Andy Hewitt
Price Escalation - can we claim for additional costs?
Since COVID and the Ukraine conflict, we have seen a major rise in the cost of completing projects. Increased costs of energy, shipping, manufacturing and raw materials are often to blame.
Contractors, locked into fixed price contracts, often face a loss-making situation on projects.
Clients often seek advice on what to do in these situations. Can they claim for these increases from the Employer?
Here's our thoughts:
In times where we face high inflation and price escalation, contractors have to allow for anticipated increases in costs when they price a job.
This is a guessing game. Whether a contractor takes a conservative view, or a protective view depends on how competitive they wish to be with the tender.
Bearing in mind that low margins may be acceptable, a loss making situation will be a road to disaster so most contractors will adopt a cautious view.
Let's also look at this from the employer's perspective.
This could lead to a situation where the Employer pays for a higher risk of inflation than will actually occur. To combat this, sensible employers will share the risk. They will pay for actual increases in costs rather than the tenderers’ “belt and braces” estimate.
If an employer does take this step, the employer will include a price escalation condition within the contract.
Such a clause provides that the tender should be priced on the costs prevailing at a base date, which is set during the tender period. The contractor will subsequently be compensated for actual increases which occur during the contract period.
This may include all costs. The increases would be calculated using published cost indices, or a list of base costs with increases calculated by comparison to subsequent invoiced costs. In other words, the contract will not be a “fixed price contract”.
Unfortunately, many contracts were entered into when inflation was reasonable. As a result, many projects in progress do not include such provisions. Most contractors are in a situation where they have to bear the current risk of cost increase.
We wait to see if employers will adapt the risk management strategy of including cost escalation provisions...
Need support with your contracts or projects? Get in touch to see how our experienced team of consultants can help.
Are Construction Experts Good Value For Money?
When speaking to clients or submitting proposals for consultancy work, we are often told that that the project is losing money. Therefore, the client can’t afford to employ external construction experts to assist them.
But in these cases, perhaps some clients do not have their eye on the bigger picture. A project in which we were recently involved illustrates this nicely.
One of our clients was working on a large project in the Middle East. They asked us to prepare extension of time claims related to COVID.
This client is a very good contractor. However, their project controls systems leave quite a lot to be desired. They recognised that preparing such a claim was beyond the skill set of their project team and appointed HDP.
A lot more time and effort went into proving the delay than usual. The main cause of this was the client’s inaccurate progress updates. Nevertheless, the time and effort were worthwhile. Ultimately, the claims were successful, resulting in relief for our client from circa US$5M of delay penalties.
Everyone was delighted with the result. The client understood that they would have been very unlikely to achieve such a result on their own. But how much had it cost them?
Our client’s investment in our expertise amounted to significantly less than one percent of the damages had the claims not been successful.
When you put it like this, construction experts seem fairly cheap don’t they?
When there are significant amounts of money involved, either from delay penalties or claimable costs, you look at the cost of external expertise differently. It should seem obvious from the above example: the decision to employ experts was the right one. But, you should base that decision on the potential return of money, rather than the upfront cost of external expertise.
When you look at it this way, you’ll be able to make much better decisions, leading to a better chance of profitable projects.
Hewitt Decipher Partnership’s expert consultants have been preparing and responding to claims for many years. We know how to comply with good practice to ensure that you have a justifiable claim. Where you do have entitlement, we will ensure that your claims are accepted in a timely manner.
Can we help you? To find out how, get in touch.
Andy Hewitt
FICCP, FCIOB, FCInstCES, FQSi
Managing Director
Hewitt Decipher Partnership
Dedicated Solutions from Trusted Professionals
Email: andy.hewitt@hewittdecipher.com
FIDIC Green Book - What's New in the 2021 Edition?
The FIDIC Green Book – What’s New in the 2021 Edition?
FIDIC have recently launched a new edition of the Green Book. We’ve taken a look at the 2021 edition and summarised the key similarities and differences with the earlier 1999 version.
What’s the Same in FIDIC Green Book 2021?
- FIDIC recommends that the Green Book is used for low-value projects (less than US$ 10M) and larger projects that are either straight forward, involve repetitive work and/or have a low-risk profile.
- It is a relatively short form of contract and requires less contract administration than the other main FIDIC contracts.
- The risk profile remains balanced.
- The provisions remain relatively uncomplex with simple contractual concepts.
