I recently presented our Construction Claims training course to a government department in Africa. As part of the practical nature of the course, we asked the attendees to complete an assignment to test their knowledge. When grading the assignments, it became clear to me that certain important principles were often misunderstood. I therefore thought it would be worthwhile to replicate them here for the benefit of our Claims Class community.

Principle 1: Incorporating Changes at Tender Stage

Question: How should changes to tender drawings (issued through a tender addendum) be incorporated into the contract documents?

Sometimes, during the tender process new information or errors come to light or the scope of work changes. Often tenderers raise queries which are addressed and clarifications are issued to all the tenderers.

The tenderers then price the work based on the revised information. This information must subsequently be incorporated into the contract documents. The way to do this is not to simply include the tender addendums or responses to requests for information as supplementary documents. to the correct way is to incorporate the information by changing the contract documents to reflect any changes during the tender period. This will avoid confusion, ambiguities and possible contention as the project proceeds.

Principle 2: Measuring Variations on a Remeasurable Contract

Question: On a remeasurable contract, how are variations taken into account?

Under a remeasureable contract the whole of the works are remeasured. The contractor is paid based on the actual quantities provided which are valued at the contract rates and prices. The contractor will be paid on the basis of the remeasured works – whether the quantity of work increases or decreases.

The remeasurement will therefore include any changes brought about by variations.

Principle 3: Measuring Variations on a Lump-Sum Contract

Question: On a lump sum contract, how is the Contractor compensated for variations?

If a variation is instructed on a lump sum contract, the works affected by the variation must be measured and evaluated separately in order to calculate the value of the varied works. This value will them be added to or omitted from the contract price.

Principle 4: Costs Associated with Extension of Time Claims

Question: Should costs associated with an extension of time be based on the resources being used during the time of the delay or the extended period?

A claim for prolongation costs is a claim for actual time-related costs incurred as a result of the delay. This means the costs that have been incurred during the period of the delay and not the costs incurred during the extended period. The following illustrates the principle:

• Contract period 1 January to 31 December
• Period of compensable delay – 30 days during July
• Effect on the critical path and the completion date – 20 days until 20 January, Year 2
• Prolongation costs incurred – 20 days during July.

The costs must be time related costs. Typically they would include site management and admin, time-related labour, site establishment, non-productive plant and equipment, insurances bonds and guarantees and head office overheads,

It is essential to substantiate the claim with detailed records of the resources deployed during the time of delay and cost records.

Principle 5: Preliminaries

Question: May the preliminaries or general items be used to calculate costs?

Most forms of contract allow for payment of ‘cost’ or ‘loss and expense’ for compensable events. Cost is defined as actual cost incurred by the claimant. Therefore, they may not be derived from notional estimates such as those included in the preliminaries or general items sections of the bills of quantities.

Principle 6: Notices

Question: Why are notices usually a contractual requirement?

Notices are a contractual requirement to formally advise parties of events that may affect their rights, obligations, and the contract’s performance. They serve as a trigger point for specific procedures, such as claims or variations. Correctly used, they help prevent disputes by allowing transparency and proper communication.

In most contracts (e.g., FIDIC, JCT, NEC), notices are required to notify the employer or project manager of potential delays, claims, or changes. These notices often include strict timeframes. This allows the affected party sufficient time to investigate, respond to, or mitigate the impact of the event.

Failure to issue a notice within the prescribed period can result in loss of entitlement to claims, even if the contractor has a valid case. This is because there must be a fair opportunity to address the issue, minimise costs, or adjust the project schedule accordingly.

Ultimately, notices promote good project management. They ensure timely communication of key events, preserving contractual rights, and reducing the risk of disputes.

Principle 7: Cause and Effect

Question: What must be linked to the cause of a delay in order to demonstrate entitlement to compensation?

Linking cause and effect in a delay claim is essential to establish entitlement to an extension of time and prolongation costs. A delay claim must demonstrate a clear causal link between the delay event (cause) and its impact on the project’s critical path (effect) and thus the completion date.

Without this link, a contractor’s claim may be rejected on the grounds that the event didn’t actually cause any delay to project completion. Merely stating that a delay event occurred is insufficient; the contractor must demonstrate how the event impacted key activities and prevented progress on critical tasks. This is usually achieved by way of a suitable delay analysis.

Establishing cause and effect establishes the claim is valid, credible, and defensible. It allows the employer to assess liability fairly. Clearly identifying the responsible party and impact on the schedule and will help to avoid or resolve disputes.

Principle 8: Time Impact Analysis

Question: A time impact delay analysis compares two programmes to calculate the effects of a delay event. What are the two programmes used in the comparison?

Time Impact Analysis is a prospective method of delay analysis. It is used to assess the impact of a delay event on a project’s critical path and completion date. The process is as follows:

1. Update the current programme for progress for the date immediately before the delay and note the predicted completion date. Progress before the delay may have affected the completion date, but this needs to be allowed for.
2. Insert a fragnet to illustrate the delay into the updated programme. Ensure that the appropriate logic links are included and note the predicted completion date including the delay.
3. The difference between the two completion dates is the number of days extension of time caused by the delay in question. This should be added to the prevailing completion date to calculated the revised date.

This method is favoured for claims because it takes into account progress before the delay. It only calculates the effect of the delay which is the subject of the claim.

A time impact analysis is most effective when used in real-time, during the project, to assess ongoing delays. It provides objective evidence of whether a delay justifies an extension of time. It will also quantify the duration of the extension based on the actual impact on the project schedule.

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