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*~1
! AN INTRODUCTION TO~·CONSTRUCTION CLAIM
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* PREPARATION AND PRESENTATION
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* 'by *
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Alan H Tyler (ARICS). **
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* .Lecturer *
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** Loughborough University of Technology
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! 10TH OCTOBER 1990 SAVSIRIPAYA AUDITORIUM .~
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*! INSTITUTE FOR CONSTRUCTION TRAINING AND DEVELOPMENT *!
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THE PREPARATION AND PRESENTATION OF CONSTRUCTION CLAIMS

Unfortunately "Claims" is an emotive word which makes the


parties to a contract take sides and think the worst of each
other.

All parties involved in the construction business must accept


that construction projects are susceptible to a variety of
factors that may result in time and/or cost increases for which
legitimate extras should be allowed.

Everyone connected -ur l t n construction projects needs a better


understanding of all parties rights and obligations under
Construction Contracts. Employers and their consultants also
need a better understanding of contracting firms and the risks
they can be properly expected to undertake. In turn contractors
mu s t stop' looking for excuses every time something goes wrong
and accept their own errors.

All parties must recognise their own faults - if the contractor


does something wrong he must e x pe c to put it right if the
Employer/Consultant is at fault he must face the financial
consequences.

General Concepts

Any unresolved matter between the parties represents a claim.


Claims can be about the following.

- What is to be done.

The time in which it is, or has had, to be done.

- What. i::>to be paid.

To ask for an' entitlement under a ·contract clause is not a


claim unless agreement cannot be reached as to the amount of
the entitlement.

Whenever anything happens that affe~ts a contract the contractor


shoul~ always register-notice of a possible entitlement as
required by the contract. The not ice can always be witharawn
if no entitlement is forthcoming.'

We all need to understand the underlying Nature of Claims.


This un~erstanding helps in three main areas:

- Helps to establish grounds for claims

-i-elpsto. determine the consultants power to deal with the


Claim

- Helps to determine the ~asis of evaluation

It is genera 11 y accept ed that the re are th ree ma in ca t ego r ie s


of claims.

Contd 2/-
- 2 -

- Contractual Claims

- Extra Contractual Claims

- Ex-grat~a Claims

Contractual Claims

This is where the specific construction contract provides for


the event or circumstance being complained of and prescribes
a remedy.

This should always be the first line of consideration. It


is usually within the cnnau Lt ant s power to settle valid
Contractual Claims on behalf of the client.'

Extra Contractual Claims

This is where the cont ract do·es not ma ke express prov is ion
for the event. In these circumstances the injured party must
seek other means to recover his loss. This usually means going
to Common Law.

The clients consultant will not usually have the power to aeal
with such claims, though his Terms of Engagement can be amended
at a n y ti ill E'" b ya g re e 111e~n t , t 0 p~r0 vi d ~ t he .r equi red .p owe r s .

Ex~gratia Claims

These claims have no grounds in law as a contractual obligatior:l


has not been broken by either party.

Their only basiq is that a loss has been made due to an event
outside the control of both parties and that something tangible."
is sought, not just sympathy.

Anything paid is an "Act of Grace" and at very best an


acknowledgement of a moral, obligation. Such payments are a
matter f(fr the Employer uho: may well seeW' his consultants
advice.

Such a claim should only be entered into as a last resort.

General Principles of Glaims

Feeling that you have the right to a cliam is one thing, proving
it "is another. Most construction contracts put the onus of
proof onto the claimant.

Most people agree that a properly prepared claim which is well


presented helps to resolve the dispute. However, even" today
too many claims are badly presented.

Gontd •.•••.• 3/-


\

- 3 -

The main faults with claims is that they do not establish any
con t r act u a 1 bas is,. the y i n c 1u den 0 fa c t u a 1 r e cor d san d the y
make no attempt to link the liability and the quantification I
of the claim.
I
I
Claims should be formally presented and they should be
persuasive, objective and positive. They should also avoid I
verbosity, repetition and emotive statements.

The preparation
site with the
for
setting
a claim begins
up of efficient
as soon
record
as you
keeping
start
systems.
on I
For. any claim to succeed at a later date' it must be based on :/
fa c t u aIr e cor d s . The c 1aim will n e (d to d raw 0 naIl the - p r oJ ec t I
files and documents. \

Claim Presentation'

All claims should follow a logical order and should move almost
automatically from one section to the next.

