E-Courses

Q&A: Contract Administration for Claims

In partnership with the CIOB, Claims Class is running a series of monthly webinars on construction claims. The webinars are based on our Construction Claims e-courses and workshops and have attracted between 150 and 300 attendees per session.

At the end of each webinar, we invite questions and send attendees answers to any questions that we do not have time to address during the webinar. I thought that this would provide some useful insight to our blog readers, so the following are questions and answers from the webinar on Contract Administration for Claims.

Question 1

Question: Would it constitute a claim event if the Engineer, within a reasonable time frame (3 months), fails to review and respond (approve/disapprove or comment) to a Variation for additional cost and time submitted pursuant to an Engineer’s Instruction and after the Contractor implements the change on-site?

Answer: You have not explained what exactly you submitted, so I am going to assume that this consists of an evaluation of the additional payment and extra time required due to the instruction. I am also going to assume that this is a lump-sum contract.

While you may not have named it as such, effectively this is already a claim for an extension of time and an adjustment to the contract price. It would have helped if you had submitted the evaluation as a formal claim, because if you had done so, the Engineer would have an obligation to respond within the time frame stipulated in the contract.

Question 2

Question: The variation’s first approval is mainly for the cost impact, and it is clearly stated that the contractor will submit a separate claim for the time impact. In that case, when submitting the updated programme to the Client/Employer, do we need to show the time impact of the said variations even though the EOT has not yet been assessed by the Engineer?

Answer: If you have submitted a claim for an extension of time, it would be sensible to include any projected delays within your updates. This will firstly show that the completion date has been affected by the delay event and secondly, put the Engineer under pressure to respond to the extension of time claim and to formally set a revised completion date.

Question 3

Question: I would like to know about the time-barring factor for claim notices. As per the contract, the Contractor is required to provide notice to the Employer within the stipulated time for a claim. Is the Contractor still entitled if they have not provided the notice on time?

Answer: We will deal with notices in detail in an upcoming module, but on strict contractual grounds, if submission of the notices is a condition precedent to entitlement, failure to do so will remove any entitlement to make a claim (if your contract is FIDIC, refer to Sub-Clause 20.1).

There may be legal arguments to counter this in civil law jurisdictions, but this is not always a certainty. My advice is to always comply with the notice requirements contained in the contract.

Question 4

Question: What if the dates have elapsed before the programme has been approved?

Answer: Sorry, I don't understand the question. What dates? In a forthcoming module, we will deal with narrative writing, and one of the things that we will discuss is to always ensure that a reader with no prior knowledge of the circumstances will be able to understand the points being made.

Question 5

Question: Can we record this session as CPD for RICS?

Answer: We have allocated 1 hour of CPD to this session. However, you will need to check with the RICS regarding their policies around CPD hours and whether they will accept online webinar training as part of your formal CPD record. I suggest that you submit your certificate to the RICS when you submit your annual CPD record and see what they say.

Question 6

Question: Are there any golden rules for subcontractors submitting claims against main contractors?

Answer: We will deal with claim submissions in upcoming modules, and everything that applies to a contractor submitting a claim to an employer will apply equally to a subcontractor claiming from a contractor.

Question 7

Question: If the Contractor submits a programme update which is commented on by the Engineer, can the programme update be used by the Contractor as part of a claim, or would the Contractor have to use a revised programme update in their claim?

Answer: It depends on the reasons for the Engineer’s comments. For example, if the comments were related to inaccuracies in the update, it would be better to correct the update and resubmit it so that an accurate and agreed record exists. If the Engineer’s comments were not valid, I would record your disagreement and state the reasons. It would, however, be proactive if both parties discussed the matter and agreed on the update contemporaneously, as this would avoid any future contention if it was subsequently used in a claim.

If you need to include an update that has not been agreed within your claim, you would need to explain exactly why you consider it to be a true record within the claim.

Question 8

Question: In practical terms, how does the signing of the contract documents take place? i.e., as good practice, which party should initially collate the tender documents for signature by both?

Answer: I would like to reiterate what I said in the webinar—the tender documents are not the contract documents. The contract documents should contain any changes and amendments that occurred during the tender and negotiation periods.

There is no contractual requirement (in FIDIC at least) for preparation and signature, but in practice, it is usually the Engineer who collates the contract documents and arranges for signature by both parties. If the Contractor notices any errors, conflicts, or ambiguities within the documents when they are issued for signature, it is at this stage that they should draw them to the attention of the Employer and Engineer and request that they be resolved.

