CLAIMS

(Read Turner & Turner, 1999)

• How they arise

• Types of claim
• Methods of evaluation
• Case study on claim under PWD 203A
(10/83)

Claims - How they arise

• Grounds for • Employer in breach –
entitlement set out the provisions
regarded as being
broken supported by
– Employer in breach? facts and records
• Employer to make
– Payments to be made payment – set out the
by the employer under relevant term and the
the contract procedures to be
followed

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 Claims - types

• Claim for damages

• Claims emanating from contract clauses
• Claims by sub-contractors
• Global claims
• Quantum meruit

Damages
• Usual remedy for • Case example Hadley v
breach of contract is Baxendale (1949)
… 2 parties made a contract
by way of un- which one of them has broken,
liquidated damages the damages the other party
ought to receive… should be as
• Court or arbitrator such as may fairly and
decides on the basis of reasonably be considered either
arising naturally… or to have
– Defendant broke the been contemplated by both
contract and parties at the time they made
– Actual loss was the contract… (in Major and
suffered Ranson, 1980)

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 Claims emanating from contract
clauses
• Expressly provided in • Contractor need not be
the contract concerned with
• PWD 203A (10/83) showing breach
Clauses: • Contractor must
• 5(d) adhere to the
• 24 procedures set out in
the contract clauses
• 44
• 45(d)

Claims by sub-contractors
• Follow similar • Refer to sub-contract
principles that being provisions
applied to main • Include those claims
contractors that the sub-contractor
• Sub-contractors claim has against the
against main employer but the claim
contractors must be made by the
main contractor on his
behalf

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 Global claims
• Where causes of delay • A situation whereby
and / or disturbance costs are calculated
were lumped together with reference to a
and one overall delay delay but not
and / or disturbance individually
(with costs) was apportioned between
claimed… (Turner, two or more causes of
1999, p246) delay
• Poor record keeping??

Quantum meruit
• … means as much as • 4 conditions
he deserves – a – Work done but no express
reasonable sum. agreement as to price
– Express agreement to pay
• A method of payment reasonable price
where a contract does – A contract done where both
not exist or that the parties believe to be valid
terms of payment are but in fact is void
not appropriate given – One done based on request
by one party but no express
the conditions / contract… eg. Letter of
circumstances intent (Turner, 1999, 157)

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 Quantum meruit
• In situations where the • Also posible in
contractor is prevented claimed for war
from completing the damages where the
works, a quantum contractor recoved the
meruit may be claimed cost of preparing his
(Loder v Slowey tender (William Lacey
(1904) (Hounslow) Ltd v
Davis (1957)

Methods of evaluation
• Establish validity of the claim:
• Principle
• Basis of a claim
• See that procedures have been followed as
outlined in the conditions (eg. Cl. 5(d), Cl.
44 and Cl. 48)
• Proper documentations

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 Methods of evaluation
• 1 Preliminaries (1)
– Average monthly value
Total preliminaries less items not related to time
contract duration
– Criticism; based on the thoughts of the
estimator, not actual costs

Methods of evaluation
• Preliminaries (2)
– Average monthly value (actual costs)
Actual costs of preliminary items related to time
contract duration
– Criticism; better than method (1) but involves
complex calculations

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 Methods of evaluation
• Preliminaries (3)
– Actual costs of preliminary items for the
duration in question
– Criticism; near accurate but complex
documentation and requires good discipline in
keeping all records, vouchers, time sheets, etc

Methods of evaluation
• 2 Plant (loss of production & prolongation)
– Hire charges (or internal charges)
– Maintenance
– Supported by invoices, etc
– Include fuels, oils, and consumables
– Define the period in question
– Use average daily or monthly costs over the
period in question?

