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.