Question 9

Question: While off-topic, does retrospective and prospective analysis for an EOT claim give two different answers?

Answer: Yes, this is likely because a prospective delay analysis will be based on best estimates, whereas a retrospective delay analysis will be based on actuals. An example of a prospective analysis would be where a delay is associated with a delivery of a piece of equipment or the like for which a delivery date has not been finalised.

This is why FIDIC requires contractors to submit interim claims until such time as the final effect may be ascertained.

Question 10

Question: How often is the contra proferentem rule referred to in claims?

Answer: Osborn’s Concise Law Dictionary offers the following definition of “contra proferentem”: ‘The doctrine that the construction least favourable to the person putting forward an instrument should be adopted against them,’ where “instrument” is defined as ‘A formal legal document in writing’. Simply put, this means that the drafter of the document had every chance to produce a clear and unambiguous document. Consequently, if any mistakes, ambiguities, or conflicts exist in the document, they must be interpreted in favour of the other party. This is often used in claims where conflict or ambiguity exists in the contract documents.

Question 11

Question: FIDIC 1987 requires the Engineer to provide their consent to the Contractor's Baseline Programme submitted under Clause 14. What is the difference between 'consent' and 'approval'?

Answer: It has been held in several legal cases that “consent,” “approval,” “no objection,” and the like all have the same meaning. Any attempts by Engineers to try to absolve themselves of any responsibility by using non-specific wording are therefore fruitless. Be aware, however, that many forms of contract contain provisions to the effect that approval or consent, etc., does not absolve the contractor from performing their contractual obligations.

Question 12

Question: If the contractor couldn't meet the submission of the programme by the specific date as mentioned in the contract, and there are some activities that have elapsed in the programme during the submission, should those activities be adjusted to reflect the true site condition?

Answer: The initial (baseline) programme should reflect the intentions of the parties at the time that the contract was entered into, even if it is prepared several weeks after commencement. It should therefore not contain any post-contract events.

If events have occurred post-contract, then these should be captured in a revised programme once the baseline has been agreed.

Question 13

Question: Would email correspondence and Minutes of Meetings (MOM) be regarded as contractual documents? My concern is that many Engineers tend to reject MOM as evidence for claims.

Answer: Neither are contract documents. Such documents, however, are contemporaneous records that could be used to substantiate a claim. If the minutes of meetings have been accepted as being contemporaneously accurate, there is no reason for them not to be used in support of a claim, and it would be unreasonable for the Engineer to argue otherwise.

Question 14

Question: Is there a maximum timeline within which the baseline programme needs to be approved? Which programme in the meantime would the contractor use for their EOT claim?

Answer: FIDIC (1999) states that the Contractor should submit their programme within 28 days and allows the Engineer to give notice if it does not comply with the Contract. If no notice is given within 21 days, the Contractor shall proceed in accordance with the programme. Consequently, if no notice is given, the programme would be a suitable one on which to base a claim.

Proactive contract administration would be to write to the Engineer after the 21-day period has expired to confirm that, as no notice has been given, you are proceeding in accordance with the submitted programme.

Question 15

Question: Can a claim be rejected if notices have not been issued?

Answer: Under many forms of contract, yes. FIDIC, for example, makes the submission of notices a condition precedent to entitlement. Failure to submit notices is one of the most common errors that contractors make and may be fatal to claims.

I will repeat what I said in answer to a previous question. Contractors should always submit the notices that are required by the contract.

Question 16

Question: Since Minutes of Meetings are acceptable for substantiation, what do we do in a case where the parties disagree with the conclusions of such meetings? For example, if the main subject matter expert was not present in the meeting and later disagreed with the minutes’ conclusions.

Answer: If the contents of the minutes were recorded as being inaccurate, then they could not be used to substantiate a particular point. Good contract administration would include a statement at the end of the minutes requiring any disagreement to the minutes to be sent in writing within a certain period; otherwise, the minutes would be regarded as a true record. If comments are received, then the minutes should be reissued in case a correction is necessary and agreed upon. Alternatively, the disagreement should be recorded.

Question 17

Question: Can we fix a logic that makes no sense in the baseline but can be corrected later during the progress of work?

Answer: Yes, you can. Common sense says that errors should be corrected. The error should, however, be drawn to the attention of the Engineer, and then the correction agreed upon and recorded to avoid any future conflicts or misunderstanding. Problems occur when contractors don't admit to their mistakes and try to change things without advising the Engineer.

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by Andy Hewitt