Claims?

Hi Andrew,



I am not sure what your question is, as I have not been on a NEC project where utility companies was used. However, on one of the projects I have worked (with the managing contractor) some of the contractors was directly employed by the client but managed by us. All the contractors or subbies have al the same rights under the NEC in terms of compensation events ("Claims"), etc.

On the project I am currently on we have some 800 utility diversions, some of which we use contractors to do, and others are done by the utility owners themselves. But as this is not a NEC project I do not know the correct answer to your question.



Regards



Philip.

Philip,



Is a Utility company employed directly by the Contractor a Sub Contractor under the NEC?

Hi guys,



Well put Daya, The NEC is also there to keep the lawyers out and the construction professionals in, without conflict.



The last post idea was good, a library of jargon, each individual thinks because he knows the jargon, everybody else knows it. This does not only relate to jargon, but also to terms. We sometimes refer to things by maybe brand names etc. I recently took some flack, because of the term ’Alimak’ in the program, because nobody knew what it meant, however everybody involved with the construction knew it was a ’rack and pinion personel hoist’ but that did not help the guys that did not know. I tend to use abreviations, I am used to, for example TRXF for transformer, andother simular things, maybe there is a scope for building a standard dictionary of abbreviations and terms, to include generic items and the like, a bit of a challenge to PP Admin.



Regards



Philip

Basically a susggestion to improve PP website - it won’t be a bad idea if we start compiling the planning related TLA’s (Three letter acronyms) as a resource in the site.

The NEC Contract is a legal framework of project management procedures designed to handle all aspects of the management of engineering and construction projects. Its benefits – stimulus to good management, flexibility and simplicity – can be applied to any project, large or small. It comprises of suite of contract documents and guidance books and a range of support services comprising training, consultancy and a Users’ Group.



for more information go to

http://www.neccontract.co.uk/

eh what’s NEC !!!

Hi Guys,



Lawyers have no place in construction, that is why we have quantity surveyors our bean counters/legal eagles. However, sometimes things get rough and you have to revert to the dirt of employing lawyers. The way out is partnering, ie transparency and honesty. The NEC is one route to achieve this, but the other route is to set up the system to work with commucation and genuine partnering to ensure the timely completion of the project. The problems usually starts when the planners become involved with legal issues rather than trying to find solutions to the problem. The object of planning is to find a way around late completion, not to provide, solutions to how much you can claim, this resides with the QS’s and the planners only provide backup.

At the end of the day, the costs for timeous completion has to be paid by the client, and with effective planning/partnering,’he’ will probably agree.



Regards,



Philip

Gwen,



I think the walkway was built conventionally but ended up as a flat pack - hence the problem!!!



Stay at home - that small bit of advice saved £1.5 million in fines and costs.

Nice one

What that flat pack or built conventionally?

I am sure the Swedish deisgner’s decision not to attend the legal proceedings in the UK was based on legal advise provided by a lawyer.



So, as you say Andrew they do have the potential to save a party a considerable amount of money.

For a PM who was never involved with a lawyer, I jumped ship and did a legal qualification!!!!!! I have seen lawyers save a party a very considerable amount of money so they have their uses. The reverse is also true.



As for Norweigians & Swedish (can’t remember which) - they just come over, build something that later collapses, kills a few people and then they sit at home avoiding the court fines and costs. Ramsgate Walkway collapse for those who are wondering what I’m on about.



I await Gwens reply!

there you go again gwen extreme hot

Lawyers are/should be the last resort. Both sides usually lose. Money sure, but more important reputation. By the time it gets to lawyers is a personality contest and not necessarily best for either company/party.

Any PM who has not been involved with a lawyer either has done a good job or had good press or of course compromised. He should be justifiably proud.

As a rule, Norweigians & Swedish just get on with the job and are pretty laid back, fair and square.

Coming from a Scottish person working in O & G in Norway not Civils Construction I burn bridges. I dont built ’em.

It is highly possible that the project employed a Dispute Board and so were able to resolve any problems amicably as the project progressed.



I wonder if anybody involved in the project reads this forum and could perhaps enlighten us?

