GUIDE FOR CONTRACTOR TO

CLAIMING LOSS AND

EXPENSES
BY AR RIDHA RAZAK
Introduction
Application of Loss and Expenses is a condition under the contract that
entitles the contractor to exercise his rights to an additional payment
under the contract. Without contractor’s application, it is very difficult for
contract administrator to assess contractors loss and expenses rights.

Common issues in Application of Loss and Expenses by contractor

There are many common problems that delay the process of EOT
application for the contractor. The most common problems are as follows:

1. Contractor does not claim for loss and expenses.

2. Contractor does not know their rights under the contract for Loss
and expenses rights in relation to the relevant events.
3. Inadequate information for Contract administrator to make decision
4. Contractor does not attempt to justify their Loss and Expenses
claim and expect the S.O to justify for them.

Guideline
This guideline is prepared for the following reasons:
1. To assist contractor in application of Loss and Expenses
2. A comprehensive standard format for contractor to follow.
3. To direct contractor on the required evidence needed as a
precedent to assess the Loss and Expenses by the SO

This guideline is prepared in reference to PAM contract 2006 condition of

contract.
Content

1.0 How to Apply L&E?

2.0 Consideration in preparing L&E claim

3.0 Sample Contractor Notification intention to claim

for L&E

4.0 Sample L&E application letter

5.0 L&E application checklist

6.0 Sample Contractor L&E application report format

7.0 Evidence required for L&E

8.0 Arrangement of application documents

9.0 Conclusion

10.0 Frequent questions on loss and expenses

 1.0

How to apply for L&E ?

Where the regular progress of the Works materially affected by any of the matters
expressly in contract, the Contractor has incurred or is likely to incur loss and/or
expense which could not be reimbursed by a payment made under any other
provision in the Contract, provided strictly following the process of claiming L&E in
the provision, the Contractor may make a claim for such loss and/or expense.

Condition Precedent to Loss and Expenses Entitlement

Under PAM Contract 2006, Contractor is to give a "written notice" to the Architect
informing him of the Contractor's "intention to claim such loss ad expenses". Such
written notice must contain 3 elements :-

1. an initial estimate of the loss and expenses he may require" duly supported
2. with all necessary calculation and
3. notice must reach the Architect within a stipulated time from the date of the
commencement of the Relevant Event, whichever is the earlier

Thus, the Contractor is to alert the Architect, within the stated time, any likely
additional claim to the completion of the Works.

The objective of this notice is to

1. Give the Architect the earliest possible opportunity to discuss with the
Employer on the additional claim

2. To ensure that the Contractor will so alert the Architect

3. The giving of such written notice by the Contractor "a condition precedent" to
an entitlement of loss and expenses

4. If the Contractor fails to give such a notice to the Architect, in the specified
manner, he will not be entitled to any loss and expenses.
Timely Submission of Full Particulars

After having given the Architect the required written notice the Contractor shall send
to the Architect "his final claim for extension of time within stipulated time of the end
of the relevant event.

Such final claim must be "duly supported with initial claim" to enable the Architect to
assess any additional claim to the following procedures:

1. submitting of "final claim" within the stated time

2. Contract must support his claim with "all particulars", necessary to

demonstrate how the Relevant Event cited by him has delayed, or will delay,
the completion of the Works with the necessary calculation claimed by him.

3. The need for limiting the submission of "final claim" to stipulated time of the
end of the cause of delay is to enable the Architect to assess the claim,
before the facts surrounding the claim become blurred by the passage of
time.

4. "If the Contractor fails to submit such particulars within the stated time (or
within such longer period as may be agreed in writing by the Architect), it shall
be deemed that the Contractor has assessed that such Relevant Event will
not delay the completion of the Works beyond the Completion Date", and that
he no longer requires the loss and expenses he notified the Architect earlier.
 2.0

Consideration when applying L&E application checklist

No Item to consider Relevant / Not
relevant
A Determining relevant Event
Check contract clause for entitlement of relevant event cause by
employer consultant or others

B Relevant event proof recorded in documents

Extract interim progress report
Extract site minutes
Analyze delay via architects instruction
Analyze delay via request for information
Analyze delay via clerk of work report / site diaries
Analyze correspondence letters
Provide proof of photos/images with dates

C Justify delay in relation to Additional / Amended works

Show that the additional / Amended works constructed is not to
near to the completion date
Explain scope of works of the additional/ amended works and its
effect to other works
Show whether there are additional team of workers and machine
for additional works.
Show duration of mobilization period

D Justify Machineries and man power

Explain the sequence of different trade
Explain specification of works in relation to drying period, handling
and etc
Justify machinery and man power via report
Explain site obstruction, machineries, existing works
Explain capacity of workers, machinery per day
 3.0

Sample Notification intention to claim for L&E

Ref:
Date:

SO address
Attn

Project title: Propose development ……..