- Design may be provided by the Employer or the Contractor.
- Options exist for pricing and evaluation of the Works.
What Are The Changes?
- Additional clarity introduced to some of the conditions.
- New provisions.
- Inclusion of flow charts.
- Inclusion of pro-formas for notices, requests, and similar administrative procedures.
- Risks are clarified.
- Some additional obligations exist for both parties.
- The inclusion of more express rights and obligations.
- The introduction of an “Engineer” to administer the project.
- The addition of a ‘Contract Data’ proforma, to cover information particular to the project.
- The inclusion of a formula for calculating prolongation costs.
- Intention to claim must be notified within 28 days. There is a requirement to submit claims within 56 days.
- The adjudicator is to be appointed within 28 days of the Contract being effected. The adjudicator also provides dispute avoidance advice.
In 2017 the Red, Yellow and Silver Books became more complex in terms of contract administration. As a result, we see the improved version of the Green Book as a viable alternative for many projects.
As always, however, give careful consideration to the nature of the project, the likely risks and the Employer’s goals before selecting the most suitable form of contract. And as always, if you need any help, don't hesitate to get in touch today.
A Tribute to Roger Knowles
It was with great sadness that I learned of the passing away of Roger Knowles.
Many people will know Roger by reputation through his books and training courses or in a professional capacity and it is without doubt that Roger was an expert in his chosen field as well as an astute businessman. Most people will not, however, know much about Roger, the person. Although I worked for JR Knowles in the Middle East and I only met him on a few occasions, we kept in touch, and he became something of a mentor to me and a great influence on my life.
When I was contemplating writing a practical book on claims, he not only encouraged me, but introduced me to his publishers and wrote the foreword to the book. I am currently working on my sixth book, so Roger helped to kick-start all these publications.
When I was not happy with my current employment, he suggested that going it alone might be an option. This eventually culminated in me being a director and partner of a consultancy practice offering similar services to JR Knowles.
After my first book was published, several readers contacted me wanting to know if I could recommend any training courses on the subject of construction claims. When I contacted Roger to see if he knew of anything available, he not only suggested that I create a course, but also volunteered to share the presentation of the first course to be delivered in London.
On one occasion, we were enjoying lunch by a hotel pool in Dubai when we started talking idly about the fact that claims had become a specialist sector of the industry and consequently deserved some sort of professional recognition. A year or so later, the Institute of Construction Claims Practitioners was born with Roger as the first president. The ICCP now has many members throughout the World and teaches best practice and sets standards for the management of claims.
In his book, Someone Up There Likes Us, Roger tells of the time in the 1970’s when he had decided to offer a one-stop dispute resolution service and says that he considered ‘that my client’s entitlements, whether in respect of time and/or money, should be encapsulated in one fully comprehensive document headed “Construction Claim”. The Claim would tell the story of the events relating to the dispute which could be understood by anybody unconnected with the project, without having to refer to any other documents or person.” This simple goal set the standard for the compilation of claims and is something that we are still observing in our consultancy work and teaching on training courses almost 50 years later.
Thank you, Roger, for your mentorship, inspiration, and support - you have left a great legacy.
My condolences go out to Roger’s family.
Constructive Acceleration Successfully Claimed
Outside of the United States, claims for constructive acceleration usually fail. However, in a recent Australian case such a claim succeeded. Does this now open the way for contractors to deploy constructive acceleration claims?
Introduction
'Constructive acceleration' describes a scenario when a contractor claims an extension of time ("EOT") for completing its works, but the employer wrongfully fails to grant an EOT. The consequence is that the contractor decides to accelerate the works in order to meet the unadjusted contractual completion date. A claim based on constructive acceleration is one for the additional costs a contractor incurs in taking measures to accelerate. This may include using additional labour or plant resources, or paying a premium for overtime working.
The predominant legal theory of a constructive acceleration claim is that the failure by the contract administrator to grant an EOT constitutes a breach of contract attributable to the employer. The additional cost incurred by the contractor in accelerating represents a loss recoverable as damages. The acceleration is "constructive" because it does not arise from any express instruction given to the contractor to accelerate. It comes about because the contractor has attempted to complete the works by the unadjusted date, to mitigate what would otherwise be the delay to the project.
Third-Party Contract Administration - The Problem:
A potential difficulty with constructive acceleration claims arises if a third-party consultant administers the contract. It may be the case that the contract does not (expressly or by implication) make the contract administrator the agent of the employer in respect of the assessing of EOT claims.