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 Methods of evaluation
• 3 Labour (loss of production &
prolongation)
– Look at wages
– Look at other benefits (costs) due
– Calculate average per man / daily or monthly
– Value = period in question x average cost per
man per day or month

Methods of evaluation
• 4 Fluctuations
– Follow special provisions to the conditions of
contract
– Otherwise fluctuations may have been catered
for in the calculations of labour, plant and
materials related to the prolongation using
actual costs

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 Methods of evaluation
• 5 Head office
– That part of the costs that does not related
directly to a specific project
– Running costs; rent, taxes, electricity,
telephones, insurances, maintenance,
secretarial
– Staff; Directors, Chief QS, PM, design staff,
technicians, etc

Methods of evaluation
• Head office (1)
– Simple percentage
– Take total of 1- 4 and apply a percentage to
cover head office costs
– The % may be as allowed in the tender
(seldom) or actual rate at the time of making
the claim

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 Methods of evaluation
• Head office (2)

– Tender allowance made during tender (seldom)

Head office allowance X extended duration

Contract period

Methods of evaluation
• Head office (3)
– Look at actual costs of overhead (running and /
or staff involved) related to the project in
question
– Involves detailed investigations
– Difficult to justify unless large sums of money
are involved

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 Methods of evaluation
• Head office (4)
– Hudson’s

Head office & profit(%) x CS x Delay period

100 Contract period

The % allowed during tender (seldom)

Methods of evaluation
• Head office (4)
– Emden’s

– Head office % actual x CS x Delay period

100 Contract period

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 Methods of evaluation
• Head office (4)
– Eichleay’s

– Head office total x Final ac x delay period

All accounts Actual period

Methods of evaluation
• Head office (4)
– Use of formulae for loss of profit earning capacity and
for the recovery of general office overheads
– Tate & Lyle v GLC (1982); it was accepted that general
office overhead were recoverable but proof of actual
costs was required
– Whittle Builders Co Ltd v Chester-le-Street District
Council (1985); formulae is acceptable; allowed
Emden’s but rejected Hudson’s.

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 Methods of evaluation
• 7 Financing charges
– Cost of the provision of capital sums by the
contractor
– Related to rate of interest and other charges

Presentation
• Factual with supporting documents
• Properly labeled under appropriate heading
• Reference to contract clauses
• Adherence to procedures
• Thorough investigation
• Do not exaggerate
• Calculation methods clearly shown
• Project specific – do not generalized
• See yourself as the person receiving the claim!!

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 Disputes
Why?

• General; adversarial, poor communication, fragmentation

• Client; poor briefing, changes, inteference, late payments
• Consultants; inadequacies in design, incompetence, poor
coordination
• Contractor; inadequate site management, poor planning,
poor quality of works, delayed payments to subbies, poor
coordination

Issues for reducing disputes

• Clarify responsibilities
• Proper risk allocation to those able to
handle such risks
• Look for cooperative procurement systems
– single point / partnering?
• Quality culture

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The ideal scenario:

All drawings, specifications

Bills of Quantities complete;

All parties appointed;

All documents ready before

work starts;

So that everyone knows

exactly what to do…

(Sir Basil Spence, in AQUA,81)

But in life, and in construction projects can we
even aim at the ideal?

Council of Imperfection:
(a) Avoid problems
whenever possible without excessive
expenditure of resources;
(b) Accommodate problems
when (a) is not possible, accepting some
disturbance as inevitable;
(c) Resolve any disputes
which arise out of the compromise of (b) as
smoothly as possible

Turner & Turner (1999)

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 ADR
• Generally
– Arbitration
– Litigation
• ADR
– Conciliation
– Mediation

See provisions in PAM 98 Clause 34-35)

ADR comparison (Ashworth, 2001, p54)

Factor Litigation Arbitration ADR

Place/conduct Public, unilateral Private, bilateral, Private, bilateral

compulsory
Hearing Formal, judge Formal, arbiter Informal, 3rd
party
Representation Legal Legal Legal if
necessary
Resolution Imposed by Judge Imposed by Mutual
arbiter
Outcome Win / lose Win / lose Satisfactory

Time / costs High / High Uneconomic Economic

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