July 17, 2018

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Careful thought: C Rigney and K Chauhan, HAL

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Christopher Rigney, HAL construction

Christopher Rigney

Claims for an extension of time with associated costs are unfortunately a regular occurrence within the Middle East construction industry. It is inevitable that a claiming party i.e. a supplier, a subcontractor, a main contractor etc. will at some point during its lifetime need to produce and submit a successful claim in order to protect itself from the imposition of damages/penalties. Furthermore, the claiming party may also wish to recover additional expenditure incurred i.e. prolongation costs, hence, the production of a claim allows recovery of the same.

We are seeing a significant increase in complex and time sensitive construction projects which are subject to more frequent budget and time overruns, mainly due to delays by others. As a result, the affected parties need to demonstrate an entitlement to recover time and costs through the production of a fully substantiated claim. However, the production of these claims can prove to be a minefield, especially when the contract provides no prescriptive guidance and with various articles, journals and books offering differing opinions, and methodologies for compiling claims which often provide inconsistent results.

Kieran Chauhan, HAL construction

Kieran Chauhan

In order for a claim to succeed, it must comply with the contract, adopt an industry standard delay analysis methodology, be accurate and consistent, and be fully substantiated through documentary evidence/contemporary records. The inadequate drafting and presentation of claims, lack of supporting contemporary records, and the inconsistent and inaccurate progress records are in our opinion the main reasons why claims are failing within the industry and have to be revised and redrafted at a later date. We are regularly appointed by construction parties to either draft a new claim document or redraft a historic claim as the submitted claim is not presented and evidenced in accordance with industry standard practice.

This submission of inadequately drafted, incomplete, and unsubstantiated claims unnecessarily inflates a claiming party’s preparation costs (which can be easily avoided by ensuring the initial claim has been submitted correctly) and may also allow the responding party to initially reject the claim, which becomes difficult to overturn at a later date.

We discuss below some of the documentation and record keeping best practices that should be considered by a claiming party when producing a claim document.

Contemporary record keeping

Many of the standard form and ad-hoc contracts used in the Middle East provide a detailed description of the records that must be kept during the currency of the project. These include records such as time specific delay notifications, notifications of a claim for costs, weekly/monthly progress reports, weekly/monthly updated programmes of work, document transmittals, and work inspection requests. Despite these requirements being embedded within signed construction contracts, we find time and again that the parties to the contract fail to adhere to such obligations resulting in the required documents not being produced and/or not being submitted. This is particularly common for updated programmes of work which are required to undertake the delay analysis, this being one of the most important and critical parts of a claim.

It is therefore recommended that the contracting party puts in place its record keeping procedures at the commencement of the project ensuring full compliance with the contract. It is common that all contracts are different, hence, it is advisable for parties to create a project specific ‘best practice manual’ for the site team with details of the contemporary records that must be submitted within any contractual timeframes, so the site team have a reference guide to protect its entitlements. Many contract management consultants offer their services before the commencement of the project to set up a fully compliant manual, which in our experience, can save the contracting parties time and cost in the long run.

Programmes of Work

The updated programmes of work are vital documentary evidence on a construction project, not just for the compilation of a claim but to provide the site team with an accurate plan of work and resources to the completion of the project. Frequently, we see construction parties failing to submit an updated programme of works, as ‘quicker’ ways of recording the progress such as in an excel spreadsheet have become the incorrectly adopted norm. Although this may ‘speed up’ the reporting process, it will undoubtedly cause significant delays in submitting a substantiated claim at a later date due to the excel spreadsheets being insufficient to prove entitlement. To avoid these issues, it is advisable that regular audits of the site documents are undertaken to ensure the progress is recorded correctly in order to produce a claim at a later date if required.

Another common pitfall that occurs when preparing a claim is the extensive number of inconsistencies/inaccuracies of dates, durations, and logic recorded in any updated programmes of work. Such inaccuracies provide the party responding to the claim with an easy justification for rejection which can delay the claims process and cause disruption to the cash flow of the project. By engaging an experienced consultant such as HAL, these inconsistencies/inaccuracies can be managed and resolved either throughout the duration of the project (i.e. monthly) or in full prior to the submission of a claim, therefore preventing possible rejection of the claim.

Recreation of site documentation

Companies should not give up on their due entitlements to time and cost if some contractual documentation is missing as methods can be deployed to remedy such issues. One example being the unavailability of contemporary programmes of work as explained earlier. Every site keeps some form of records, usually in the form of drawing logs, transmittal logs, progress reports, work inspection requests, requests for information, and other project or company specific records which can be used to retrospectively produce the programmes of work.

To give the claim the best chance of success, it is advisable to review all available documentation and agree on a strategy and methodology for the claim prior to commencing the document as every project and therefore every claim is different.

To Claim or Not to Claim?

It is always beneficial on a number of levels for a party to claim its due entitlement to time and cost. The cost of preparing a claim can be compared with the losses of not making a claim, which are almost always greater. Not submitting a claim can be a risky strategy and one that will quickly be outweighed due to the likely inclusion and imposition of substantial penalty/damage provisions within contracts.

Sometimes expending a sum of money with no guarantee of obtaining a time/cost award can be unsettling for the claiming party, hence prior to any detailed claim preparation work commencing, it is best practice to undertake a ‘Claim Viability Assessment’ which would comprise an initial audit of the available documentation and analysis of updated programmes of work. This would determine the likely success of the claim before significant time and cost is expended and allows the claiming party to make an informed decision whether or not to proceed with the compilation of a fully detailed claim.

 

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