If that happens, a problem may arise where the contract administrator fails to grant an EOT when one should have been granted. Contractually, it may not amount to conduct which is attributable to the employer, and for which the employer can be liable in damages.
This potential difficulty does not arise, however, where
- (i) the contract is administered by the employer or its representative.
- Or: (ii) the employer and the contract administrator have wrongfully colluded with a view to denying the contractor its true EOT entitlement.
The latter situation arose in a recent Australian case.
V601 Developments Pty Ltd v Probuild Constructions (Aust) Pty Ltd [2021] VSC 849
The case concerned a dispute between V601, the Principal, and Probuild, the Contractor. It relates to the development and construction of a residential and commercial development project in the state of Victoria, Australia.
- The contract was an amended Australian Standard Contract AS4902-2000 form (the "Contract").
- The Principal commenced litigation seeking liquidated damages under the Contract. In its defence, the Contractor argued that the project manager, acting on behalf of the Principal, failed to allow its EOT claims. The Contractor therefore counterclaimed for the cost of accelerating its work to meet the unadjusted completion date. In effect, it made a constructive acceleration claim.
- The Contractor contended, among other things, that it 'accelerated' the performance of the works. This was to try to reduce or overcome one or more of the delay events in its EOT claims. Or, alternatively, to try to achieve practical completion by the date for practical completion certified by the project manager.
- The Contractor argued it had a right to recover the costs incurred in accelerating these works, because of the project manager's failure to
- (i) approve updated versions of programmes.
- And/or (ii) grant in full the EOT it should receive.
Claim Allowed:
The court allowed the Contractor's constructive acceleration claim, finding that:
- The Principal, through its project manager, breached the Contract by not awarding and compensating the Contractor for its EOT claims. It was important to the court reaching this conclusion that the Principal and the project manager had engaged in "contractually wrongful conduct". They colluded with a view to denying the Contractor its proper EOT entitlements;
- The Contractor could in principle recover the additional costs it incurred in its efforts to overcome and minimise delay to the works;
- The Contractor's acceleration costs were necessary and reasonable costs incurred in mitigating the delays to the works;
- The Contractor's acceleration costs were within both parties' contemplation; and
- The Contractor took the necessary and reasonable measures to accelerate the works and overcome or reduce delay to achieve practical completion by the dates for practical completion.
Commercial Implications
The facts of V601 v Probuild were relatively uncommon:
The Principal and the project manager had evidently colluded with a view to defeating the Contractor's justified EOT claims. Wrongful interference by an employer with a contract administrator's functions constitutes a breach of contract. This, in turn, opens the employer to a claim for damages for what foreseeably flows from that breach. The breach may include (as here) a claim based on constructive acceleration.
We may distinguish V601 v Probuild from other, more usual cases. Cases where the employer and the contract administrator do not wrongfully collude together. Perhaps the contract administrator, acting genuinely but mistakenly, will simply "get it wrong".
The laws in England, Australia and other common law countries (the US aside) don't take the line that failure to grant an EOT by a contract administrator (where it should happen) opens the door to a constructive acceleration claim.
For this reason, as the Society of Construction Law Delay & Disruption Protocol noted in 2002, "it is not recommended that a claim for so-called constructive acceleration is made". The 2017 edition of the Protocol cautions that constructive acceleration is "rarely recognised under English law".
Nevertheless, conceptually the common law does permit constructive acceleration claims in certain circumstances. This is vividly illustrated by V601 v Probuild where a constructive acceleration claim succeeded. The case also illustrates the empirical notion that wrongfully denying a justified EOT claim simply stores up a problem for another day.
This guest piece was authored by Julian Bailey, Partner, and Caitlin Lloyd, Associate, at White & Case.
Can we help you? To find out how, get in touch.
Help! I'm Going to Finish Late and I'm Losing Money
Recently we have had several contractors approach us who have advised us that they are going to finish late and/or are losing money. When they do, they tell us they need to submit a claim.
The first thing we do when approached about such matters is ask about the reasons for the delays and losses. In many cases, we find these events happened much earlier in the life of the project. However, no claims have been submitted.
It is astounding that some contractors don't realise that they will finish late and lose money until the project is nearing completion. I don’t believe that is the case. In reality, these contractors have a complete misconception as to the reasons to submit claims.
