Consultants and Solicitors

THESCIENCEOFPRESENTINGCLAIMS
INTRODUCTION Claims arise on many construction projects. A great deal of emotion and anxiety is wasted by parties to a constructiondisputebecauseclaimsareoftennotfullyandfairlydocumentedandproperlypresented.The purpose of this paper is to provide practical tips in organizing, documenting, negotiating and resolving constructionclaims.Awellorganizedanddocumentedclaimhasafargreaterchanceofsuccessinconvincing acontractpayorthatpaymentisfairandreasonableinthecircumstances. REQUIREMENTSOFASUCCESSFULCLAIM Many contractors harm their credibility in providing verbose, complicated, emotionally charged and over reaching claims without addressing the primary requirements for a successful claim. These include the following(1)(2)(3)(4)(5)(6). Recognizewhenapotentialclaimarisesandprovidetimelynoticeoftheclaiminaccordancewiththeterms ofthecontract; Determinethefacts; Establishentitlement/identifytheapplicablecontractprovisionorlaw/establishliability; Establishcausation; Calculatedamagesinaccordancewiththecontract;and Negotiateoradjudicatetheclaim. 1. RECOGNIZE A POTENTIAL CLAIM AND PROVIDE TIMELY NOTICE OF THE CLAIM IN ACCORDANCE WITH THECONTRACT Claimsariseonaconstructionprojectformanydifferentreasons.Frequentlytheprospectofmakingaclaim isnotrecognizeduntilsomeconsiderabletimehaspassedsincetheeventsarosewhichgaverisetotheclaim. It is quite common that at the commencement of construction, both parties wish to remain in a non adversarialrelationshipsofrequentlyfactsorcircumstanceswhichmaygiverisetoaclaimareignoredwith subsequent far reaching consequences. No one likes to give notice of a claim at the early stages of a constructionproject.Ittypicallycreatesanadversarialrelationshipandapolarizationofthepartiesinterests. Thisisthetimehoweverwhenmostclaimsarise.Issueswithrespecttositeaccess,adequacyoftheplans andspecifications,changesinthescopeoftheworkandimpedimentsfromutilities,etc.allariseatornear thebeginningofconstruction.Failuretoprovidenoticeofaclaimatthistimewillprecludethepartyfrom raisingitsubsequently. Themainreasonsfordisputesarisingonaconstructionprojectare: PROFFESSINELS1


Consultants and Solicitors I.General a)Adversarialnatureofcontracts b)Poorcommunicationbetweentheparties: i)Communicationonsite;and ii)Understandingtermsofcontractandexpectationsoftheparties. c)Proliferationofsubsidiarycontractsandwarrantiesincludingthosewithconsultants. d)Fragmentednatureoftheindustry. e)Contractualdocumentation. f)Tendersystemsandgovernmentpolicyontenderingencouraginglowtendersfollowedbyclaims. g)Inabilityorreluctancetopay. h)Erosionofcontractadministratorsroleasquasiarbitratorincontracts. i)Knockoneffectofthirdpartyinterests. II.Consultants a)Designerrors. b)Designinadequacies. c)Lackofappropriatecompetence. d)Failuretodefinebrief. e)Failuretodefineconditionsofengagementandfees. f)Delayinsettlingclaims. g)Lateinformation. h)Incompleteinformation. i)Ambiguousspecifications. j)Variationsandlateconfirmationofvariations. k)Lackofcoordinationofinformationfromdifferentsources. l)Undercertifying. m)StatutoryAuthorityrequirements. n)Briefingclientonimplicationsofcontractandbuildingprocess. o)Checkingcontractorsprogramandmethodstatement. p)Uncleardelegationofresponsibilities. q)Inexperience. III.Client a)Poorbriefing. b)Expectationsatvariancewithcontractdocumentation. c)Changesofmindduringconstruction. d)Changestostandardcontractconditionsandadditionalnonstandardconditions. e)Poorfinancialarrangementsleadingtolatepayments. f)Rigidbudgets g)Reluctanceofpublicbodiestoreachdecisionswhichmightbecriticized. PROFFESSINELS2


Consultants and Solicitors h)Interferencebyadministratorsoutsidethecontractprocess. i)Interferencebyclientincontractualdutiesofthecontractadministrator. IV.Contractor a)Inadequatesitemanagement. b)Poorprogramming. c)Poorworkmanship. d)Disputeswithsubcontractors/suppliers. e)Latepaymentofsubcontractors/suppliers. f)Deliberatemanufactureofclaimspremeditatedoratconclusionofcontract. g)Coordinationofsubcontractors. h)Unforeseenitems. V.Subcontractors a)Termsofsubcontractand/ormismatchwithmaincontract. b)Coordinationofdesigninputinnondesignmaincontracts. c)Failuretofollowconditionsofcontract. d)Inabilitytosubstantiatecostsattheappropriatetime. VI.Manufacturersandsuppliers a)Failuretodefineperformanceorpurpose. b)Failureofperformance. Thelongerapotentialproblemorclaimisallowedtogoon,themorelikelyitistoescalateandlesslikelythat thematterwillberesolvedwithoutadispute.Anearlynoticeofclaimhastheadvantageofavoidingsurprise and enables the parties at an early stage to consider solutions to avoid and minimize the impact of any potentialclaim. Timelynoticeofaclaimiscriticaltotheclaimsultimatesuccess.Manycourtauthoritieshaveheldthatthe failuretoprovidetimelynoticeofaclaimtotheotherpartytotheconstructioncontractprecludesanyclaim fromsubsequentlybeingadvanced.Thisappliestobothpartiestotheconstructioncontract.Thepurposeof timely notice is to provide the other party with an opportunity to assess the circumstances to determine whetherornotthereisanalternatemethodofdealingwiththeproblemsoastoavoidthecostsassociated withaclaim.Thelackofnoticeprejudicestheotherpartyspositionandthecourtswilltakestepstodeprive theclaimantofanyclaimsadvancedwithouttimelynoticeeventhoughtheclaimmaybemeritorious. Contracthasmanyrequirementsfornoticeforclaims.Theseincludethefollowing: I.Changes Ifacontractorproceedswithworkthatisinadditiontotheoriginalscopeofworkunderthecontractwithout aChangeOrderorChangeDirective,thenitisrequiredtoprovidenoticetotheownerofitsrequirementthat PROFFESSINELS3


