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Delay claim

8 replies [Last post]
Sat, 2005-12-17 11:51
manulal inasu
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Hi,

In the contract with our client we had to overhaul one equipment and because of the beyond repairable condition of the equipment we advised the client to replace it with a new one. we could have repaired it but the cost will be more than that of a new one. This being an item used in the defence system, we can not directly procure it and the client had supply the new one as per the variation. because of the delay in its procurement and other linked activities are getting delayed.( tasks in the original scope of work also getting delayed.)

Now what are the possibilities for delay claims?

Manu.
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Replies

Mon, 2005-12-19 14:44
#1
manulal inasu
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Darryl,

Thank you for your reply. I agree with you. This is quite a complicated issue. But the fact that there are more than 20 such cases in our project makes it more complicated.

The original contract says that we have to conduct the standard overhauling of the equipment (which is described by the OEM of the equipment in the service manual). After opening up and inspecting, any additional work which arises apart from the standard overhauling will be seperately estimated and quoted. Our estimation for the additional works proved it to be beyond economical repair.

I can understand that from different view points we get different solutions and reasonings for this issue.

Regards,

manu.
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Mon, 2005-12-19 14:32
#2
manulal inasu
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Norzul,

A variation order is exactly what you mentioned as a change order.

Regards,

Manu.
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Mon, 2005-12-19 05:11
#3
darryl khoo
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Since you have contracted to overhaul the equipment, is the cost of repair above what you have tendered for? If it is, then the client is doing you a favour by replacing it. You would also have cost savings as u mentioned that the cost of the replacement would be lower.

This is complicated as the client would be doing you a favour in terms of cost savings and at the same time delaying the job through late procurement or delivery of the parts. Sometimes, considerations of any proposals shouldn’t be made in relation to cost alone. Delivery of the material should also be considered. Was your client advised on that?

Regards

Darryl
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Sun, 2005-12-18 08:07
#4
Norzul Ibrahim
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Dear Shahzad,

Can yu elaborate further what do yu mean by Variation Order? Is it a procedure?

In my experience, change of work is because of a deviation from a previously approved contract provision (e.g. scope, time, cost etc.) Hence it denotes any increase/decrease, deletions/additions or alterations to the scope of work.

The way we normally do is :
1) Contractor to issue Change Notification - informing the client of the potential change.

2) Once approved by the client, the contractor will proceed with Change Proposal. Detail out the impact on schedule & cost.

3) Once agreed on the actual cost and schedule, the the contractor will proceed with Change Order or perhaps yu may call it Variation Order

The above is the normal procedure that we normally practised.

Thanks

norzul
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Sun, 2005-12-18 07:53
#5
Shahzad Munawar
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You can claim your additional cost through Varitaion Order only in this case.
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Sun, 2005-12-18 07:36
#6
Norzul Ibrahim
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If that’s the case, then proceed with the change notification...all the best Manu....
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Sun, 2005-12-18 00:00
#7
manulal inasu
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Norzul,

Thank you for the reply.

1.Its not a lumpsum project.
2.The term regarding supply of providing new equipment by our client is clearly mentioned in the variation order.
3.By "Beyond repair" I meant beyond economical repair.

Manu.
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Sat, 2005-12-17 15:13
#8
Norzul Ibrahim
User offline. Last seen 16 years 50 weeks ago. Offline
Joined: 17 Dec 2005
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Groups: GPC Malaysia, Petro-Chem / Oil & Gas

Hi,

In the contract with our client we had to overhaul one equipment and because of the beyond repairable condition of the equipment we advised the client to replace it with a new one. we could have repaired it but the cost will be more than that of a new one. This being an item used in the defence system, we can not directly procure it and the client had supply the new one as per the variation. because of the delay in its procurement and other linked activities are getting delayed.( tasks in the original scope of work also getting delayed.)

Now what are the possibilities for delay claims?

Manu.


It’s quite difficult to say without reading the actual contract. However, if in the contract, it is clearly stated that the scope of supplying the material shall be by the client...then it’s no doubt that the schedule delay is due to the client & yu have the right to claim.

But yu also mentioned that yu could have repaired... however the cost will be much more than the new one. Yu also mentioned yu can’t repair coz it’s beyond repairable conditions. This is not clear and can be item to be disputed and argued by your client.

If the contract is a lump sum turnkey contract, your client will not bother about the cost. In this type of contract, the cost is the contractor’s responsibility and is considered part of the risk....If I were your client and the contract is a lump sum turnkey type, yu will have difficulty to justify the claim....
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