If you want to develop your understanding further, take a look at some of the courses we offer here.


cost claims, prolongations costs,

Cost Claims: 11 Tips for Success

Cost claims can be tricky...and if you want yours to be a success, there are some important principles to follow. Not only that, you need to present your claim in line with good practice. This article discusses both.

Before we go further though, I'd like to mention that some contracts and legal jurisdictions refer to “costs” and others refer to “loss and expense”. Essentially, they mean the same thing, but here I will refer to “costs”.

Principles for Cost Claims

1. The general principle for cost claims: put the claimant in the position that he/she would have been in, had the breach of contract or claimable event not happened.

2. Most cost claims are related to extension of time claims. If there is an extension of time, the Contractor will incur costs to maintain his site and head office for longer than planned. These costs are generally referred to as “prolongation costs” and form the majority of cost claims.

3. Most contracts provide that cost is actual cost incurred. In other words, money that the claimant has spent or will have to spend.

4. In light of the above, you cannot calculate costs from estimated costs shown in the Preliminaries or General Items from the bills of quantities.

5. If there is true concurrent delay, i.e., where an Employer-responsible delay and a Contractor-responsible delay occur at the same time, and both affect the time for completion, then the entitlement to claim costs for the concurrent delay period is generally negated. Why? Because the Contractor would have incurred costs for this period had there been no Employer-responsible delay, so he/she may not profit from his/her own failure.

6. In some cases, the contract may allow for recovery of profit and costs. Check your contract and the clause that provides entitlement for this.

7. Calculate the cost at the time that the cost was incurred. In a claim for prolongation costs, the costs are incurred during the time of the delay and not for the extended period. If, for example, a delay of 30 days occurred in August and the delay analysis demonstrates that this delays the time of completion by 15 days, you need to calculate the cost for 15 days of time-related costs during August.

Good Practice

1. Prolongation cost claims will be for extra site overheads, i.e., time-related resources deployed to the project during the time of delay. You need to keep contemporaneous records of resources to show that the claimed resources were deployed to the project. You need to submit these with the claim as substantiation.

2. Show actual cost with reference to payroll information (invoices, etc.). Substantiate these records and submit with the claim.

3. Calculate prolongation costs based on a cost per calendar day. This will then relate directly to the extension of time period. If you try to allow for irregular work weeks or public holidays, the calculations will get complicated, difficult to understand and any revisions during negotiations will be difficult to make. Keep it simple.

4. Present cost calculations in a clear, well-explained manner. Explain the principles that you've based the calculations on in the claim narrative. If necessary, provide further explanation in the narrative of how you've done the calculations. The idea here is that any non-financial expert reviewing the claim can understand the calculations, audit them and ultimately, agree with them.


Construction Claims, Contract Admin

Will Your Contract Admin Stand Up to Future Claims?

Good contract admin (or administration) is key to any successful project.  If a claim is to succeed, it must contain certain essential elements: Cause, effect, entitlement and substantiation.

In other words:

  1. What happened that gave rise to the claim.
  2. The dates that various events occurred.
  3. The effect of delays on the time for completion
  4. In the case of incurred costs: Are they appropriate? Are they calculated correctly?
  5. Does the contract contain entitlement to compensation?
  6. Is every statement or fact in the claim substantiated?

We should also remember that the onus is on the claimant to prove that the claim is just. It is not the respondent’s job to do this when reviewing the claim.

To achieve this, the contractor’s contract administration systems must be able to support future claims. If they are not, it will be difficult or impossible to prepare a claim that fulfils these criteria.

Contract Administration: Things to Consider

Some things to consider in this respect are as follows:

  1. Is your record keeping adequate and can the records be easily retrieved?
  2. Are important and formal records drafted so that they may be understood by a person not familiar with the project?
  3. Are notices that are required by the contract given within the prescribed time frames? Do they contain the correct information?
  4. Has a baseline programme been established? Is it prepared in line with good practice?
  5. Are revised programmes prepared when circumstances dictate?
  6. Are progress updates accurate? It is difficult to subsequently claim a delay if progress has been reported showing no delay.
  7. Do monthly reports adequately record the events, and may they be understood by a person not familiar with the project?
  8. Are daily records of resources deployed to the project being maintained and submitted to the engineer on a regular basis?
  9. Do you have adequate and properly qualified and experienced resources to create and maintain efficient contract administration?
  10. Do you have adequate and properly qualified and experienced resources to prepare your claims?

If you can answer yes, to all these questions, there is a good chance of success for your claims. If not, then you may need to reconsider your approach.

For more help with these subjects, why not consider joining one of our e-courses?


abbreviations-acronyms

Abbreviations and Acronyms: To Use or Not?

A couple of days ago, I spent a frustrating couple of hours reading a FIDIC report.

Why was it frustrating?

It was not because the report was particularly difficult to understand. It was because it was littered with so many abbreviations and acronyms.

I have a lot of experience reading contract documents, but even for me, it was difficult to make sense of.

Sure, FIDIC placed footnotes in the document to explain what the abbreviations stood for. But, the fact that I had to keep checking these disrupted the 'flow' of reading and again, made it harder to understand.Read more


construction-claim

The Cycle of A Poorly Written Construction Claim

It is no secret that poorly written construction claims are one of the main causes of time-consuming and costly disputes.

However, the dispute process often finds in favour of the claimant.

Why is this?

Let’s look at a typical claim and dispute cycle:

  1. The claimant submits a construction claim that does not include: Cause, Effect, Entitlement and Substantiation (CEES).
  2. The respondent rejects the claim because it does not prove the claimant’s case.
  3. Discussions and negotiations take place, but the parties maintain their positions.
  4. The claimant is convinced that the claim is a fair one and elevates the matter to a dispute.
  5. At this point, the claimant realises that the claim needs improvement. They consult an expert.
  6. The expert confirms that the claim is poorly written. They advise that if it has any chance of persuading adjudicators or arbitrators in favour of the claimant, it needs improvement.
  7. The claimant engages the expert to improve or rewrite the claim.
  8. The adjudicators or arbitrators decide in favour of the claimant.
  9. The respondent agrees with the adjudicators or arbitrators, and would have made an award if the claim was properly presented in the first place.

So here's a question...

Wouldn't it have been better for the claimant to submit a well written construction claim in the first place, saving all parties time and money?

Need to improve your claims writing skills? Check out our e-courses today. 

Looking to upskill your project teams? Book a call with us to discuss how we could support you. 


Justice - Avoiding Disputes and Claims

How To Avoid Disputes From the Outset

Hewitt Decipher Partnership recently presented a webinar on international arbitration. Panel members included a barrister, an arbitrator and a solicitor. They were joined by HDP employees who provide expert advice to legal professionals working on construction disputes. The aim was to look at how to avoid claims.

Whilst these professionals earn fees from disputes, the overwhelming consensus was that the best way to deal with disputes is to not have them in the first place.

So, what can we do to avoid disputes right from the start of the project?

Read more