Consultants and Solicitors aChangeOrderorChangeDirectivebeissued.Iftheownerrefusestoprovideanotice,thenthecontractoris requiredtoprovideaNoticeofIntentiontoPerformtheWorkunderProtestinordertopreserveanyrightto aclaim.

II.ConcealedorUnknownSiteConditions If the contractor discovers subsurface or other physical conditions at the place of the work which are materiallydifferentfromthoseindicatedinthecontractdocumentsorthoseordinarilyfoundtoexist,then the contractor is required to provide notice in writing to the owner of such conditions no later than five workingdaysaftertheconditionswerefirstobserved.

III.Delays Ifthecontractorisdelayedintheperformanceoftheworkbyanactoromissionoftheowneroranyonefor whomtheownerisresponsible,orbyanactorasaresultofaneventforwhichtheownerisnotresponsible, thenthecontractorisentitledtoanextensionoftimefordelayifnoticeinwritingoftheclaimisgiventothe consultantnolaterthantenworkingdaysafterthecommencementofthedelay.

IV.OwnersRighttoTerminatetheContract Anownerisentitledtoterminatethecontractasaresultofthebankruptcyorinsolvencyofacontractoronly afterprovidingnoticeinwritingofsuchterminationtothecontractor.

Ifthecontractorneglectstoprosecutetheworkproperlyorotherwisefailstocomplywiththerequirements ofthecontracttoasubstantialdegree,andiftheconsultantisgivenawrittenstatementtotheownerthat sufficientcauseexists,thentheownermaynotifythecontractorinwritingthatthecontractorisindefaultof itsobligationsandinstructthecontractortocorrectthedefaultin fiveworkingdays immediatelyfollowing thereceiptofsuchnotice.Ifthedefaultisnotremediedinfiveworkingdays,thentheownerisatlibertyto terminatethecontractorcorrectthedefault.

V.ContractorsRighttoTerminatetheContract If the owner is adjudged bankrupt or is insolvent, or completely failed to perform his part of contractual obligations, the contractor may terminate the contract after giving notice in writing to the owner or its trustee.

Iftheworkisstoppedorotherwisedelayedforaperiodof30daysormorepursuanttoanorderofacourtor other public authority, and if such order was not the fault of the contractor, then the contractor may, by noticeinwritingtotheowner,terminatethecontract.

Ifthecontractorwishestoterminatethecontractforownercauseddefault,thenthecontractorisrequired toprovidenoticetotheownertocorrectthedefault.Iftheownerfailstotakestepstoremedythedefault, thenthecontractorisfreetoterminatethecontract.

VI.DisputeResolution If a dispute arises between the parties, the consultant is the initial arbiter of the dispute. A party is conclusivelydeemedtohaveacceptedthefindingoftheconsultantunlesswithinspecificworkingdaysafter PROFFESSINELS4


Consultants and Solicitors receiptofthefinding(insomecases)thepartiessendanoticeinwritingofthedisputetotheotherpartyand theconsultant.Therespondingpartyisrequiredtosendanoticeinwritingofareplytothedisputewithin specificworkingdaysafterreceiptofthenotice. Afteraperiodofafewworkingdaysfollowingreceiptofarespondingpartysnoticeinwritingofareply,the partyshallrequesttheprojectmediator(ifsomebodyisthere)toassistthepartiesinreachingagreementon thedispute.Ifthedisputeisnotresolvedwithinspecifiedperiodaftertheprojectmediatorwasrequestedto resolvethedispute,thentheprojectmediatorshallterminatethenegotiationsbynoticeinwritingtoboth parties.Eitherpartyisentitledtoreferthedisputetoarbitrationnotlaterthanthegivenperiodafterthedate ofterminationofthemediatednegotiationsbytheprojectmediator.Ifthepartiesfailtoprovidenoticeof arbitrationwithinsetinperiod,theneitherpartyisfreetotaketheunresolveddisputetothecourts.

VII.DamagesandMutualResponsibility Ifeitherpartytothecontractsuffersdamageinanymannerbecauseofanywrongfulactorneglectofthe otherparty,theninordertopreserveaclaimagainstsuchparty,noticeinwritingtothepartyliablemustbe madewithinareasonabletimeafterthefirstobservanceofsuchdamage.

VIII.ToxicandHazardousSubstances If the contractor encounters toxic or hazardous substances or materials at the place of the work, or has reasonable grounds to believe that toxic or hazardous substances exist at the place of the work, then the contractormustimmediatelyreportthecircumstancestotheconsultantortheownerinwritinginorderto preserveaclaim.

IX.IndemnificationbytheContractor Thecontractorisrequestedtoindemnifytheownerforanyclaimsbroughtagainsttheownerbythirdparties attributabletothecontractorsperformanceofthework.Inordertoperfecttheindemnity,theclaimmust bemadeinwritingwithinaperiodofsixyearsfromthedateofsubstantialperformanceofthework.Claims notnotifiedtothecontractorwithinthesixyearperiodareexpresslywaived.

