Notices

things contractors get wrong when it comes to claims

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 does to 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.


FIDIC 2017

Why do contractors make so many mistakes when it comes to notices?

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 I am asked about by attendees.

So, what is it about notices that causes people so many problems?

Some of the most common mistakes include:

  • Failure to give notices when obliged to do so by the contract.
  • Failure to give notices within the time-frames specified in the contract.
  • Failure to properly identify communications as notices.
  • Failure to record the necessary information within notices.
  • Failure to cite the contractual clause under which the notice is given.
  • Failure to address and/or copy the notice to the correct party.
  • Failure to deliver the notice to the place specified in the contract.
  • Failure to 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 had been included in the 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.

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. 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.


Money and Cashflow

Cashflow and the Contract

Cashflow and the Contract. Dominic Mondino

Cashflow is essential for business.

Everyone will be well familiar with the well-worn trope, “cashflow is the lifeblood of the industry”. As well-known American businessman, Chris Chocola once said, “balance sheets and income statements are fiction, cashflow is a reality”.

So, what can we do to improve and maintain cashflow, ensuring suppliers and staff can be paid and the business remains solvent?

Some Key Points to Remember

Firstly, and fundamentally, read and understand your contract.  Remember that with standard form of contracts, amendments are very common and if not considered correctly, are likely to trip you up.  Understand your contract, make notes, and schedule out any pertinent clauses.  Particularly, clauses relating to dates, durations, timeframes for submission of notices and payments.  Timeframes are critical no matter what contract you are working under or the location of your project.

It is important for you to understand the type of contract you are signing up to. Check the contents, the supporting appendices, the extent of amendments to the contract and the impact these may have on cashflow.

Typical Contract Risks and Elements to Consider

Looking at standard forms of contracts, they will typically advise of similar obligations. These will include:

  • Key personnel and their responsibilities.
  • A requirement to state a starting date, a completion date, access dates and any sectional completion.
  • Provisions for the price to be payable in the form of a BQ or Activity Schedule.
  • A variation mechanism, and timeframe for notification and response.
  • Options for employer design or contractor design responsibility.
  • A mechanism for making the contractor responsible to provide quality and workmanship in accordance with the contract.
  • A process for accepting any contractor’s defects.
  • Valuation mechanisms for payment and timeframe for notification and response.
  • Various options to suit the size, complexity, type of work.
  • A process for dealing with defects and resolution of disputes.

All these elements need understanding. If understood correctly, this can assist with maintaining effective cashflow. If you miss or misunderstand any element, payments may be delayed and costs incurred.

With regard to payment periods and notices timeframes - be particularly vigilant.

What you have agreed on one contract with a particular employer, although it may be the same standard form of contract, may have been subject to amendments. Therefore, be mindful of this, allow time for review and consideration, and to become familiar with the amendments and their impact, before they are agreed.

Change and Variation in Contracts

With regard to Variation Notification Timelines on projects, different contracts take different approaches. Some examples of that are highlighted by the following example clauses (this is by no means a comprehensive list):

  • In the JCT form of contract, most popular in the UK:
  • 3.5 - deals with changes by the employer.
  • 3.6 - the time for confirmation of change by the contractor.
  • 3.7 - the time for confirmation of verbal changes.
  • 3.9 - the instructions that require formal agreement.
  • 5.2 - valuation of change and the rules around other forms of change.

And for the NEC contract:

  • 6 - deals with variations (or ‘compensation events’).
  • 61.1 - compensation events from the project manager.
  • 61.2 - the requirement to issue a quotation.
  • 61.3 - requirements for compensation events from the contractor.

And for FIDIC (based on the 2017 Yellow Book):

  • 3.3 deals with instructions from the engineer
  • 13.1 deals with the right of the Engineer to vary the contract.
  • 13.4 deals with payment and subsequent clauses deal with different elements of cost on a project.
  • 13.7 tackles the issue of costs arising from changes in the law of a country.
  • 20.1 addresses the requirement to give notice of delay or additional costs.

Concluding Points

In conclusion, there are a few key points to take away:

Where variations arise, try to agree these promptly. Remember vesting: off-site storage of materials may qualify for claims in the valuation. Check the timing of deliveries in terms of notices and notifications / responses to any changes. Liaise closely with your project teams on valuation cut off dates in order to avoid disappointment.

