Preparing Construction Claims

Stephen C. Hall

• Publisher: Wiley-Blackwell
• Year: 2020
• ISBN:
  9781119166535
• Edition: 1
• Topic: Law
• Subtopic: Construction Law
• Index: Law

Provides tools and techniques required to research and prepare a contractual construction claim

This book guides readers through the techniques and approach for properly preparing a construction contract claim and seeing it through. It teaches them how to gather all the facts in order to present arguments concisely, clearly, and forcefully. It focuses on the practical issues of how to research and present a contract claim—whether it be for additional time, prolongation costs, disruption, or revised rates and prices for work due to some changed circumstance affecting construction.

Aimed at those who need to prepare a claim, but just as helpful to those defending one, Preparing Construction Claims offers chapter coverage on everything about planning and programming—the methods for assessing them, as well as regular and computerized techniques. The book covers time chainage/line of balance; bar charts, common sense evaluation techniques; and relevant clauses that all contracts contain. Readers will learn about standard forms and common deviations and modifications made by employers. They'll also be taught how to establish the entitlement to make a claim from the contract and then shown what to do next. In addition, the book teaches them what to do when their records are insufficient; how to resolve a dispute; and much more.

• A clear and comprehensive, step-by-step guidebook for researching and preparing contractual construction claims
• Includes worked examples of certain types of claims to help readers comprehend the process
• Beneficial to both sides of a claim—teaching each how they should approach one

Preparing Construction Claims is an essential "how to" manual for contractors, subcontractors, and consultants worldwide dealing with all manner of construction disputes and claims preparation.

1
Types of Claims

1.1 What Are Claims?

A claim is an application for additional payment and/or request for an extension of the time for completion due to some change that has affected the construction process, content or timing of the works, and caused additional costs for which recompense is sought. Most internationally recognised standard forms of contract and bespoke forms of contract contain similar clauses that detail the Contractor's entitlement to make a claim for additional payment and/or an extension to the time for completion for any variation or change that was not of its own volition and which causes additional costs or delays and is the liability of the Employer/Owner. Variations and instructions issued by the Owner or its representative may result in a change to the contract scope either by requiring additional work or changing the constituents of the work already included – for example, by varying the specified materials that are to be used. Changes to the design may also affect the complexity of the construction process, making the work more difficult, or perhaps altering the planned method of construction and temporary works required. Changes may also be made to the timing of work and sequence of construction. The typical sources of claim can arise from any one or a combination of the following:

• Instructions and variations issued.
• Late provision of design information or correction of information.
• Revised specifications for materials.
• Stoppages or suspension of work instructed.
• Changes to the access to and egress from the works.
• The impact of adverse weather.
• Increased quantities of work as compared to those set out in the contract.
• Incorrect descriptions of work items in the Bills of Quantities.
• Changes in the laws and customs of the country where the project is being built will also result in claims for payment or additional time.
• Claims may also arise where the Employer instructs the Contractor to accelerate the works either to recover lost time caused by variations or some other reason (perhaps even political).

The Conditions of Contract will detail what type of events enable the Contractor to pursue claims for extension of time and/or additional payment from the Employer. Some contracts do not recognise claims but deal with them either as variations or by calling them different names such as ‘compensation events’ or ‘change orders’. All forms of contract require two things to be established for a claim to succeed: first and foremost, it must be notified as soon as possible and certainly within any period stipulated under the terms of the contract; and, second, adequate contemporary records must be kept in order to prove the impact of the event in terms of costs and time. The following is a typical list of events or changes that entitle the Contractor to make a claim for time, extra payment or both, that are included in most forms of contract:

1. An instruction, variation or other substantial change in the quantity of an item of work included in the contract.
2. A cause of delay giving entitlement to an extension of time.
3. Unforeseen physical conditions or artificial obstructions (e.g. changes to the ground conditions from those described in the contract or perhaps the discovery of some artefact that has to be preserved).
4. Adverse or exceptionally adverse climatic conditions.
5. Unforeseeable shortages in the availability of personnel or goods caused by government actions (e.g. changes in the law, customs regulations, or visa requirements).
6. Any delay, impediment or prevention caused by or attributable to the Employer, the Employer's personnel or the Employer's other contractors on the site.
7. Strikes, lockouts, civil unrest or similar unexpected ‘neutral’ events that may entitle the Contractor to an extension of time but not to any reimbursement for the costs associated with the delay.

The important point is that any source of change or delay to the works must be reviewed and a notice given, since, under most forms of contract, there are strict time limits within which a claim notice must be made in order to preserve the Contractor's rights to make a claim for time or money. It is becoming more common to find that many standard contracts contain (or have inserted under amendment clauses) more stringent time bar clauses or condition precedent clauses that, if not complied with, result in the Contractor forfeiting its rights to an extension of time and payment of additional costs. Therefore, it is imperative that, on starting any new contract, the Conditions of Contract be examined to see what amendments have been made to the standard forms of contract.

