Contractors! Are Your Claims Responded to Correctly?

EC Harris’ (now Arcadis) Global Construction Dispute Report has, for many years, cited inadequately expressed claims as being one of the top five causes of disputes in the construction industry.

Although the reports do not specifically mention it, I suspect that inadequately and unfair determinations should also be somewhere near the top of this list. This is because, over and over again, attendees at our courses complain that their claims have not been responded to either fairly or in a meaningful way.

So, what is the problem?

If we look at the FIDIC forms of contract as being fairly typical of the widely-used forms of contract, we can see that the Engineer has the following obligations when responding to claims:

• Respond to the claim within 42 days – Sub-Clause 20.1 (Contractor’s Claims);
• In a case of rejection, respond with detailed comments – Sub-Clause 20.1 (Contractor’s Claims);
• Include sums that the Engineer considers to have been reasonably substantiated as being due in interim payment certificates – Sub-Clause 20.1 (Contractor’s Claims);
• Consult with each party to attempt to reach agreement – Sub-Clause 3.5 (Determinations);
• Make a fair determination in accordance with the Contract – Sub-Clause 3.5 (Determinations);
• Give notice to parties with detailed particulars – Sub-Clause 3.5 (Determinations).

It should be noted that the above are obligations, which means that if the Engineer does not fulfil them, they will place the Employer in breach of contract. In other words, this is a serious matter, so why do those responsible for administering the contract frequently not comply with them?

If you are a consultant responsible for responding to the contractor’s claims, what should you do to comply with your obligations? If you are a contractor, what are your rights when your claims are dealt with incorrectly?

Firstly, the Engineer should review the claim and come to an assessment that is in compliance with the contract. They should then meet with the parties to explain their findings and to allow the parties to provide additional information or particulars and to express their own points of view. If necessary, the Engineer should revise their findings to take into account any additional information received. Finally, they should issue detailed particulars of their assessment of the matter so that both parties may fully understand how they have reached their conclusion.

It may be necessary to repeat some of the above steps after the assessment is revised, but by doing so, this will bring the parties closer together, and hopefully, agreement will be reached. In such cases, the Engineer has done a good job.

Lastly, it is my firm belief that the Engineer’s assessment should be prepared for the benefit of both parties and should be adequately explained and reasoned to such an extent that both parties will be convinced that if they raise a dispute, it will likely fail.

If this article has been useful, you’ll find our Perfect Claim workshop essential. Learn to ensure each claim document you prepare is perfect. Avoid costly pitfalls.