Depending upon your local legislation, you may need to look to the local law and how it interacts with the contract. If something is not covered by your contract, local law may take precedence. Even where something is covered by the contract, local law may overrule it. This is particularly important in the Gulf region as a result of the civil code systems of law.

Effective communication and maintaining good relationships is key.  Ensuring valuations are accurate is a result of good communication with your suppliers and with the person paying the bills. Good communication may smooth the way for prompt payment.

Remember to check any contract amendments.  Amendments may shift risk from places it may be expected, to places it may both be unexpected and unwanted. They can also conflict with existing standard clauses, so be sure to watch out for those and if unsure, seek advice - our team of consultants will be happy to chat.

Dominic Mondino, based on a talk delivered February 2021


FIDIC 1999 Notices - Andy Hewitt's Latest Book

At the end of 2019 I was working with a contractor-client on several extension of time and additional cost claims and, as is necessary in any claim, I needed to demonstrate that the contractor had complied with the contractual notice provisions.

This client had sent some notices. In most cases though, these didn't comply with the contract requirements and in many cases they were completely meaningless as notices.

The Proposed Solution

It was clear that those responsible for contract administration on the projects were unclear about what a notice should contain and how it should be composed. I suggested to our client that it would be a good idea for me to prepare drafts of the most common notices so that their contract administrators would have a starting place when composing notices on their projects. Our client liked the idea and agreed. A couple of weeks later, a Notice Manual was distributed to all the projects.

An Idea Was Born

It then occurred to me that this client isn’t alone in their lack of understanding of notice provisions of FIDIC. During my considerable time working as a claims consultant I have noticed that failure to provide notices in the correct format is one of the biggest mistakes made by the parties and those appointed to administer a FIDIC contract.

And that was the lightbulb moment.

I decided to write a book on the subject: FIDIC 1999 Notices: A Guide to the Requirements Content and Composition of Notices Under the Red, Yellow and Silver Books.

The book examines each clause of the FIDIC Red, Yellow and Silver forms of contract that require notices to be given by the Contractor, the Employer and the Engineer. It contains explanations of why, and under what circumstances, each notice is required and provides real-world, written examples of typical notices for each clause.

This is what Dr. Cyril Chern, (Barrister, Chartered Architect, Chartered Arbitrator, Adjudicator, Accredited Mediator, Dispute Board Expert) had to say about it in the foreword:

FIDIC contracts are the basis for most of the world’s major infrastructure projects and also for most of the litigation that arises from these projects. For example, a typical FIDIC notice provision states that notice must be given within 28 days of any event the result of which is that the date for completion ‘is or will be delayed’. What does this mean? What is the notice to look like and what is it to say? And this is where the problem starts.

In my role as both an adjudicator and arbitrator of FIDIC matters, what is most common is the lack of proper notice, timely notice, and intelligent notice but nowhere does FIDIC set out how these are to look and what they are to contain. There are no exact standards to guide the Contractor (nor the Employer or Engineer) and as a result, large amounts of time and money are lost in litigating these issues after the fact, rather than having clear standards to rely upon and prevent problems in the first place.

FIDIC 1999 Notices: A Guide to the Requirements, Content and Composition of Notices Under the Red, Yellow and Silver Books by Andy Hewitt provides both the Contractor and Employer/Engineer as well as their advisors with the needed information and clarity for each of the steps in the construction process under FIDIC contracts (1999 versions) and generally and most importantly doesn’t just ‘talk’ about the issue but gives actual examples which can be used and/or modified for use on any FIDIC project worldwide for maximum benefit.

The book covers first the administration of notices and what is involved and then moves into the necessary Contractor’s notices which form the bulk of claims seen both in a dispute board setting as well as in arbitration—was notice given, what did the notice contain, was it sufficient, why yes and/or why not, and all the needed information for every situation and for every sub-clause of the standard FIDIC contract. Then it delves into the Notices required by both the Employer and its Engineer, thus covering all aspects of any project.

This is a ‘must-have’ and ‘go-to’ book for any Contractor, solicitor, barrister, Engineer and Employer who uses FIDIC contracts, and its information will save time and money for all those who use it. I highly recommend this book.’

If this sounds like something that might be helpful to you or your company, get your copy from Amazon UK or Amazon.com.

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 do not lose your entitlement and if you have entitlement, to ensure that your claims are accepted. Can we help you? To find out how, get in touch.