X.WaiverofClaimsbyOwner The owner expressly waives and releases the contractor from all claims against the contractor, including thosethatmightarisefromnegligenceorbreachofcontractexceptthosemadeinwritingwithinaperiodof sixyearsfromthedateofsubstantialperformanceofthework.

XI.Warranty The owner is obliged to provide prompt notice in writing of defects and deficiencies observed during the warrantyperiod. Timingisvitaltosuccess.Withoutatimelynoticeofclaim,thepartiestoaconstructioncontracthavewaived anyentitlementtoclaimbythetermsofthecontract. Inordertoensuretimelynoticeofclaims,apostbidcontractreviewshouldbeconductedtoidentifyareasof potentialclaim.Theseshouldinclude: PROFFESSINELS5


Consultants and Solicitors (a)identifynonstandardpotentiallyriskycontractclauses; (b)identifypotentialdesignissueswhichmayincreaseconstructioncosts; (c)identifypotentialschedulingproblemswhichmayaffectdifficultworkorweathersensitivework; (d)identifyuniquefeaturesofthesiteorworkthatmayincreaserisksofclaim; (e)identifynoticeperiodsunderthecontractforchangeorders,extraworkanddelays;and (f)identifycontractualrequirementsforprovidingaclaim. ThetimelynoticeofclaimswillbeassistedbyimplementingaweeklyChangeLetterandweeklyDelayLetter whichwillprovideongoingnoticetoanownerofchangesanddelays. 2.DETERMINETHEFACTS Oftencontractorsareunsuccessfulinpresentingaclaimbecausethehistoricalaccountisunclearbecauseof poor contract administration. It is extremely important that a proper program of record keeping and fact retention be implemented in order to successfully capture all facts which are pertinent to a claim. Some suggestions for proper contract documentation which should be implemented on projects include the following: (a)establisheffectiveestimatingandjobcostaccountingsystemsandprocedures; (b)establishaccountingsystemproceduresthatcaptureallneededinformation.Youshouldrecordandtrack bothbudgetedandactualworkquantities,costs,labourhoursandproductivity.Thecostaccountingsystem mustcompareplannedversusactualcostsonanearnedvaluebasissothatpromptactioncanbetakento correctproblems; (c)thecostaccountingsystemmustidentifyandrecordextraworkseparatelyfrombidworkandprovidea separatecostcodeforextraworkitems; (d)recordweeklyproductionquantitiesinordertocompareactuallabourproductivitywithplanned.Thisis criticalforameasuredmileanalysistoproveefficiency; (e) track the cost of all changes, even for signed change order work, in order to control costs to identify furtherchanges,delayimpacts,anddocumentadditionalclaims; (f)verifycompliancewithproceduresinordertoavoidchangeordercostsbecomingburiedinstandardcost codecategories.Areallocationofcoststothecorrectcostcodeafterthefactbytheprojectmanagerand/or supervisorcannotbedonewithreasonableaccuracyandalwaysappearssuspicious; (g) if disputed work is ongoing, use time lapse video photography or standard video tape to record the detailedstepsofimpactedoperations; (h)usephotographsandmoredetaileddailydiariesandotherdatacollectiontechniquestopreservevaluable information; (i)trainandmotivatecompanystaffbyeducatingthemwithrespecttothecompanyspolicyandprocedures onchangeorders; (j)alertfieldpersonneltocriticalcontractclausessuchasthenoticeprovisionsandpotentialproblemareas; (k)becertainthatfieldpersonnelcloselyreviewtheplansandspecificationsbeforestartingwork; (l)producealistofcriticalconcernsandspecialproceduresfortheproject; PROFFESSINELS6


Consultants and Solicitors (m)reviewdailyfieldreportsregularlyandrespondwhereappropriate; (n)developstandardformsforcostinginformation,allocatinglabourandmaterialstoextrawork,etc.; (o)timecardsaretheprimarysourceofdatafortheaccountingsystemandcanbeaninvaluablesourceof informationforcostingclaims.Thetimecardsshouldhavecolumnsforassigningcostcodestotimeexpended and columns for work to be described for time expended. Labour hours should be coded to specific cost codeswithanoteofspecificworkactivitiesundertaken; (p)developafieldsupervisorsdailyreportwhichincludesbasicprojectinformation,includingdate,weather information,highandlowtemperatures,siteconditions(muddy,flooded,frozenground,etc.),impactsfrom weatherorsiteconditions,scheduleofactivitieswithstartandfinishdatesofactivitiesthatbeganorended onthedateofthereport,useofequipment,workperformed,crewsizeandworkaccomplished,equipment operatingoronstandby,materialdeliveries,eachsubcontractor,theircrewsizeandworkperformed,note when equipment is mobilized or demobilized, describe problems, delays and extra work being performed, describe inefficiencies and the reasons why and the approximate loss, describe acceleration or expediting effortsinresponseofsubcontractors,listownersandothersonsiteandprovideforthereporttobesigned. Thesereportsmustbecompleteddailyandboundinabook.Theirpurposeistocontainstatementsoffact andnotopinionsorconclusions.Acopyofthereportshouldbesenttotheprojectmanagertobereviewed and actions should be taken on reported problems immediately. Field supervisors daily reports are commonlyacceptedasbeingmorereliablethandocumentspreparedbyofficepersonnelandbyanexchange ofcorrespondence; (q)adailydiaryshouldbemaintainedbytheprojectmanagerandprojectengineer,ifany; (r)aproperscheduleshouldbepreparedwithmonthlyupdates; (s) take photographs before starting work of the entire site and take photographs weekly or monthly throughoutthecourseofthework.Whenproblemsoccur,takephotographsmorefrequently.Useacamera withdatestampingandmakesurethatthedateissetproperly.Keepalogofthephotographsandwhotook themandwhy; (t)keepproperdetailofminutesofmeetings.Ifthemeetingsaretakenbyothers,keepdetailednotesofthe meetingsandchecktheofficialversionoftheminuteswithyournotesimmediatelyuponreceipt.Ifthereare anyerrors,notifytheauthoroftheminutesimmediately; (u)recordnotesofallinformalmeetingsandtelephoneconversations; (v)communicationandcorrespondencemustbeclearandconcise.Limiteachlettertoonetopicandclearly describethetopiconthereferenceline.Shortletterstothepointarefarmoreconvincingthanlongrambling letters.Theuseofserialnumbersinalllettersisaconvenientwaytokeeptrackofcorrespondence.Maintain alogofallcorrespondence; (w)makeafileprintedcopyofallincomingandoutgoingemails.Useemailsforinformationgatheringbut donotuseemailsfortakingformalpositionsforaclaim; (x) use requests for information (RFI) to obtain clarification on design or other issues or to confirm oral questions.EnsurethatanRFIlogismaintainedwiththedatetheRFIwassentandthetimefortheresponse oftheRFI.TheRFIshouldcontainacleardescriptionoftherequestandanindicationofthedaterequiredand thepriorityandimpactarisingfromtherequest;