It is generally better if the claim is divided into two parts


- the entitlement or liability and the quantum or evaluation.

The following are some suggested logical sections for a claim.

1. Establish Contract Particulars.

Too often we think that we. know what is included in the contract
and all the relevant dates and amounts.

You must check all the contractual details and make sure you
understand the contractual base for your claim.

2. Record All the Matters Affecting the Contract

In this section identify all the matters that affected the


execution of the Works and have any bearing on the claim.

This is the story of what happened, what actions were taken,


and by whom, and how they affe~ted the Works.

You nee d t 0 ba c k u P yo u r s t or y with factual records and


documentation. Also use graphs, charts tables and schedules
to illustrate you points, they are better than the written
word.

Any lack of records will come to light at this time when it


is really too late.

3. Establish Contractual Grounds

It is only after you have established all the facts that


affected the ocntract that you can establish the grounds of
your claim and identify the particular clauses which give you
the power to ask ~or additional time and/or payment •

'.
Contd ••.••••• 4/-
This is often not totally clear cut and you will have to 'rely
on more that one clause for a particular point. There may
also be fault on both sides.

This should be .acknowledged and the details left to the


evaluation.

4. Establish any Extension of Time'

Apart from claims for higher rates virtually all ~laims include
some time delay. As some of the additional cost may be time
related you must obviously establish the extension of time
before you can calculate the additional tim~_related paym~nts.

It is Lmportant that you do not try to prove a total time delay


if not all of the delay is relevant to the Employer.

Establishing a time delay is another area where you should


use visual presentations. Bar charts are usually not enough
as they are only lineal, it is better to use graphs plotting
progress against time. v,

5. Evaluate the Claim

In addition to the direct costs of actual work executed you


will need to evaluate the indirect costs of the prolongation'
cir,d disruption.
Prolongat ion costs come under the following headings- and a re
often knrrun as the Heads of Claim. They should be the costs
at the time of delay and not the Bill of Quantity costs.

1.1 Site Establishment

1. Site staff and non-productive labour (Agent, Foreman,


Gangers, Eng ineers, Bu r-ve vo r-a, Accountant s, Clerks,
"Secretaries, Drivers, Cooks, Cleaners, Watchmen, Etc.).

2. Temporary office and storage accommodation (Offices,


Sheds, Welfare Facilities, Laboratories, Etc. including
any rates).

3 • u ivi n g a c com mod a t ion (C a m'pus, R en t e d Pro per t y , Hot e 1 s ,


Et c .) .

4. PUblic utilities (Electricity, Water, Telephones, Etc.).

5. Meals (Canteen Expenses, Subsistence Allowances, Etc.).

6. Vehicles (Site Vehicles, Buses, Cars, Etc. excluding


any Plant).

7. Transport charges (Air Fares, Taxis, Etc.).

8. Sundry Expenses.

-Cnnt d ••••••• 5
• t Y'
{.

1.2 Plant, equipment and temporary works (Tower Cranes, Hoists,


S c a f f 0.1din g , Dew ate r in g E qui pm e nt , Sun dry PIa nt , E t c .) .
Major items of Plant specifically related to particular
activities are probably best included in the 'Disruption'
section of the Claim.

1.3 Increased costs (Labour, Materials, Plant, Et c . ) . Fixed


price -c crrt r ac t s or non-adjustable element of price
fluctuation contracts.

1.4 Insuarance Premiums (Fire, Injury to Persons and Damage


to Property, ECG or similar, Etc.).

1.5 Head office overheads and profit.

1.6 Financing CHarges (Interest on Retentions, Funding Bonds


and Guarantees, Interest on Additional Works, Etc.).

2.0 Disruption Costs

2.1 Labour and Plant (Standing Time, Reduced Output, Etc.).

2.2 Materials (Waste, Restocking', Double Handling, Etc.).

.3. f ex e _ _9 contract

3.D Acceleratio~
3.1 Labour (Overtime/Shift Working, Etc.). a~e~~a s (Additives,
Protection, Etc.). Equipment (Dryers, De ifiers, Etc.).

N'. B. The Employer's speci c authorisation


. is generally required to accelerate the
Works.

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