A claim is simply an assertion of a party’s rights under the contract. The trigger as to whether to submit a claim should not rest on whether the contractor needs extra time or payment. The trigger should be whether the contractor has entitlement to extra time and/or payment. Waiting to see if you will finish on time or lose money at the end of the project will inevitably place the contractor at a huge disadvantage.
Most construction contracts make it an obligation to submit claims within a set time frame from the occurrence of the event which gives rise to the claim.
There are good reasons to submit claims on time:
- To ensure you deal with claims as the project progresses.
- So that each event is the subject of a separate claim, as opposed to consolidated claims for several events.
- Keeping matters simple: Several bite-sized claims are easier to prepare and to respond to than one huge, complicated claim.
- So that the Engineer and Employer can make timely financial provisions.
- To ensure the Employer is aware of revised completion dates and may make appropriate arrangements.
- So that the project has a new completion date that all participants may work towards.
If the Contractor leaves the submission of claims until it is apparent that they need extra time or payment, they will most likely face the following problems:
- The Contractor may not have kept the contemporary records to substantiate your claims.
- The Contractor may not have submitted notices which may be conditions precedent to an award.
- The Contractor’s own staff and those of the Engineer who have knowledge of the events may have moved on.
- The preparation of the claim is likely to be a huge, complicated, and daunting task which will take time and expertise.
- The review and assessment of the claim is likely to be huge, complicated, and daunting task for the Engineer, which will take time.
- The settlement of a single, huge claim can stall because parties cannot agree a few items.
- The Employer will probably not have made any financial provisions for additional payment.
- The Employer may feel ambushed and that the claim is adversarial which will cause him to be defensive.
- Once the project has been handed over, there is little incentive to the Employer to settle claims amicably or in a timely manner.
Points to Remember:
The time to submit claims is as soon as an event arises which provides entitlement to an award. Do not wait until you have reached the end of the project and already run out of time and money.
Hewitt Decipher Partnership’s expert consultants have been preparing and responding to claims for many years. We know how to comply with good practice to ensure that you have a justifiable claim. If you do have entitlement, we can help you ensure your claims are accepted in a timely manner.
Can we help you? To find out how, get in touch.
Webinar - International Arbitration in India and Around the World
On 7th September 2021 we hosted an 'in-conversation' style webinar on international arbitration. Chaired by Paul Gibbons, four world-class experts in construction, law and dispute resolution examined the latest developments in construction and dispute resolution.
You can watch the video here, or read the write up from the event below.
Construction contracts around the world end in dispute if not done correctly from the start and working on international projects can raise unique challenges. Rupa Lakha, disputes lawyer at Charles Russell Speechlys advises that minimising the risk of disputes is completely dependent on what you put in at the outset.
There is a tendency to want to get things started quickly. However, slowing down and carefully considering things like the appropriate procurement model, level of resources priced for and whether the programme is realistic, can pay dividends in the long term.
It is important early on to pay heed to warning signs. If it looks like the price of a project is too cheap, this could be a red flag. Be realistic and invest time at the beginning and during every stage. Don’t take unnecessary risks. Set the contract up to deal with every factor, the legal aspect, the risk and the technical aspects. Consider what the project is aiming to deliver and ensure everyone is on the same page.
Minimising Risk
Looking at minimising risks from the contractor’s perspective, Mitesh Vekaria notes that it is important to use a pre contract services agreement if you can. As an Employer, it may be tempting to put all the risks onto the contractor but it is not always the best way forward.
Spend the time you have early on. Make use of workshops, education and training for everyone and ensure they spend time on this stage. If employers put time in their Gantt chart specifically for this, it would make such a difference.
Mitesh goes on to say you can avoid having to go down the litigation route by ensuring clear communication with all stakeholders and CEOs. Nobody wants to end a project in dispute. Clear communication can help the people involved stay detached enough to work things out without the need for any use of litigation and a shooting match.
Warning Signs
As a project progresses, there can often be warning signs that a dispute may arise. Rupa warns us to take notice if notices start being fired off or letters start coming in. If use of the contract becomes defensive, you know there is a problem. People are trying to protect themselves rather than work with others and use the contract as a tool.
Once disputes become inevitable, delay analyst Tom Francis explains that the biggest issue often becomes a lack of good records. People seem to not keep their records. That can make the difference between winning and losing. If you keep a good trail of evidence any claim is likely to be more successful. Photographic evidence is very important. The culture of construction needs to evolve so evidence keeping and record keeping becomes the norm.
