Construction Claims and Contracts

Administration

RICS Dubai
06 November 2019
Presented by: Kieran Chauhan BSc (Hons), MSc, FRICS, FCIArb
Kieran@hepher.com
www.hepher.com
About the Speaker
Kieran Chauhan BSc (Hons), MSc, FRICS, FCIArb
 Partner at Hepher Associates Limited, a Claims, Dispute Resolution and Contracts
Specialist Consultant based in Dubai.

 Provide consulting services to contractors, subcontractors, consultants and employers

within the GCC region in the following areas:
o Construction claims;
o Contractual advice;
o Programming, planning and delay analysis;
o Expert witness;
o Arbitration;
o Disputes;
o Commercial and quantum;

 Started career as a Quantity Surveyor in the UK

 Fellow of the RICS (FRICS), a Fellow of the CIArb (FCIArb), BSc in QS&CM and a Masters
Degree in Construction Law and Dispute Resolution.
Learning Outcomes
 Understand the differences between the different types of Claims in Construction;

 Identify effective forms of Contracts Administration;

 Be aware of the various methodologies available to support the preparation of

Claims for Time and/or Costs.

 Recognise the significance of Contracts Administration in Construction Claims;

Types of Claims in Construction

 What is a Claim?

"Claim" means a request or assertion by one Party to the other Party

for an entitlement or relief under any Clause of these Conditions or
otherwise in connection with, or arising out of, the Contract or the
execution of the Works.

FIDIC Conditions of Contract for Construction for Building and

Engineering Works Designed by the Employer Second Edition 2017
Types of Claims in Construction
 What different types of claims are you aware of in construction or have on your
projects?
Types of Claims in Construction
 Mostly likely to encounter the following especially in the UAE:

 Delay Claims

 Acceleration Claims

 Variation / Change Order Claims

 Disruption Claims

 Prolongation Cost Claims

 Liquidated Damage Claims

Types of Claims in Construction
Basis for a Claim – Applicable to ALL

 Federal Law No. 10 of 1992 Civil and Commercial Transactions Law concerning the
Law of Evidence
 FIDIC 2017 - Sub-clause 20.1 and 20.2 – see next slides for extract
 Cause and effect - the claiming party has the evidential burden to
 — Show a contractual entitlement to claim
 — Demonstrate that the facts trigger the contractual entitlement to claim
 — Establish delay/costs incurred
 Only proven losses can be recovered - speculative claims are inadmissible
Types of Claims in Construction
Basis for a Claim – Applicable to ALL

 FIDIC 2017 - Sub-clause 20.1 and 20.2

Types of Claims in Construction
Basis for a Claim – Applicable to ALL

 FIDIC 2017 - Sub-clause 20.1 and 20.2

Types of Claims in Construction

Why do Claims Happen?

 Unsuitable procurement

 Poorly drafted contracts (including the programmes)

 Uncertainty regarding what constitutes the contract

 Unrealistic deadlines

 Refusal to collaborate/cooperate
Types of Claims in Construction
Contracts
What contracts do you use?

 FIDIC Conditions of Contract for Construction for Building and Engineering Works
Designed by the Employer Second Edition 2017

 Sub-Clause 20.1 deals with Claims

 Sub-Clause 20.2 deals with Claims for payment and/or EOT

Types of Claims in Construction
Delay Claims
 Delay Claims – Usually where a Contractor files a claim because the project is delayed
pursuant to the CoC.
 Examples of Excusable or Non excusable delays.

 Excusable delays e.g. e.g. access, variations, late nominations etc.

 Non excusable – e.g. slow progress, lack of manpower, design errors etc.
Types of Claims in Construction
Delay Claims

 Excusable delays TFC

Baseline Programme

Excusable delay i.e. no access

Extended TFC
Types of Claims in Construction
Delay Claims

 Non-excusable delays TFC

Baseline Programme

Non-excusable delay i.e. slow

progress

Not extended TFC

Exposure for LD’s

Types of Claims in Construction
Acceleration Claims

What is Acceleration in Construction?

 Acceleration of a construction project is pretty simple.

 It’s when the work being performed must be done at a quicker pace than planned.

 Generally, acceleration occurs after project delays have been encountered.

 However, acceleration could also become necessary if the scope of work increases
during the life of the project;

 or if the finish date is moved up for some reason.