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Consultants and Solicitors (y)maintainanextraworkorderformforrecordingforceaccountwork.Setupaseparatefileforeachextra work issue, including the document first identifying the change, sketches of the change, correspondence, supportingdocumentation,forceaccountrecords,etc.;and (z)maintainalogofsubmittalsidentifyingallrequiredsubmittals,whoistopreparethem,whentheyaredue andwheretheyaredescribedinthespecifications. Iftheserecordsareproperlymaintained,theyshouldbeanexcellentcollectionof informationtoformthe factualbasisofaclaim.

3.ESTABLISHENTITLEMENT A claim will have no chance of success if it is not grounded in the contract. Claims at large are not compensable.Theremustbeabreachofanobligationbyapartytothecontractorachangeinthescopeof the work or a delay under the contract as a basis for a claim. Contracts on large projects contain many volumesofspecificationsandoftenconsistofaconfusedassemblyofgeneralconditions,specialprovisions, special conditions, specifications, etc. Many times, these documents are not coordinated, so that inconsistenciesandambiguitiesexistbetweenthem.Adetailedfamiliaritywiththetermsandconditionsof thecontractisessentialtothesuccessofaclaim.Inordertobesuccessful,thecontractormustbefamiliar with the Dispute Resolution clauses, the Change clauses and the Delay clauses in the contract so that it is awareoftherequirementsthatitmustmeetinordertoestablishliability.Theseclauseswillalsodetailthe cost elements that are reimbursable, including costs such as direct or indirect costs, labour, materials, equipment,subcontractcosts,overheadcostsandprofitcosts.

Inestablishingentitlement,thefollowinginformationshouldbecollected: (a)identifytheissueandestablishaclaimfile; (b)providenoticeofclaimwithspecificcontractualreferences; (c)definethescopeoftheproblem,change,delay,impact,etc.; (d)notifysubcontractorsandinstructthemtomaintainproperrecordsofcosts; (e)schedulethework,includingthecreationofanupdatedschedule; (f)prepareanestimateofthecostsusingastandardestimatingformusecrewproductivityunitratesfrom theestimateandincludeimpactanddelaycosts;and (g)documentthechangeorderordelayrequestontheappropriateformdescribingthescopeofthework, the proposed cost and time which should include all costs, direct costs, indirect costs, overhead costs and profituseastandardcostestimatingformtopriceoutthecosts. It is often helpful to use a preconstruction meeting to initiate a change management program. This establishes an upfront methodology for identifying, presenting and dealing with claims. It can be used to establishanagreeduponrateforactivitieswithinthescopeoftheworkand,oncomplexprojects,itisvery helpful to establish an agreed upon productivity rate for impacted work or agreed upon indirect overhead rate for delayed work. The following matters could be usefully dealt with at a preconstruction meeting in ordertoassistinestablishingentitlement:

(a)seekclarificationofanycontractambiguities;

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Consultants and Solicitors (b) establish procedures to better manage changes such as an agreement with the owners representative that it will sign force account sheets of disputed extra work to confirm the work was done without acknowledgingentitlement; (c)establishweeklychangenotificationanddelaynotificationletters; (d)agreeonaprocessforsubmittingandobtainingapprovalofchangeorders,requestsforinformationand claims; (e)seekagreementonanymodificationstonoticetermsandtimerequiredinthecontract; (f)agreetoavoidpaperwarstheywastetimeandcreateanadversarialapproachandreprisals; (g) document the facts and provide notice of changes as required by the contract but avoid exchanging accusationsandallegations; (h)setapositiveandfriendlytonewithamatteroffactreferencetothecontractrequirementsandestablish yourpositionwithoutarguingthepoint;and (i)ifwarranted,callbeforesendingthenoticeletterinordertoletthemknowitiscomingandthatyoudo notwanttoescalatethedispute. 4.CAUSATION Without establishing causation, there is no basis for recovery of a claim. In many claims, causation is self evidentwheretheincreaseinthescopeoftheworkorthedelayingeventisclearlyattributabletooneparty or another. In complex claims, establishing causation is very difficult and time consuming. Writing a lot of lettersandpointinganaccusingfingerdoesnotestablishcausation.Causationisestablishedbytheinjured party demonstrating that its loss arose from an act or omission of the other party in respect of which the contract provides compensation. Without an act or omission of the other party, or without the contract providingcompensationforsuchactoromission,causationisnotestablished.