-Intention to claim for Loss and Expenses

In reference to the above, we wish to inform you our intention to claim for L&E under
our contract clause ___. Our intention to claim is base on the following relevant
events:

No Reason Justification Clause

1
2
3

We shall submit our L&E claim upon completion of the above events for your
assessment.

Thank you

………………
Contractor

CC
 4.0

Sample L&E application letter

Ref:
Date:

SO address
Attn

Project title: Propose development ……..

-Loss and Expenses Claim no ___

In reference to the above, we are pleased to forward our L&E application under the
contract clause ___ for your consideration. The application is base on the following
events:

No Reason Clause Cost

1
2
3
Total

Attach supporting documents as follows:

1. L&E application report
2. Evidence in compliance to L&E application checklist

Your decision is widely appreciated. Thank you

………………
Contractor

cc
 5.0

L&E application checklist

Project title:

Reason for application

Reason: Clause of relevant event:

Completion of event date: Cost:

Checklist required Attached (Yes/ No)-
Provide reason if No
1 Copy of Notification letter
2. Brief report contains justification of loss and expenses claim,
intention of which relevant event to claim, detail breakdown of
additional cost incurred.
3. Architects/engineers Instruction/ Request for information related
to the event
4. Relevant Photos with dates
5. Relevant Copy of Site diaries referring to the applied dates.
6. Related Correspondent letters related to the event
7. Related Local authority letter related to the event
8. Related Minutes/ site possession minutes circle/highlighted to
the related event
9. Timeline justification of relevant event- to show sequence of
event, dates and days.
10. Others-
11 Others-

Signature by Project supervisor

……………………………………
Name:
Date:

Note :
 Application must be made with a cover letter and EOT application report.
 Each application of relevant event must use separate checklist to be attach with the evidence.
 6.0

Report Format
------------------------------------------------Cover page ------------------------------------------

CONTRACTOR LOSS AND EXPENSES NO __ CLAIM REPORT

PROJECT TITLE :

PREPARED BY :

------------------------------------------------Page 1 -------------------------------------------------

CONTENT

1. Summary of L&E claim

2. Summary of timeline
3. Propose revise work program

------------------------------------------------Page 2 -------------------------------------------------

1.0 Summary of application

No Reason/ justification Clause Cost Supporting

document
A Reason: Appendix a

Justification:

B Reason: Appendix b

Justification:

C Reason: Appendix c

Justification:

Total

The new propose completion date _____________.

 ------------------------------------------------Page 3 -------------------------------------------------

2.0 Summary of time line- Sample

Time Start 1st 2nd 3rd 4th 5th 6th 7th 8th
PARTICULAR
Week Week Week Week Week Week Week Week
1. VO work- Boundary fencing & gate
2. VO work- M.S. Grill to windows
3. VO works-Pump House
Delay material from NSC- UAC
4.
Ceiling to Eaves
5. Delay by NSC-Landscaping
6 Compliance to Syabas

TOTAL EXTENSION OF TIME : 8 WEEKS

------------------------------------------------Page 4 -------------------------------------------------

3.0 Propose Revise work program

 7.0

Evidence Required For Loss and Expenses Claim

Delay description Delay by
Late AI Architect
delay by the Employer in giving possession of the Site Employer
compliance with AI issued by the Architect in regards to postponement or suspension Architect
delay on the part of craftsmen, tradesmen or other contractors employed or engaged by the Employer
Employer
Delay/failure to supply materials and goods which the Employer had agreed to supply for the Employer
Works;
the opening up for inspection of any work covered up, testing any materials, goods or executed Architect
work
any act of prevention or breach of contract by the Employer; Employer
compliance with AI issued in connection with the discovery of antiquities under Clause 33.1; Employer

appointment of a replacement Person under Articles 3, 4, 5 and 6; Employer

compliance with AI issued in connection with disputes with neighboring property owners Employer

delay as a result of the execution of work for which a Provisional Quantity is included in the Architect
Contract Bills which in the opinion of the Architect is not a reasonably accurate forecast of the
quantity of work required;
failure of the Employer to give in due time entry to or exit from the Site Employer
suspension by the Contractor of his obligations under Clauses 30.7 and 30.8; Employer
suspension of the whole or part of the Works by order of an Appropriate Authority due to Employer/Arch
negligence or omission on the parts of Employer, Arch or consultant. /Consultant