Mimoune,



That is indeed very good news for the industry, however, what was not said was how they overcame what must have been a large number of claims submitted by the various Contractors.



Most Forms of Contract set out a series of procedures that must be carried out prior to Arbitration/Litigation i.e. Engineer’s Decisions, Amicable Settlement, Adjudication etc.



I would imagine the size of the Contractors involved on the stated Project had their own in-house "experts" which would have put together the claims and presented them to the Client for review/discusion/agreement.



The agreement of Claims really can depend on the mind-set of the contracting parties.

Mimoune



Only a few and major Contractors refer their Claims to arbitration/litigation. Mostly Contractors settle their claims during the negotiation of Final Account.



Your quoted example is really good for construction industry. Better to settle the claims amicably rather than refer the matter to litigation/arbitration to save time and money.

Mimoune,



And that’s the way it should be, and in reality is for the vast majority of projects. Don’t know how many construction projects happen in the UK each year, many thousand I’m sure of which a couple of hundred or so each year end up in court. The proportion is small.

hello all



Yesterday I saw a documentary about the construction of the link between Sweden and Norway in National Geographic channel, the Project manager was happy to say that during the nine years of the project he never saw a lawyer!!!!!!





mimoune

David,



The public authority point is well made. We can’t do a commercial deal with the contractor as the auditors will not like it excuse - one that is often heard. Therefore we have to have a third party decision/award - right or wrong I’m not sure, but it keeps the adjudicators busy in the UK if nothing else.



The contractor hasn’t provided us with the information!!!! Another excuse often put forward, but also often missing the point, (and sometimes the contractual obligation) that in the absence of the information the CA should still make his/her own assessment on the facts he/she has. If the contractor is then unhappy with the decision, tough, the contractor should have provided the information and only has himself to blame.



As for the side issue, it is certainly a well settled legal princple that a party should not benefit from his OWN default or breach, whether a party should be able to benefit from the OTHER parties default is alittle more complicated.



I’m thinking of condition precedent EoT notices and Employer caused delay - the contractor fails to give notice but the event leading to the delay was the Employers default and the remedy (award of EoT, etc) is covered under the contract.



The contractor is in breach of contract for not giving the notice, the Employers default caused the delay and which there would be an EoT awarded if notice had been given.



Can the Employer not give an EoT and charge LD’s even though he caused the delay or is it stalemate? Two wrongs don’t make a right as the saying goes however.

Bryan you are correct but David is also correct.



We need to try and avoid having to thrash it out in the courts as the only sure winner are the Lawyers



But if one party to the contract justly or unjustly think they are not to blame then it ends up in Court.



Sadly, however, quite often one party to the contract may try and get away from paying for their own mistakes.



It is therefore very important to keep good records of progress through out the contract.



Some Contracts are better then others and facilitate the need to give Early Warnings of Consequential Delays when memories are fresh.



Regards



Daya

David,



Your side discussion was covered 35 years ago in the following quotation.



Salmon LJ, in Peak v McKinney CA 1970, held “The liquidated damages and extension of time clauses in printed forms of contract must be construed strictly contra proferentum. If the employer wishes to recover liquidated damages for failure by the contractors to complete on time in spite of the fact that some of the delay is due to the employers’ own fault or breach of contract, then the extension of time clause should provide, expressly or by necessary inference, for an extension of on account of such a fault or breach on the part of the employer. ….There had clearly been some delay on the part of the corporation. Accordingly, as the architect has not made ‘by writing under his hand such an extension of time’, there is no date under the contract from which the defendants’ liability to pay liquidated damages for delay could be measured. And therefore none can be recovered.”



Best Regards

Hi Andrew,



Interesting in deed, my personal experience is that there is probably a 60/40 split. 60% in favour of those who do not believe they caused a problem, often hiding behind the "design development" and "you were late/underperforming in any case" arguments. [As a side discussion, is it right for one party to benefit from anothers culpable delays?]



The remaining 40% tend to be those who are waiting for the contractor to actually demonstrate their case (something that many contractors forget to do) or they are waiting for a 3rd party such as an adjudicator or arbitrator to tell them to pay the contractor. This latter point is often due to the fact that the CA is dealing with public money so he doesn’t want to be seen to ’just give it away’.



