First Impressions of a Contractor’s Claim
I have just spent half a day reviewing a claim from a contractor on a project where I have been appointed to manage the claims and produce assessments on behalf of the Engineer. My impressions after this first review are that the contractor may very well have a valid case for an extension of time, but to a lesser extent than what was claimed. However, based on the way the claim has been presented, they do not deserve anything because their claim is inadequately expressed. The main issues are that the contractor has failed to link the cause to the effect they are claiming, and the basis of their delay analysis is founded on something that, if they had taken the time to substantiate their assertions, they would have realized was simply not true.
Aside from the fact that the contractor has not established entitlement to an award, their claim is frustrating to read and deal with—something that is hardly going to elicit much sympathy from a reviewer. It is badly organized, the narrative says a lot but doesn’t convey much meaning, and large amounts of records have been quoted without drawing any conclusions from them. Furthermore, the few substantiating documents that the contractor has included are very difficult to locate within the claim submission document.
I have a feeling that the contractor is going to receive the award they deserve based on this submission. Unfortunately for them, that won’t be much.
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It is a constant battle to marry all the necessary aspects of a claim together. Very often it is clear that A occurred which interfered with the progress of B, but it is much more difficult when assembling the cost records to match the effects to the cause. It is only a month or two later that the supplier invoices are available for the period when the event occurred and then invoices received by commercial departments are not readily associated with the event that occurred elsewhere in the organisation. It is the Claims specialist who needs to tie the effects, the delays and costs, to their cause.
A good way to do this is to create as much record as possible and as early as possible linking the ’cause and effect’. The claimant’s first action should include notes showing rough estimates of the effects arising from the event. These will then trigger the search for accurate proof when the programme updates and commercial documents become available.
For example, ‘speculative records’ created immediately could look like:
Obstuction by employer’s other contractor – event description, names and photos.
Works affected: Activity BB – Standing time resources; people, plant and overheads with first impression of the hours and costs involved.
Knock-on effects: Activity CC, DD. – slowed but not stopped – obtain record of progress before and during interference, names of involved persons, with first impressions of the hours and costs involved.
Ensure that next update of programme records the event and time effects.
Ensure that daily diaries, including those of subcontractors, are consistent in their record of the event and consequences.
The claim writer’s job starts with making sure the information is collected and connected – not just preparation of the submission.
I absolutely agree with Nic’s comments. One of the principles that we teach on our courses is that the three most important things in compiling a claim are good records, good records and good records. Contract administration systems need to be set up so that record keeping is part of the daily activities on a project. When an event occurs which is likely to result in a claim, additional records may very well have to be kept, and someone needs to trigger such actions.
Many forms of contract (the FIDIC Red Book for example) require interim claims to be submitted until such time as the final effects of the event may be fully ascertained. In an interim claim, the claimant should base what he can on substantiated facts and make a reasoned estimate of everything else. This goes along with Nic’s comment that it may be some time after the event that the final effect of delays and the associated costs may be ascertained. I am not sure that I agree that this is a ‘constant battle’ as Nic puts it, but it certainly involves quite a lot of work for those responsible for preparing the claim. Unfortunately, contractors often do not seem to appreciate that they need to ensure that the resources to manage both the record keeping and the compilation of the claim are available and subsequently find that their claims fail simply through lack of substantiation or because they are inadequately expressed.