Relevant event Explanation Evidence

Late Architect/ Engineers
Instruction
In order to found a claim under this 1. Notification to claim
Clause, the Contractor must :- 2. Brief report of application
(i) "specifically applied in writing" to Evidence
the Architect for "the necessary 3. Proof of work program vs Late AI
A.I." ; and 4. Photos with dates
(ii) submit such application to the 5. Site diaries
Architect "in sufficient time before 6. Timeline duration chart
the commencement of
construction of the affected Works,
to enable the Architect to issue the
necessary AI within a period which
would not materially affect the
progress of the affected Works,
having regard to the Completion
Date." Such "necessary A.I."
however, does not include A.I. that
was required "as a result of any
negligence, omission, default
and/or breach of contract by the
Contractor and/or Nominated Sub-
Contractor".
Delay by the Employer in Self explain 1. Notification to claim
giving possession of the Site 2. Brief report of application (justify reason
and clause)
Evidence
3. Copy of award letter
4. Copy of minutes for site possession
Compliance with Architect -Instructions arising from discrepancies 1. Notification to claim
Instruction issued by the in or divergences between any of the 2. Brief report of application (justify reason
Architect for : Contract and clause)
1. Discrepancies of Documents and any subsequent Evidence
contract document documents issued by the Architect ; 3. Copy of AI
2. Variations -Instructions requiring a variation ; and 4. Photos with dates
3. Suspension and -Instructions postponing or suspending 5. Site diaries
postponing work the executing of all or any part of the 6. Timeline duration chart
Works.
Delay on the part of Employer accepts liability for "delay on the 1. Notification to claim
craftsmen, tradesmen or part" of such people. However, its 2. Brief report of application (justify reason
other contractors employed application is restricted to delay or failure and clause)
or engaged by the in the execution of their work and not to Evidence
Employer delay caused by their returning to carry out 3. Copy of program highlighted on Others
remedial work after purported completion. works
4. Photos with dates
5. Site diaries
6. Timeline duration chart
Delay/failure to supply Employer accepts liability for "delay on the 1. Notification to claim
materials and goods which part" for material to be supplied by 2. Brief report of application (justify reason
the Employer had agreed to Employer in relation to contractors work and clause)
supply for the Works; program. Evidence
3. Copy of program highlighted for the parts
4. Photos with dates of parts that cannot be
completed
5. Site diaries
6. Proof material arrive
7. Minutes
8. Timeline duration chart
The opening up for the Contractor will be entitled for an 1. Notification to claim
extension of time, if he should suffer a 2. Brief report of application (justify reason
inspection of any work delay in the completion of the Works, as a and clause)
covered up, testing any result of such inspection and testing Evidence
unless 3. Photos with dates
materials, goods or
4. Site diaries
executed work (i) the results of such inspection and 5. Timeline duration chart
testing establish, that the
workmanship or materials are not
in accordance with the Contract ;
(ii) such inspection or test is ordered
by the Architect, as a result of
some previous "negligence,
omission, default and/or breach of
contract by the Contractor".
Any act of prevention or
breach of contract by the
Employer;
Compliance with AI issued in Self explain
connection with the
discovery of antiquities
Appointment of a
replacement Person for
PSP/SP
Compliance with AI issued in Self explain
connection with disputes
with neighbouring property
owners
Delay as a result of the
execution of work for which
a Provisional Quantity is
included in the Contract
Bills which in the opinion of
the Architect is not a
reasonably accurate forecast
of the quantity of work
required;
Failure of the Employer to Self explain
give in due time entry to or
exit from the Site
Contractor can claim EOT for act of 1. Notification to claim
prevention by employer. 2. Brief report of application (justify reason
and clause)
Evidence
3. Photos with dates if any
4. Site diaries
5. Timeline duration chart
1. Notification to claim
2. Brief report of application (justify reason
and clause)
Evidence
3. Photos with dates
4. Site diaries
5. Timeline duration chart
Self explain 1. Notification to claim
2. Brief report of application (justify reason
and clause)
Evidence
3. SO to assess
1. Notification to claim
2. Brief report of application (justify reason
and clause)
Evidence
3. Architect Instruction
4. Photos with dates
5. Site diaries
6. Timeline duration chart
Self explain 1. Notification to claim
2. Brief report of application (justify reason
and clause)
Evidence
3. Architects/Engineers instruction
4. Photos with dates
5. Site diaries
6. Timeline duration chart
1. Notification to claim
2. Brief report of application (justify reason
and clause)
Evidence
3. Award letter
4. Site possession minutes
Suspension by the Self explain 1. Notification to claim
Contractor for non payment 2. Brief report of application(justify reason
or termination of PSP/SP and clause)
Evidence
3. Architects Payment cert.
4. Contractors letter to remind for payment
to architect
5. Notice of suspension
Suspension of the whole or Self explain 1. Notification to claim
part of the Works by order of 2. Brief report of application(justify reason
an Appropriate Authority and clause)
due to negligence or Evidence
omission on the parts of 3. Letter from authority
contractor or NSC 4. Timeline duration chart