 Generally, the instruction to accelerate work will come via change order.
Types of Claims in Construction

Acceleration Claims

What are Acceleration Claims in Construction?

 Acceleration claims are claims for payment;

 that are made as a result of the costs associated with speeding up work;

 typically consisting of overtime payment, compensation for increased scope of work,

change orders, supplementing the workforce, and more.

 When work must be accelerated during the life of the project, the compensation for
that acceleration leads to acceleration claims by the parties performing that work.
Types of Claims in Construction
Acceleration Claims
Types of Acceleration?

 Voluntary Acceleration - Contractor decides to accelerate their work on their own,

voluntarily. NO entitlement to claim costs.

 Directed Acceleration - When a contractor is directed to accelerate the project

schedule. YES entitlement to claim costs.

 Constructive Acceleration - Constructive acceleration occurs as a result of the

situation. It’s not explicitly laid out like directed acceleration, but it’s also not
undertaken solely based on the contractor’s decision like a voluntary acceleration.

Excusable delay -> EOT requested -> EOT refused -> Constructive Acceleration
Types of Claims in Construction
Variation Claims
Variations
 Variation (sometimes referred to as a variation instruction, variation order (VO) or change order);

 is an alteration to the scope of works in a construction contract in the form of an addition,

substitution or omission from the original scope of works.

 Almost all construction projects vary from the original design, scope and definition.

 Variations may include:

 Alterations to the design.

 Alterations to quantities.

 Alterations to quality.

 Alterations to working conditions.

 Alterations to the sequence of work.

Types of Claims in Construction
Disruption Claims
Disruption

 Difference between disruption and delay?

 Complex topic can do a full session on this alone in summary:

 Disruption refers to a loss of productivity due to a hindrance or interruption of the

progress of the construction works which reduces the rate of efficiency.

 If disruption is caused by the employer, the contractor may have grounds to seek
compensation.

 Delay relates to lateness rather than productivity, although they can often be
related. Delays can cause disruptions, and vice versa. Despite their inter-
relation, they require a different approach to assessing claims.
Types of Claims in Construction
Disruption Claims
Disruption

 Contracts less prescriptive for disruption claims.

 Contractor must provide reasonable evidence that:

 Progress of the works has been disrupted.

 Which element of the works and which trades have been disrupted, why losses
occurred, and so on.

 The disruption incurred additional costs.

 The cause of the disruption constitutes a breach of contract.

Types of Claims in Construction
Disruption Claims
Disruption

 Several methods can be used to estimate loss in relation to disruption, including:

 Measured mile analysis: Compares actual labour performance between two periods
– a normal measured mile period and an impacted period.

 Baseline productivity analysis: A more conservative estimate used when an

unimpacted section of the works is too difficult to isolate.

 Earned value analysis: Compares the amount and cost of work that was planned to
have been done by a particular stage with the amount that has actually been done
and what it has actually cost.
Types of Claims in Construction
Prolongation Cost Claims
Definition?

 Definition contained in the Society of Construction Law Delay and Disruption

Protocol;

 the term ‘prolongation’ refers to 'the extended duration of the works during which
time-related costs are incurred as a result of a delay’;

 usually recognised as the additional projected time required to complete a contract

extending beyond the contractual completion date.
Types of Claims in Construction
Prolongation Cost Claims
 The contractor may incur additional costs as a result of having to remain on site for
longer than anticipated
 Heads of Claim:
 On site staff costs;
 Plant and equipment;
 Consumables, utilities etc.;
 Bonds/insurances;
 Labour camp;
 Transportation;
 Finance costs;
 Head office overheads;
Types of Claims in Construction
Prolongation Cost Claims

 RECAP

 Excusable delays

 Which period would the costs be recovered from?

TFC

Baseline Programme

Excusable delay i.e. no access

Extended TFC
Types of Claims in Construction
Liquidated Damages Claims
Definition?
 FIDIC 2017 - "Delay Damages" means the damages for which the Contractor shall be
liable under Sub-Clause 8.8 [Delay Damages] for failure to comply with Sub-Clause 8.2
[Time for Completion].

 Common law jurisdictions - liquidated damages.

 A typical clause will provide that should the contractor fail to complete by a date
stipulated in the contract, or any extended date, he shall pay or allow the employer to
deduct liquidated damages at the rate of ‘X’ per day, or week, for the period during which
the works remain uncompleted.