On the subject of notices, Tom thinks attitudes need to change. Giving notice should be a positive thing, a warning sign.
Experts
So what is the role of an expert in a dispute? In Tom’s experience it is important to be clear what your instructions are. Are you a claims consultant/expert, an advocate at an early stage? What is your exact role and what input do clients want? Advocate and expert roles are very separate and the difference needs to be clear especially when it comes to arbitration and litigation.
Formal Dispute Resolution
David Brynmor Thomas QC of 39 Essex Chambers explains what our options are in the event that a dispute does arise. He says every contract should have a final and binding form of dispute resolution included, usually either litigation or arbitration.
If you do not include any clause, then you line yourself up for the potential of immediate litigation in court. FIDIC, the construction contract widely used on large international projects, uses arbitration as its default form of dispute resolution. Another option is expert determination - this is often seen as 'cuddlier' than arbitration and litigation to many. David explains this is in fact wrong.
Statutory adjudication is an option for quick simple disputes. However, David advises that one of the better options for large international projects would be the use of dispute review boards or DABs. However, he warns that many put these boards in place but then they are not used correctly. Effective dispute review boards visit the project regularly. They ask what is happening, is the programme on time, is anything slipping, are there any problems? By asking the right questions, they can see if the project is going wrong anywhere.
Be Prepared
Rupa stresses the importance of getting your advisors in early, in preparation for the dispute resolution process. You need legal advice pre contract and continue working with your advisors throughout the life cycle of the project. That way they can help tackle any problems that may arise in any stage of the project.
If you allow a problem to grow, then only bring an advisor in at the end, it becomes very difficult and very expensive. It also means you take valuable resources away from the project.
Formal dispute resolution is sometimes necessary and appropriate. However, there is value to having lawyers involved from the start. Little and often is when advisory works best, helping you avoid problems getting too big.
David agrees and advises to work with the legal team who put the contract and the project together continually. Having an expert or a consultant like Tom on the programming makes matters better as well. They can make sure you are using notices correctly and appropriately. A programmer can make the barrister's job much more straight forward should disputes arise later.
Mitesh adds that for his larger projects, he advocates for them to demonstrate due diligence little and often with the use of delay analysis and programmers throughout.
Clear Roles and Responsibilities
Construction disputes are different to other disputes. Rupa explains that they need an interface between the lawyer and the expert. A good close relationship is essential between the sharing of information and knowledge. The legal knowledge and the technical knowledge need each other to work, they rely on each other and that is fundamental. That is very particular to construction disputes.
Tom warns us to be wary of blurring the line between being an advocate and expert. He asks can you honestly put yourself forward as an independent expert if you were involved in the writing of the contract? The key here is being open and clear with your past and present roles. Make sure your role is clear from the start before you get into a tricky situation.
Thank you to all the speakers and attendees. Should you need any help with any of the issues raised in this webinar, please get in touch today.
The Top 10 Things Contractors Get Wrong When it Comes to Claims
At Hewitt Decipher Partnership we have many, many years of experience of claims. We have prepared them for contractors, responded to them for consultants and employers and have provided expert reports on them in disputes. We often see the same issues crop up time and time again. So to stop you making those mistakes, we’ve put together a list of the things that contractors frequently get wrong when it comes to claims.
1. Failure to give notice.
The giving of notices is usually an obligation and is often a condition precedent to entitlement. Yet, contractors frequently either do not give notice or when they do, the notice is not submitted in a suitable form, or does not contain adequate information.
How to avoid this mistake?
Firstly, make sure you give notice. The form and manner in which you should submit your notice will usually be set out in your contract.
2. Failure to submit claims on time.
If you leave your claim until the end of the project, it will be harder to resolve. If the project has been handed over, this will become even more difficult.
How to avoid this mistake?
Submit your claim as soon as you become aware of the problem. Our friends at Claims Class have some useful advice on the timing of claims and notices in this blog.
3. Submitting consolidated claims.
Contractors seem to like to wait until several delay events have occurred before submitting an extension of time claim and then they submit one claim for several events. This is not good practice. Firstly, this delays the submission of the claims for the early delays. Secondly, one large, complicated claim is harder to respond to than several individual claims. Finally, if they employer doesn't agree with one event, the settlement of the whole claim will be held up.