What are your thoughts?



David

David,



You are right when you say that in reality only a very small percentage of contracts end up in serious dispute.



You are even more right to point out that many disputes arise because of an unexpected action of one of the parties. The contractor contracts on the basis that the Contract Administrator will act impartially but this seem to be forgotten by many Contract Administrators!!!!!!



That leaves those where the parties actually believe that the position they’ve adopted is guenuinely right.



It woud be interesting to know what the actual percentage split between the two types was. Any suggestions?

Hi everyone, this is an intersting discussion regarding claims and their morality; it is worth remembering that in reality most projects do not end up in a dispute and an amicable conclusion is reached. I also note your comments regarding the management of projects and the use of the NEC and so on, however what happens to the contractor who receives his information late from the architect and suffers genuine delay to the project because of it. To make matters worse, the architect refuses to discuss the matter let alone award an EoT? Or the case of a gas pipeline being constructed under the NEC where due to a lack of resources, both sides agree to review the effect of the Change Orders when the job is finished; except at the end the CA/Engineer refuses any such review leaving the contractor out of pocket?



These are 2 actual scenarios under 2 different forms of contract and both featured respectable well know businesses - so what is one to do?



Fact is claims and disputes do exist and are as prevelant as they always were, they aren’t invented to keep the lawyers in the lifestyle to which they very quickly become accustomed...

Hi Guys,



The project I am involved at this time does not involve the NEC, but I try and apply the same principles of transparancy, and it has an effect of settling things.



My opinion of the NEC, after having used it it on two previous projects, is that it takes some education, and re-education in a lot of cases, but in eesence it sets the baselines for non-confrontational project management. You have to be fair and understand all the issues involved.



Regards



Philip

Philip,

can’t be doing too well cause the Claims Consultants and Construction Lawyers are still in business.

I think the NEC works cause you have knowledgeable clients who have a long term business interest in having a heathly industry over which they can exercise some direction. So they sacrifice any short term gains for longer term goals. If however the business climate turns the other way then would they stick to it?

Collectively this set up does produce some of the most expensive (UK) infrastructure in the world.

Peter,



I agree. Working in the building and (more recently) the turnkey power plant business for the past 20 years, there are still many hard-nosed attitudes in evidence, and nothing like the NEC contract on the horizon.



I also agree that the lawyers are now increasingly infesting the front end of jobs. When negotiating terms and conditions in the US, often we see more lawyers at the table than engineers and managers - and those lawyers will almost all be representing the client side! Indeed, there is often a reluctance for contractors to bring any lawyers into pre-contract discussions, for fear of appearing too confrontational.



Certainly in the business I work in, the odds are still well stacked against the contractor.



Regards,



John

Hi guys,



My experience, over the last couple of years, suggest that claims are on the decline, and moere so where NEC is used. The point is they are an unnecessary cost to the project. It was a 90’s thing, but the last time I saw a serious claim was at least 5 years ago, and it was resolved in camera by the client and contactor without litigation.



Regards

I propose that a good contract is one that a competent Client make with a competent Contractor; and where one is not trying to out do the other. Each party knows what is justly expected of them and also is responsible enough to shoulder their own mistakes.

Perhaps too much to expect hey !!!!!!!!!!!!!!!!!!!

Daya

I think thats why for the last 25 years the construction industry has been trying to change through a number of mechanism - better contracts being one. You could argue that it was in response to Clients perceptions, real or not of the industry rather than from any inherent sense that the industry was doing anything wrong.

I would still like some proof that the new strategies have lead to less legal involvement in the industry or have the lawyers just shifted their fee income from the back end to the front end of projects?

You must always bear in mind that Oil / Gas / Petrochemicals / Building etc industries have not gone through this sole searching and still quite like the hard nose attitudes.

I don’t agree with you Richard Rush. I think you are just trying to be controversial.

Philip Jonker is correct when he says that the NEC brings some sanity to the situation of claims. I have worked on a couple of Civils contracts under the NEC form of contract and it is the more intelligent approach to contracting, by sorting out the issues as you progress and high lighting early warnings before it becomes impossible to recover from.