 Under UAE law, despite what the parties may have agreed, the court (or an arbitrator)
has the ability retrospectively to change that agreement, to ensure that the damages are
equal to the loss that has been suffered. The parties are not able to contract out of this.

 Dubai Court of Cassation – 138/94

Types of Claims in Construction
Best Practice Claims

 A successful claim should prove four key elements:

 Cause,

 Effect,

 Entitlement

 and Substantiation.

 Demonstrating these matters in claim documents is KEY otherwise Claim may FAIL
Forms of Contracts Administration

 Contract administration refers to the task or function of ensuring that a construction

contract is executed in accordance with the terms of the contract

 Pre-award Contract Administration duties:

 Contract establishment
 Planning
 Specification development
 Contract documentation
Forms of Contracts Administration
 Post-award Contract Administration duties:

 Monitoring Contractor performance

 Payment approval

 Review Invoice in line with progress on site

 Correspondence / records filing

 Change Management

 Remedies for non-performance or sub-standard performance

 Dispute Resolution

 Contract Close-out
Methodologies
DA Methodologies
 CA will also support DA methodology to support claims for time and/or costs;

 There are numerous forensic schedule analysis methods that can be used to
quantify delays that occurred during a project. The most common delay
analysis methods are as follows:

 Impacted As-Planned

 As-Planned vs. As-Built (As built but for delay events)

 Time Impact Analysis (TIA) (during project usually)

 Windows Analysis

 Complex Topic similar to disruption so could do a full presentation on it

Significance of Contracts Administration in Claims
Records
• The three most important things in preparing a successful claim are the 3 R’s:

 Records,

 Records and;

 Records
Significance of Contracts Administration in Claims

https://issuu.com/constructionbusinessnewsme/docs/fullmag_cbnme0518_issuu
Significance of Contracts Administration in Claims
Monitoring Contractor performance
How is this done?

 Programme

 Progress reports – daily, weekly, monthly

 Site logs
Significance of Contracts Administration in Claims
Monitoring Contractor performance
Types of Programmes
 The Contractor’s Programme or ‘Baseline’ Programme
• Most forms of contract require the contractor to submit a programme within a stipulated time frame
(FIDIC Red Book 28 days)
• Programme will become the baseline against which to measure delays

 Revised programmes
• Should circumstances affect the programme – additional work, re-sequencing of the work, delays,
etc. – then the programme may be revised accordingly
• The programme should also be revised to take into account extensions of time

 Updated programmes
• Updated programmes should be produced and submitted to the Engineer on a regular (monthly)
basis
• An updated programme, or as-built programme, will record the actual progress up to the data-date of
the update and predict the events after the data-date of the update
Significance of Contracts Administration in Claims
Correspondence / records filing
Types of Correspondence

 Letters / Notices;
 Reports;
 Meeting minutes;
 Instructions;
 Submittals;
 RFI’s etc.
Significance of Contracts Administration in Claims
Letters / Notices – What Constitutes an Effective Notice

 Follow express wording of the Contract Agreement

 Generally:

 Formal letterhead, letter Reference, Contract Reference, Project, Date,

Authorised signatory

 Title – reference to the event

 Ideally one letter per notice (do not bundle multiple notices)

 Meeting Minutes can be relied upon but should not replace formal notices.

 Avoid verbal discussions and emails (informal)

 A poor notice is better than no notice at all – ideally must comply with CA

 Make it timely
Significance of Contracts Administration in Claims
Timebars

 Definition:
 A limit in time as to when an action may be taken, such as claiming for Time and
Costs on a construction project.

 Most contracts in the UAE have time bar clauses for example FIDIC 2017:
Significance of Contracts Administration in Claims
Timebars

 Defence:
 Freedom of contract and contracts to be interpreted in accordance with their terms

 Shar’iah principles that ‘valid claims do not expire’

 10 year limitation period under the UAE Civil Code

Significance of Contracts Administration in Claims
Timebars

 Defence:
 Freedom of contract and contracts to be interpreted in accordance with their terms

 Shar’iah principles that ‘valid claims do not expire’

 10 year limitation period under the UAE Civil Code

Summary
 Understand the differences between the different types of Claims in Construction;

 Identify effective forms of Contracts Administration;

 Be aware of the various methodologies available to support the preparation of

Claims for Time and/or Costs.

 Recognise the significance of Contracts Administration in Construction Claims;

Questions