Thequestionofcausationfrequentlyarisesonlargeprojectswithcomplexissuesofwhocausedadelayand what are the consequences to the project completion date by the delay. In these cases, causation is often establishedthroughtheuseofconsultantssuchasdelayconsultants. If you hire a delay consultant, you should expect to spend a great deal of time with them rewriting their reports.Ifyoudontassisttheminconstructingareportthatislimitedtoaspecificquestion,basedonclearly identifiable assumed facts, you run the risk of having your experts report being inadmissible in any legal proceedingsandtherebywastehundredsofthousandsofdollars.Inmyview,theareasofproperevidenceof adelayconsultantinthisareaareasfollows: I.AuditingCosts Onlargeclaims,itismypracticetoconductanaudit,oratleastareview,ofthecostsofthecontractororthe ownerasthecasemaybe.Thisisanaccountingexercisetodeterminewhetherornotinfactthecostswere incurred.Youwouldbeamazedwiththeamountoffluffwhichisfoundinownersandcontractorsclaims. Ihaveonverylargecaseshadmyownclientscostsauditedandhaveprovedtheauditaspartofthecase.In thisway,thereisevidencebeforethecourtthatthecontractoractuallysufferedsubstantiallossesfromits

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Consultants and Solicitors plan which, with other evidence, establishes that the losses are caused by the breach of contract of the owner. II.ConcurrentDelay Concurrentdelaymustbeconsideredwhentryingtoprovecausation.Manyconstructioncontractscontain clauseswhichprovidethatacontractorisnotentitledtobecompensatedforadelayingeventcausedbythe ownerifthecontractoralsocausesaconcurrentdelay.Theseclausescandefineaconcurrentdelaytoinclude adelayingeventcausedbythecontractororevenadelayingeventcausedbyathirdpartywhichwouldnot giverisetoarightofcompensationtothecontractor.Evenwhereconcurrentdelayclausesarenotfoundin contracts,Ihaveseenownersarguethatacontractorisnotentitledtocompensationbecauseofaconcurrent delaycausedbythecontractor. Theissueisoneofcausation.Thetheoryisthateventhoughtheownerbreacheditscontractandcausedthe contractortobedelayed,thecontractorisnotentitledtoanycompensationasitwouldhavebeendelayedin anyeventbecauseoftheeventofconcurrentdelay.Ihaveevenseenclauseswhichrequirethecontractorto providearevisedscheduleatthetimeofanownerscauseddelayinordertoconvincetheownerthatthere isnotaconcurrentdelay. What is a concurrent delay? Does it have to be an overlapping delay or is a delay at any time during the projectsufficient?Forinstance,ifthecontractorisdelayedbytheownerforthreemonthsatthebeginningof theprojectbutthenthecontractorisdelayedbyaneventofitsownforthreemonthsinthemiddleofthe project,aretheseconcurrentdelays? Inourview,thewholeargumentoverconcurrentdelayignoresthecontractualrightofthecontractortoplan andmanagethesequenceofitswork.Thecontractormaybeabletorecoveritsowndelaybyresequencing work or using additional resources in order to complete the activity without any delay. The mere fact that therewasaneventwhichhadthepropensitytocausethecontractortobedelayedshouldnotprecludethe contractor from recovering for the owners delay. In other words, the owner should not be able to take advantageofanothereventtoexcuseitfromitsownbreachofcontract. III.Float Theissueofcausationandconcurrentdelayisalsointertwinedwiththequestionofwhoownsthefloatina construction schedule. In simple terms, float is the flex time built into a schedule in order to permit the contractortoovercomethetypicaldifficultiesandeventswhichariseonaconstructionprojectwhichcause delays. There is again a debate among U.S. authorities as to whether or not the float should be used to excludeanownerfromtheconsequencesofanyofitsdelays.Inotherwords,ifadelaycausedbytheowner occursatthebeginningofthejobandusesupalltheflextime,shouldtheownerbeexcusedfromhavingto compensatethecontractorforthedelays.Thisseemsunfairasanysubsequentdelayingeventcausedbythe contractor would be without compensation and the contractors flex time to recover from such delays has been consumed. In our view, the debate on float again ignores the contractors right to plan its schedule. PROFFESSINELS10


