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SUCCESSFUL DELAY AND DISRUPTION CLAIMS: PRESENTING THE CLAIM (May 2005) The principle behind a claim

SUCCESSFUL DELAY AND DISRUPTION CLAIMS: PRESENTING THE CLAIM

(May 2005)

The principle behind a claim for recovery of the costs of delay and disruption is that due to one single act, or due to several different events and circumstances, the aggregate effect of which has caused the period for completion of the Works to be extended, the contractor has remained on site and expended resources over a longer period.

DELAY CLAIMS

Delay causes prolongation of the contract. The recovery of prolongation compensation depends on the terms of the contract and the cause of the prolongation. Prolongation costs may be caused by any act or omission of the employer, for example, an employer variation, breach of contract, or other contract provision such as unforeseen ground conditions. Whether the cause of the prolongation is governed by a provision in the contract or a breach of contract, the onus is on the contractor to demonstrate that it has actually suffered loss and/or expense before it becomes entitled to compensation.

In respect of prolongation costs arising out of an employer breach, the tender allowances are not relevant because the contractor is entitled to recover the actual costs of prolongation. It is a common misunderstanding in the construction industry that if the contractor has made no, or inadequate, allowance for site overheads in its tender, this fact limits or removes its entitlement to compensation for prolongation. This is not correct. Under such circumstances recoverable compensation requires the ascertainment of the actual cost of remaining on site.

CONCURRENT DELAY EVENTS

Where concurrent delay events occur, the contractor may not recover compensation for delay arising out of the employer risk event unless it can separate the loss and/or expense that flows from such event from that which flows from the contractor risk event. If the contractor would have incurred the additional costs in any event as a result of the contractor’s own delays, the contractor will not be entitled to recover additional costs during the same period save to the extent of any period by which the employer delay exceeds the contractor delay.

GLOBAL CLAIMS

The not uncommon practice of making global claims without substantiating cause and effect is rarely accepted by the Courts. The failure by the contractor to maintain accurate and complete records, so as to enable the contractor establish the causal link between each delay event and the resultant loss and/or expense suffered, does not justify the contractor in making a global claim.

TYPICAL HEADS OF RECOVERY OF DELAY COSTS

The following represent the typical heads of claim for recovery in delay claims:

Head Office Overheads - easier to establish this as a cost incurred if charged to the job. If not charged to the job, costs may be allocated on a proportional basis

Loss of Profit – lost profit on other contracts are generally not recoverable under the standard forms. However, where there are no limiting contract provisions, a claim for loss of profit under the general law may be possible

Site Overheads – these include costs of supervision, rental/depreciation of site offices, plant and machinery, site services, insurance and bond premiums

Additional Preliminaries – recoverable whether priced in a separate section of the Bill of Quantities or in the rates

Interest and Finance Charges - recovery of these will normally be subject to strict limits

Inflation – delay causes works to be carried out at later times than originally programmed. Consequently, any increase in labour and materials cost will be recoverable

DISRUPTION CLAIMS

Disruption is often treated by the construction industry as if it were the same thing as delay. They are, however, two separate matters. Delay is lateness, whereas disruption is loss of productivity, disturbance, hindrance or interruption to the contractor’s normal working methods, resulting in lower efficiency. Disrupted work is work carried out less efficiently than it would have been had it not been for the cause of the disruption.

Disruption compensation is only recoverable to the extent that the employer caused the disruption. Most standard form contracts do not deal expressly with disruption, but disruption may be claimed as a breach of the term generally implied into construction contracts that the employer will not prevent or hinder the contractor in the execution of its work.

ESTABLISHING DISRUPTION CLAIMS

Disruption has to be established in the normal cause and effect manner. It is not just the difference between what actually happened and what the contractor planned to happen.

The prime questions to be addressed in establishing and valuing a disruption claim are:

What work was affected?

How was it affected?

With what should the actual progress and cost be compared, in order to assess the additional cost?

TYPICAL HEADS OF RECOVERY OF DISRUPTION COSTS

The following represent the typical heads of claim for recovery of disruption costs:

Plant, Tools and Equipment - uneconomical use of plant, idling time, is the plant owned or hired?

Loss of Productivity – loss of productivity is commonly established by “The Measured Mile” technique. This compares productivity achieved on an unimpacted part of the contract with that achieved on the impacted part

Redeployment of Workmen - It may be necessary to redeploy workmen from other contracts or engage sub-contractors at higher rates. Redeployment of labour from one part of the site to another may also cause secondary disruption

CONCLUSIONS

As discussed in more detail in my first article on delay and disruption, one of the primary administrative objectives of the contractor must be to ensure that it maintains sufficient records, documentation and correspondence so that in the event of delay or disruption occurring to the works the contractor is fully prepared to recover all of the resultant costs that it has incurred.

My first article set out a checklist of records and documentation that contractors should maintain in order to succeed in their claims. Understanding how to present a delay and disruption claim and the typical heads of claim recoverable is only valuable if there exists sufficient records and documentation to successfully support those claims. The degree of success of your delay and disruption claim is likely to be directly proportional to the quality of the supporting records and documentation.

© Matheson Ormsby Prentice 2005

This Article was first published in Irish Construction Magazine (May 2005).

The Information in this document is provided subject to the Legal Terms and Liability Disclaimer contained on the Matheson Ormsby Prentice website. The material is not intended to provide, and does not constitute, legal or any other advice on any particular matter, and is provided for general information purposes only.

For further information, contact Damien Keogh, e-mail: Damien Keogh@mop.ie, Construction Group, or telephone +353 1 619

9000.

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