How to avoid this mistake?
Don’t hold up the submission of claims. Submit your claims as and when issues occur and keep them simple. Don’t confuse multiple issues, and make it easy for the employer to assess your claims.
4. Failure to keep records.
You must substantiate any claim you submit. This substantiation will rely on contemporaneous records. If robust contract administration systems are not created and administered, then it becomes difficult to substantiate the matters relied upon in the claim and the claim will fail.
How to avoid this mistake?
Records, Records, Records. Keep and maintain good records. Decipher have some useful advice on what ‘good record keeping’ actually looks like in this video.
5. Failure to provide accurate progress reports.
Contractors are often “creative” when reporting on progress because they don't want to give bad news or face criticism. If no delays were reported contemporaneously, it subsequently because difficult to change the story in a claim for an extension of time.
How to avoid this mistake?
Be honest about the position of the project. If you can see a potential delay on the horizon, report it as soon as you are aware so sets can be taken to mitigate. Don’t bury your head in the sand and wait till it is too late – be proactive.
6. Failure to maintain accurate updated programmes.
To demonstrate the effect of claimable delays, you will need an up to date version of the programme. They are vital in a claim situation. If these do not exist or they are inaccurate, the demonstration of delay and cost entitlement will become difficult.
How to avoid this mistake?
Keep the programme up to date and be sure that it reflects accurate progress on the project. Don’t be tempted to manipulate the programme to avoid showing delays to the completion date.
7. Failure to link cause with effect.
For a claim to succeed, it is necessary to demonstrate that the event had an effect on the completion date and /or entitlement to payment.
How to avoid this mistake?
Follow our ‘Four Corners of a Claim’ method of claim preparation. This will make sure you have included everything necessary for the claim to be accepted.
8. Failure to establish contractual entitlement.
Contracts provide remedies to the contractor if certain types of events occur. The claim must demonstrate that the contract provides entitlement to compensation for the event on which the claim is based.
How to avoid this mistake?
Make sure you understand the contract and your obligations and entitlements. Often the contract is not referred to until problems arise, at which point it is too late. Strong contract administration will help you be sure of your entitlement.
9. Inadequately expressed claims.
It is not enough for entitlement to exist – it must be demonstrated. If the respondent cannot understand the claim or if the claim does not contain sufficient information for the matters relied upon to be verified, an award will not be forthcoming.
How to avoid this mistake?
Include the relevant information, appendices and evidence to back up your claim. Make sure it is presented clearly. Make it clear and easy for the employer to follow and understand. Paul has some useful advice on preparing claims in this podcast.
10. Lack of claims expertise.
It is unlikely that a contractor would employ a plumber to carry out electrical installations. Why then do contractors leave the preparation of claims for what may amount to huge sums of money to inadequately qualified, inexperienced staff who have little expertise?
How to avoid this mistake?
Bring in help early. It is often tempting to wait until a problem occurs, but by that point it is often too late. Getting support from the outset of the project, either in the form of training, contractual advice or claims management support can help you avoid issues later on.
Hewitt Decipher Partnership’s expert consultants have been preparing and responding to claims for many years. We know how to comply with good practice to ensure that a justifiable claim is presented in such a way to ensure that it is accepted in a timely manner and so that disputes are avoided.
Can we help you? To find out how, get in touch.
Why do contractors make so many mistakes when it comes to notices? (FIDIC 2017)
FIDIC 2017 Notices: A new book by Andy Hewitt
In the many years I have been helping people manage their construction contracts and claims, I don’t think I have come across a single issue that causes more problems than notices.
Failure to comply with contractual obligations related to notices often leads to disputes.
Over the course of the last twenty years, I have delivered training on managing claims and avoiding disputes all over the world. Notices are one of the most common issues attendees ask about.
So, what is it about notices that causes people so many problems?
Mistakes
Some of the most common mistakes include failure to:
- Give notices when obliged to do so by the contract.
- Give notices within the time-frames specified in the contract.
- Properly identify communications as notices.
- Record the necessary information within notices.
- Cite the contractual clause under which the notice is given.
- Address and/or copy the notice to the correct party.
- Deliver the notice to the place specified in the contract.
- Deliver the notice by the means of communication specified in the contract.