1.2 Measurement Claims

These are claims arising from incorrect measurement of the works or incorrect quantities stated on which the tender bid was based and which may change the integrity of the rates and prices for the work. For example:

• Incorrect application of any standard method of measurement specified in the contract.
• Incorrect or misleading descriptions of the work.
• Major differences between the original and actual quantities of work to be performed.

Measurement disputes are no longer as common as they once were as many modern contracts are made using a design‐and‐build form of contract. These do not rely on measurement (or re‐measurement of the works performed) and Bills of Quantities; instead, they stipulate the Employer's requirements and specifications for quality and end performance to be met. In such contracts, there are no formal Bills of Quantities, and it is left to the Contractor to provide its own quantities and estimate its price for the scheme. Previously, most construction contracts included references to methods of measurement, Bills of Quantities and the rules of measurement that applied. This still occurs in some contacts, particularly large civil engineering works where the quantities given in the Bill of Quantities are approximate and must be re‐measured on completion based on drawings, instructions and the actual quantity of work performed. While measurement is a practical, partly academic process, the application of measurement rules can cause disputes to arise if the original Bill of Quantities was incorrectly drawn; items for work performed are found to be missing; or misleading descriptions were used, resulting in arguments about the description quality and quantity of work and the requirement for revised rates and prices. Measurement claims also deal with events that arise because of either a change in the character, quantity, timing or nature of the work, or because of considerable differences between the works described in the Bill of Quantities and the work carried out. When disputes arise, these claims rely either on a proper interpretation of the measurement rules applicable to the work, or on the impact of a change that has occurred which has affected the timing, quantity, quality, and price of the item concerned. Correct measurement and/or application of the rules governing measurement of the work is usually a straightforward issue to determine. However, such matters can easily become a large dispute, depending on the quantity of work, the degree of change imposed or revised prices sought for the actual work performed.

1.3 Changes to the Character Timing, Quality and Content

Some contracts contain restrictions on the entitlement to claim revised prices depending on the proportion of increase or decrease in quantities or other changes that occur. The Contractor must make out a case for new rates and prices for the work as actually performed due to the differences identified. These differences can be a change in the timing, season or alterations from the envisaged method of work due to some imposed restraint on how or when the work can be done. Generally, claims for new rates are based on alterations to the character, quantity, quality, timing or method of working. When the Contractor claims that the work has varied, or that the method of work has been changed, this is usually caused by some alteration to the anticipated production rate. The rates and prices can also be affected by the height above ground, the depth below ground, access and egress, and any other relevant factors that would change the price per unit for that work, providing the change was not made by the Contractor or was due to it misinterpreting the type of work described in the contract.

1.4 Revised Rates and Prices

Every rate or price in a Bill of Quantities or estimate is comprised of the following:

• Labour.
• Plant and equipment (including temporary works equipment).
• Materials
• Risk.
• Overheads and profit.

To derive a unit rate for an item from first principles, there are two main elements/methods used:

1. 1. Work out a production rate or factor for the type of work using ‘norms’ obtained either from internal records and historical project information, or from industry norms, and use that to calculate the unit cost.
2. 2. Work out how long the operation is expected to take for the entire quantity of work described based on experience and norms. Then, by using the cost of the chosen resources, divide the answer by the total quantity to obtain the unit cost. This would be useful for calculation of a long‐term operation such as concrete work on a major project where the concrete gang, plant and equipment (batching plant, distribution plant, vibrating pokers, pumps, etc.) have to be on site from the first pour to the last, and the overall duration divided by the total quantity will provide a more realistic answer than a basic unit rate using norms.

The common factor is always the time required for the work described to derive the unit rate. If the quantity is understated, then, depending on the degree of error, the unit rate may not recover the actual costs. If the design changes (shape height, width, depth, etc.), this may affect the planned temporary works (e.g. formwork and falsework support or perhaps pumping and shoring activities). Other constituents may also change the price per unit as described earlier; changes to the diameter and shape of bar reinforcement or a concrete design mix and aggregate sizes can all influence the unit cost.

Changes within bulk earthworks can also dramatically affect the unit cost. For example, on a major road scheme, the earthworks pricing will depend on the anticipated materials to be excavated and embankment construction volumes. Unforeseen changes in the volumes of suitable fill material, unsuitable material, contaminated material, rock, etc., will affect the work carried out, the haul distances and perhaps the equipment being used. Most bulk earthworks projects are priced based on a mass haul diagram that shows where the cuts and fills are located, what they contain and where the material is to be deposited. This provides a method statement in a tabular format that describes the volume, distance travelled and plant used for each material. Changes to the constituents may dramatically change the unit cost and result in a claim for a revised rate for the work....

Table of contents

• Cover
• Table of Contents
• Copyright
• Preface
• Introduction
• 1 Types of Claims
• 2 Basis of Claims
• 3 Contracts
• 4 Available Documents
• 5 Records and Notices
• 6 Programmes
• 7 Delay Analysis
• 8 Direct Costs of Changes/Variations
• 9 Disruption
• 10 Presentation
• 11 Disruption Claim Examples
• 12 Prolongation Costs
• 13 Thickening Claims
• Index
• End User License Agreement