Note:
Relevant events as describe above applies for PAM contract 2006.
To determine relevant event for other contracts, refer to the conditions of contract.
 8.0

Arrangements of application documents

Application documents must be arrange in following order

1. Contractor application letter

2. Contractor L&E application report
3. Prior notice claim
4. L&E application checklist for each relevant event
5. Evidence for each relevant event
6. Timeline justification
 9.0

Conclusion

In short, if the claim is to be successful, it must :-

1 be submitted in time to prevent waive of rights

2 be supported by relevant information and details of the claim ; .
3 Understand the process flow as follows:
 9.1

FREQUENT QUESTIONS ON LOSS AND EXPENSES

Question 1:
Where a contractor is granted an extension of time, is there an automatic right to the recovery of loss and
expense?

Answer
1. NO. There is a misconception in the industry that if given EOT, L&E can be claim.
2. Contractor can only claim loss and expenses for affecting matters that falls under the contract.
3. Any other matters claim not within the clause shall not be within the jurisdiction of architect and QS
and shall be brought to common law and resolve between employer and contractor

Question 2
Will a contractor substantially prejudice its case for additional payment if it fails to keep adequate accurate
records?

Answer
1. The Contractor shall keep contemporaneous records of all his claims for loss and/or expense and
shall submit all particulars to the Architect
2. The time scale shall be in accordance to stipulated time in contract.
3. Therefore failure to comply will result in loss of entitlement.
4. Where record is to be contemporaneous or submitted within time scale, it is crucial for contractor
to made at time required.

Question 3
When a contractor fails to serve a proper claims notice or does not submit details of the claim as required by
the contract, can the architect legitimately reject the claim?

Answer
Yes. There are 2 condition that the contractor loses his entitlement to claim for L&E. The conditions are:
1. Failure to submit notice within a stipulated time under the contract
The Contractor has fail to set a precedent to any entitlement to the loss and expenses claim.
2. Failure to submit claim within a stipulated time under the contract
Contractor waive his right for L&E claim.

Question 4
With a programme shorter than the contract period, can the contractor/subcontractor claim additional
payment if, because of the timing of the issuance of the architect/engineer's drawings, he is prevented from
completing in accordance with the shortened programme?

Answer
No. Architect has no implied obligation as to issue drawing to allow contractor to complete work to meet
early completion programme.

Question 5
Where a contractor submits a programme (which is accepted) showing completion on the completion date
written into the contract, must drawings be issued in good time to enable the contractor to carry out the work
at the time and in the sequence indicated on the programme?
Answer
1. No. Architect has no implied obligation as to issue drawing to allow contractor to complete work
indicated in his programme.
2. It is the contractors obligation to apply in writing to the architect in sufficient time before the
commencement of the affected works to allow architect to give direction or furnish further drawing
within period which would not materially delay the progress of the affected works.

Question 6
Is a contractor/subcontractor entitled to recover the cost of preparing a claim?

Answer
Contractor shall require to follow the procedure for loss and expenses and submit particulars of his claim in
accordance to contract condition expressly stated.
Referring to this clause, it is the contractor obligation to prepare the claims under the terms of the contract
and submit it within time in order to claim for L&E. There for the cost of preparing the claim will be of no
entitlement for reimbursement.

Question 7
Where a delay to completion for late issue of instruction has been recognized, are loss and expense or
additional cost claims in respect of extended preliminaries properly evaluated using the rates and prices in
the bills of quantities?

Answer
Loss and expenses should be evaluated on the real cost and not the rates and prices in bills of quantities.

Question 8
Is a contractor/subcontractor entitled to be paid loss of profit as part of a monetary claim?

Answer
Not covered under the contract and within the jurisdiction of architect and QS. .
Contractor shall have to resolute to common law to be entitle for this claim base on loss of profit

Question 9
If a delay in the early part of a contract caused by the architect/engineer pushes work carried out later in the
contract into a bad weather period causing further delay, can the contractor/subcontractor claim loss and
expense resulting from the bad weather delay?

Answer
Yes. If the bad weather delay is a consequential delay cause by matters affected in L&E relevant event.

Question 10
Where one party to a contract is in breach and the injured party incurs loss, what obligations are there on
the injured party to mitigate the loss?

Answer
Where a breach of contract occurs,
The injured party shall take all necessary steps to keep the losses down to the minimum.
The losses which could have been avoided by taking reasonable steps will not be recoverable.