FIDIC recognised that these failures were causing significant problems and leading to disputes. So, in the 2017 editions of their contracts they introduced a contractual definition of a notice. They also added significantly more obligations to give notices and more opportunities to give notices than the previous 1999 editions.
But are these changes enough to address the problem?
Failure to properly administer the contract is a top cause of disputes. After many years in this field, I know that project teams often put the contract away in a drawer, only to dust it off when problems occur. Often, project teams are unaware of the implications of contract clauses and don’t fully understand their obligations.
I hope my new book will help make things simpler.
Solutions
In FIDIC 2017 Notices, I examine each clause of the 2017 editions of the FIDIC Red, Yellow and Silver forms of contract that require notices to be given by the Contractor, the Employer and the Engineer. Consequently, for each, I provide an explanation of why, and under what circumstances, each notice is required. I’ve also included real-world, written examples of typical notices for each clause, to make things event clearer.
My hope is that this new book will help make dealing with notices clearer for anyone working under FIDIC 2017.
If it sounds like this might be useful to you and your project team, you can order your copy here. Alternatively, get in touch or find out more about bespoke training on FIDIC 2017 for your team.
Delay & Progress Updates | why honesty is the best policy
There are many ways that contractors can shoot themselves in the foot when it comes to claims. Being less than truthful when reporting progress to the employer’s team is one of them. This is a problem that we often face when we have been brought in after the contractor has already suffered delay and realises that he/she needs assistance to secure an extension of time.
Why Honesty is Always the Best Policy
Yes, it's tempting to report good news month-on-month. And a less than competent consultant on the employer’s side may even believe the reports. After all, good news will not lead to additional and tricky work for them.
The problem with this is that if delay occurs and the contractor needs and has entitlement to an extension of time, it then becomes very difficult for him to subsequently tell the employer’s team:
“I know we kept telling you that there was no delay to the completion date but actually, there is and it’s not our fault, so please can I have an extension of time.”
A progress update, as-built programme or updated programme (all different names for the same thing) is created by using the latest agreed programme. Actual start and finish dates are added for each completed activity along with the percentage progress for activities in progress, as of the data-date of the update. The logic contained in the programme and the programming software will then predict the completion date based on progress to date.
Before I started to specialise in contractual matters and claims I was a project manager for both contractors and consultants. I found that when my planning team produced a progress update, I wanted only one thing from them and that was…
THE TRUTH.
If the update predicted early or on time completion then I knew that we were doing okay. However, if the update was predicting a delay, then the planners need to tell me the cause, or causes, of the delay so that we could take appropriate action.
If the delay was caused by us or was due to something that we were responsible for under the contract, we had to find ways to recover the delay. Possibly by working longer hours, mobilising additional resources or mitigating delays caused by a supplier or subcontractor.
If the delay was caused by the employer or by something which is considered the employer’s risk under the contract, then we needed to identify this, ensure that the necessary notices were submitted and make preparations to submit a claim.
So, what would I report to the employer’s team in our monthly progress reports under such circumstances? Again…
THE TRUTH.
Burying Heads in the Sand
Many contractors will not agree with this tactic. Often they will be reluctant to tell the employer’s team that the project will experience delays for any reason. If the contractor admits to his own delay but explains the steps that he is taking to mitigate, then generally, the employer’s team will accept that delays do happen. In addition, they will accept that the contractor is being proactive about dealing with them (or, at least I would). Telling the employer's team that the predicted delay is due to something that gives the contractor the right to an extension of time will only support subsequent claims.
This, of course, only works if the contractor is not going to just bury his head in the sand and hope that the delay will go away, which it probably won’t. The contractor must actually take mitigating action to recover his own delays. Or they must ensure that the necessary notices are sent, and a claim is submitted without undue delay.
So, what is the alternative to telling the Employer’s team THE TRUTH? Unfortunately, many contractors manipulate the forecasted parts of the programme so that it no longer predicts a delayed completion date. Subsequently, avoiding giving the employer’s team any bad news.
The fact that this knee-jerk reaction is not sustainable through many progress updates. It will also not support any legitimate claims for extensions of time seems lost on such contractors.
Fact or fiction? I will leave you to decide the best way.
Hewitt Decipher Partnership’s expert consultants have been helping contractors with efficient contract administration, programming and planning, as well as preparing and responding to claims for many years. We know how to ensure you prepare and use your programmes correctly and properly, so as to preserve any entitlement to extensions of time. Can we help you? Get in touch.