Consultants and Solicitors Once the owner has accepted the contractors schedule, then any delay caused by the owner should compensatethecontractorifitputsthecontractoroffitsplannedschedule. IV.UseofVisualAids Onaverycomplexdelayclaim,itisveryhelpfultousevisualaidstodemonstratethedelay.Wherethereare anumberofchangeordersthataffectthework,itisusefultoplotthechangeordersonplans.Wherethere arealargenumberofaccessconstraints,itispowerfullypersuasivetoplottheseconstraintsonthesiteplan. Inthemostcomplexcases,ananimationshowingthesequenceofdelayingactivities,oneagainsttheother,is incrediblypowerfulaspeoplearehighlyconditionedtobelievesomethingtheyseevisuallyasbeingaccurate. V.ProofofDelayClaims As I mentioned earlier, most construction contracts on large projects have very detailed requirements for provingdelayclaims.Notonlymusttherebeproofofdelayinaccordancewiththeschedule,thecontractor must also be able to prove which direct and indirect costs were incurred as a result of the delay. As we mentioned, wherethere are anumberofdelayscausedby, forinstance,inadequateplansorchanges,itis very difficult to trace with any precision which delaying event caused which additional cost. This makes it impossibleforthecontractortocomplywiththecontractualrequirementstoproveeachdelaytoitsschedule when presenting its delay claim. Faced with this task, contractors often prepare a global claim. In our experience,theseclaimsareoftenrejectedbytheownerforanumberofreasons,includingfailuretotake intoaccountcontractordelaysandinefficiencies,orfailuretocomplywiththerequirementsofthecontract. Logichasprevailedovertheimpossibilityofcontractperformancetodocumentallchangesassociatedwith eachchangeordelayingevent.Thereareanumberofcaseswhichhaveheldthatwhereitisimpossibleto separatethecontractorscostsintodiscretedelayingactivities,itisquiteappropriateifthedelayingclaims are bundled together in rolledup claim. It will be interesting to see if this line of argument is accepted in courts. 5.CALCULATEDAMAGESINACCORDANCEWITHTHECONTRACT Manycontractorsspendagreatdealofeffortindocumentingtheclaimandestablishingcausationbutpay little attention to the calculation of damages. Proper record keeping will be invaluable in recording actual direct costs incurred by a contractor in performing changed or delayed work. Without contemporaneous recordsofcostsallocatedbyappropriatecostcodes,theexerciseofcalculatingdamagescanbeoneofguess work. I.ContractorClaims Thetypicalclaimsadvancedbycontractorsincludethefollowing: (a) Extra Work: This claim should include the direct labour hours, equipment and subcontractor costs incurred in performing extra work. It should also include supervision, overhead and profit as agreed in the contractoranallowanceforthesecostsifthecontractcontainsnoagreedmethodofcalculation. PROFFESSINELS11


Consultants and Solicitors (b) Delay or Prolongation Costs: These costs should include the additional labour hours, additional equipmenttimeandsupervisioncostsincurredbeyondtheplannedcompletiondateforthecontract.These costsshouldalsoincludeacomponentforsiteindirectcostsaswellashomeofficeoverheadfortheextended periodbaseduponindustryrecognizedcalculationformatsuchastheEichleyorHudsonformulas. (c)ProductivityCosts:Inordertoproveproductivitylosses,themeasuredmileisoftenusedbycontractorsor claimsconsultants.Thismethodologymeasuresthelabourandequipmentefficiencyonapartoftheproject wheretherewerenoimpactscausedbydelaysorchangeswiththelabourandequipmentefficiencyforthe impactedpartoftheproject.Inordertobesuccessful,apropermeasuredmilemustbeavailabletogether with reliable labour and equipment hour records. Inefficiency increases from acceleration, overtime, crowding and trade stacking, overstaffing, task reassignment, multiple changes, extreme temperature, learningcurvesandacombinationoftheabove. (d)Acceleration:Thisclaimincludesthepremiumovertimehoursincurredbyacontractorinacceleratingthe work in order to meet a completion date. It generally involves only the premium portion of the overtime hoursandcareshouldbetakentoensurethatitdoesnotresultinanyduplicationwithaproductivityclaim. (e) Subcontractor Claims: This claim usually involves subcontractor claims of delay, productivity or acceleration and should be documented in detail by each subcontractor demonstrating entitlement, causationandpropercalculationoftheirdamages. (f)Overhead:Thisclaimusuallyinvolvesaclaimforheadofficeorsiteofficeoverheadstotheextentthatit was not included in any of the previous claims. It is usually based upon a recognized formula such as the EichleyorHudsonformulas. (g)Profit:Profitmaybeclaimedonthebasisoftherateplannedatthetimeofbiddingofthetenderforthe projector,alternatively,onthebasisofthehistoricalgrossprofitbythecontractorinsimilarprojects. (h) Financing Costs: This is a claim for the costs of financing or other bank interest charges and penalties incurredbythecontractoras aresultofbeingdeprivedofitscostoffunds.If aclaimforfinancingcostsis advanced,thenthecontractorwillnotbeentitledtoaclaimforinterestunderthecontract.Thecontractor shoulddeterminewhichalternativeismoreappropriatetoadvance. (i) Claim Preparation Costs: These are often claimed by a contractor but are rarely agreed to. Generally, ownerstakethepositionthatcostsinpreparingaclaimareacostofdoingbusiness. II.OwnersClaims A significant bar to an owners claim is the failure to provide timely notice of claim to the contractor, particularlywithrespecttodelays.Caseauthoritieshavefoundthatwithouttimelynotice,anownerisbarred PROFFESSINELS12


Consultants and Solicitors from bringing any claim against the contractor. Additionally, reference is made to the CCDC2 1994 StipulatedPriceContractwhichprovidesthattheownerexpresslywaivesandreleasesthecontractorfromall claimsunlessnoticeinwritingismadewithinaperiodofsixyearsfromthedateofsubstantialperformance ofthework. Ownersclaimsusuallyfallintothefollowingcategories: (a)costsincurredinremedyingdeficienciesinthework; (b)costsincurredinperformingworknotperformedbythecontractorupontermination; (c)additionalprofessionalservicesrenderedbydesignprofessionalsandconstructionmanagers; (d) overhead expenses incurred by the owner that are directly attributable to the delayed project, such as ownerstaff(managers,representatives,secretaries,securitypersonnel),equipmentrentals,utilities,etc.; (e)rentalofsubstitutefacilitiesfortheperiodofdelayandrentalofstoragefacilitiestostoreequipmentand furniturethatcouldnotbeinstalledonschedule; (f)additionalfinancingcosts,suchasextendedinterimfinancing,increasedcostofpermanentfinancing,or lossofpermanentfinancing; (g)lostrent; (h)lostprofitsandlossofgoodwilltoanestablishedbusiness; (i)damageclaimsoftenantswhoarepreventedfromoccupyingspacewhenplanned; (j)diminutioninmarketvaluecausedbylossoftenantsoradversepermanentfinancing; (k)delayclaimsbyfollowoncontractorsandlitigationcoststodefendmechaniclienclaims; (l)escalationcostsfromdelayedpurchasesofequipment,addedinsurancewarrantycosts;and (m)liquidateddamagesprovidedbythecontract. 6.NEGOTIATETHECLAIM Aproperlydocumentedandpresentedclaimismucheasiertonegotiatethananillfoundedanddisorganized claim.Negotiationisamuchmoreprofitableresultfortheresolutionofaclaimthanarbitrationorlitigation. Preparationfornegotiationsisakeyfactor.Negotiationisnotsimplyshowingupandcompromisinginorder to achieve an objective. In order to be successful, the following basic negotiating techniques should be followed: (a)Appreciatethatthenegotiationisaprocess:Itusually involvesmorethanoneexchange,sometimesit involvesmany.Still,theseexchangescanoccurin ashorttime.Goodnegotiationisnotanallornothing confrontationatthefirstcontact. (b) Plan the negotiation: Not all disputed items are dealt with in the same way. Select a method of negotiation:persontopersonmeetings,letters,oracombination.Onemustassesshowlongonecanafford tonegotiatebeforearesolution,thedeadlinesimposed,andtheeffectsofdelaysononeselfandothers. (c)Preparethenegotiation:Thereisnosubstituteforthoroughandstructuredpreparation.Itisabsolutely essentialtopreventclaims,tonegotiatethem,andtoadvancethemthroughADRandlitigation.Thismustbe doneattheearlieststage,toimproveonesprospects,tosavetimeandmoney,andtoavoidcomplications PROFFESSINELS13


Consultants and Solicitors lateron.Becompleteinthepreparation;onewillnotmakemuchprogressinameetingbysayingthatsome of the supporting material is back at the site office. Paper and material dont tell the whole story; before negotiating, one should check with the persons who were actually involved for additional information. In preparingthenegotiationposition,onemusttakethetimetopreparethecalculationsandarguments. (d) Choose negotiators carefully: One should make a considered decision as to who should represent one eitheratvariousstagesoralltheway.Considerwhomtheothersideislikelytopresentandwhetherthereis someotherpersonwhoislikelytobeimportantintheproceedings.Assumingthatonesnegotiatorhasgood negotiationskills,thereisstilladistinctioninfacetofactnegotiationsbetweenhavingthefactspersonand thedecisionpersonthere.Incommercialnegotiationsandlabournegotiations,thedecisionpersonisoften excludedfromtheroomforobviouspurposes. (e)Decidehowmuchtosay:Sinceconstructionhasspecifictimeframes,disputenegotiationsrequiresones bestshotattheoutset.Inprotractedcommercialnegotiationspartiesfrequentlyholdsomeargumentsin reserve; construction doesnt lend itself to that. Also, if the dispute is heard by a third party later on, somethingmaywellturnonthecompletenessofonesfirstpresentationtotheotherparty. (f) Cover all the elements: In ones preparation and presentation at the meeting, there are at least four elementsthatmustbeaddressedeverytimeeveniftheirsignificanceisnil. (g)Giveandtake:Eventthoughonemaybeirrefutablyrightononesposition,onemustbepreparedfora little or perhaps a lotof give andtake. Although neither side likes to admitit is wrong,if they are to keep workingtogether,usuallythereshouldbeatleastsomesmallelementofcredittotheotherside.Toorigidan approach can paint a party into a corner from which it cant escape. As well, one may entrap oneself with defensivenitpicking.Onemaynothavetogive,butonemustbepreparedtowaitandsee. (h)Developalastposition:Evenbeforenegotiating,thepartiesshoulddevelopsomesenseofwhatresult theycanlivewithandwhattheycannot.Atthesamestage,eachshouldconsiderwhattheothersideslast positionmightbe. (i)Watchforsignals:Gutreactionstendtocreatefarmoreproblemsthansolutions.Agoodnegotiatorwill develop a skill oftruly listening,ratherthan busilythinking aboutits next response.Agoodnegotiator will readmaterialcarefullyandwillreadthesignificantpartsmorethanonce. (j) Allow for pauses: Negotiations can develop heat, and they may raise a point on which one wishes to reflect.Ifeitheroftheseoranotherfactorpresentsitself,thepartiesshouldtakeabreak.Iftheyaremeeting PROFFESSINELS14 theworklabour,material,supervision; themoneyinvolvedor,ifnotdeterminableatthetime,aformulaorwaytodetermineit; thenatureandextentofeffectonothers; thetimefactwhatisnecessary,whatisallowable.


Consultants and Solicitors facetoface,anothermeetingshouldbesuggested.Anyexcusewilldo,butthemosttactfuloneisYouve givenmesomethingtothinkabout. (k)Recognizetheend:Itscrucialtoknowwhenonehasreachedtheendofnegotiations.Anegotiatorwill knowwhetherithasadealorwhetherithascometoanimpasse.Theskillednegotiatorwillnotwastetime floggingahopelesscausebutwillratherterminatetheprocedureandproceedtoapreplannedalternative. 7.LITIGATION Litigationisentirelyadifferenttypeofclaimresolvingpractice.Itneedsasynergeticstrategyconstructedout oftherealitiesofthecase.Theentireauraoftheclaimcasewillchangeinlitigation.Thecasewillenterinto the vast arena of Law, Acts, Constitutional aspects, case laws, jurisprudence system and legal procedures. Apartfromthehugeplayground,playingthestrategiescleverlyintheeverchangingcontextsisacrucialand critical aspect of the litigation. Successful litigation requires a fullfledged home work, documentation, brainstormingsessionswiththerelevantstaff,continuousfollowupareimminent.Thelitigationstageofthe ClaimManagementrequiresthefollowingadherences: (a)Engagementofexpertcouncil:Differenttypesofcasesrequiredifferenttypeofcouncilscountingontheir pastexperiences.Ateamofpersonnelhavingtheknowledgeofthecaseshallbeengagedtoassistthecouncil with the complete project knowledge. It is highly advantageous to engage a consultant firm for claim resolution,sothateachandeveryaspectoftheclaimresolutionwillbeaddressedinaprofessionalway. (b)ContinuationoftheStrategy:Itisverycriticalpartofthelitigationhowyouoryourcouncilconstructthe strategy of litigation. It depends on the other party and their team. It depends on the strengths and weaknessesofyourcase.Itdependsonthecourtwherethedramaticscenesaretobeenacted.Strategyof the Case will be entwined between the arguments forwarded or not yet forwarded. The screen play will unfoldstepbystep;thecouncilhastoshowhisspontaneouswitandwisdominthecourthall;itisawarof words, logics, knowledge bites and moreover an excellence of court maneuvering. If any breakage in the strategy,whatever may be the reasonfor thesame, turnstobe adisastrous endtothe case and istobe avoidedatanycost. (c)PerfectEvidencing:Thecaseshallbereliedonitsownstrengthatthefirstinstance.Forthis,everyfacetof thecaseistobesupportedbyunflinchingevidence.Evidencesmaybeintheshapeofdocuments,records, instruments,mediapresentations,personsinvolvedandexpertsconcerned.HeretheClaimConsultantsrole isveryimportant.Collectingtheevidencesfromvarioussources,studythesame,organizingandanalyzingthe sameinordertomakeoutastoryoftheavailableevidencesandunearthingtheunrevealedevidencesfrom forensic investigation, electronic exploration, reengineering the historic events through 3 dimensional graphicmaneuverings,reconstructionofthedelayeventsthroughCPMtechniquesispossibleonlythrough theprofessionalconsultants.Theycanassistthelitigationexpertsintherequiredmanner. PROFFESSINELS15


Consultants and Solicitors (d)SystematicApproach:Litigationneedshighpatiencelevels.Nocaseistobepushedfast,withoutcaring fortheLitigationSystems,whichneedsacomprehensiveandintegralapproachinmovingthecaseintothe litigationarena.ItisalikeaCricketPlay.Afewhoursofplay inthefieldneedsafewmonthsofvigorous exerciseandpractice.Itrequiresapsychologicaltransformationsupportedbynewinformation,techniques, stratagemsandconfidencebuildingarrangements.Similarlythelitigationcasealsoistobeevolvedpassing throughvariousstagesofcaseestablishment. (e)EmpoweringwithCaseLaw:Itisaverypertinentaspectofthelitigation;merecollectionofsupportive Case Laws is not sufficient to deal with. The expert legal council will find out New Arguments from any concernedcaselawswithhisinterpretative genius. Asupposedtobenegativecaselawalsowillbecome a supportivedocument,asperthetextandcontextofthesaidcaselaws.Aseasonedlegalcouncilwillstarts withinfinitesimalthreadandturnsitintopowerfulpointwithwhichheropesintoawinwinsituation.

(f)SpecialAttentioninCourtHall:Theexpertcouncilwillnotonlytakeupscriptwritingandscreenplayof the case but also but enact the crucial role before the jury wherein he needs spontaneous action with extemporedialogue.Assuchhehastopreparewell;hehastodohishomeworkwithprecision;hehasto keephistempersandpsychicattitudesintunewiththeassignedlitigation.

(g)StrictcompliancewithProcedures:Manyclaimcasewillfailnotinthewarfieldsofcourthalls;butthey willfailoutofthecourtrooms,forthereason,inappropriatesubmissionsinlinewithlegalprocedures.Every careistobetakeninthisregardbymaintainingtheprotocoldiaries.Acompletechecklistsaretobeinplace andregularfollowupisimminent.

CONCLUSION Theproperorganizationandpresentationofaclaimtakestimeandagreatdealofcare.Thewholepurpose of presenting a claim is to convince the other party to the contract that they should pay the claimant additionalfundsunderthecontract.Detailedscrutinyisbroughttobearonthequestionofwhetherornot theclaimisvalidandshouldbepaid.Moreoftenthannot,theclaimreviewersmustanswertocorporateor governmentalmanagersindeterminingwhetherornotaclaimisvalidandshouldbepaid.Itisnotusuallya pleasanttasktotellyourbossthattheirbudgethastobealteredbecause aclaimisproperandshouldbe paid.Wellpreparedanddocumentedclaimsthatmaintaintheirconsistencythroughouttheprojectaremuch more successful in getting paid than ill prepared claims that lack foundation, analysis and justification. Withouthardworkandattentiontodetail,mostclaimsarerejected.Ifyoufollowtherecommendationsset outinthispaper,youwillhaveamuchgreaterchanceofsuccessinhavingyourclaimspaid.

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