Daya

Hi Richard,



I do not miss points, as I have been through the mill, and find claims longwinded and frustrating, never the mind I enjoy the challenge. What I am trying to say is that in my mind they are destructive to the companies that partake in them. It is much simpler to resolve issues on an ongoing basis than at the end of the project.

Like Richard says, why bankrupt contractors, when you can use them in the future, Not exactly his words, but I believe that is what he was inferring to. You answer that one yourself Richard.



Regards



Philip

Phil,

I agree. Its also I find very much industry specific. They all have different business drivers. Too many good contractors have gone bust on one or two bad contracts due to cash flow problems awaiting around for clients. They probably thought they had good arguments but in the end the banks don’t want to know.

Hi Guys,



I have worked on a substantial number of projects, with some serious claims in a few instances. I have also worked on both sides of the fence. My opinion is that claims are negative for all the parties concerned. In other words, clients that have a track record of claims against them are inviting higher tender prices as they are obviously have a track record of bad information, and as such a risk to work for. Contractors with a claims record, are seen as opportunists. Managing contractors with claims against them obviously are not managing as they should.



In the recent past I have done two projects under the NEC, and have found that it brings some sanity to the problem of claims. It solves the problem of claims, being produced towards the end of the project, and issues that could have been resolved at the time of the incident, being piled up, into some massive sum, and this leads the all kinds of arguments, and as a result arbitration and litigation, which ends up in massive escalation of the original amounts involved.



The NEC allows for a constant flow of discussions, and provides many ways to resolve issues on an ongoing basis. How do you eat an elephant? One bite at a time.



Regards

John

You have had a hard life

Peter,



I’ve been involved for contractors in lump sum EPC turnkeys for the past ten years, all of which have had bespoke contracts written for them. In only one of those contracts during that time has there been any provisions allowing arbitration to commence during the course of the project.



Prior to EPC turnkey, I was involved for contractors working in the traditional procurement system (design-bid-build). Without exception, all the clients that I came across under that system came up with any excuse in the book (and some not even in the book) to delay or prevent entitlement to the contractor, whether for extension of time, or payment for extras or claims.



With clients having the balance of power (client-friendly contract docs; contractors working on credit is a big help!) it stands to reason that they will do that - it’s just human nature. Everybody wants something for nothing.



I have not yet had the pleasure of being involved in this brave new world where both sides are in a "partnership" and talk openly about their problems. It all seems a bit touchy-feely and Dave Cameronish to me, somehow. Either that or maybe I’ve just had a hard life!





John

Don’t you have ongoing adjudication clauses in the contract just to prevent this Final Account problem

Dear all,



I am a contracts engineer in the construction industry. the situation of this discussion shows that both of you handled claims in defferent situations:



some times the Engineer as we call him here in jordan or the CA as you call him is a party that is concerned with his market reputation and causing costs that is the reason of poor drawings or defecte specs will render him non-professional, so he will keep rejecting the contractor’s claims and argue the contractor about his clear obligations and entitlements, to cover his failure hopping the arbitration later will not award the claim.



in other instances the under-estimation made by some contractors will make them try to recover some costs through claims.



this is evident and i have faced both situations

Hi Shazhad,



How long have you been in this business? There is is always going to be a case for a claim, but the latest thinking in the industry is to try and avoid them where possible, by early warnings, and discussing things openly. The point being is that there has been companies who made a businees of it.

Hi Jonker



I totally disagree with your reply and our approach to raise the Claims is not like that as you stated. Be acknowledge that those Contractors who adopt your stated way, not exist more in the Construction Industry. This is the fact.



The Claims are basically established by the Default of the Client and his additional instructions which are not envisioned by the Contractor at the time of Tender.



In addition to above the Contractor always raises his claims as per his contractual confines not over and above.



Yes, the settlement of claim may take time but there are rare chances that these are being settled during execution. Mostly claims are settled in Final Account.

Hi Shahzad



So you use the method Price (Bid) very low and make your money on extra’s.Wrong attitude when pricing. You are one of the reason why we have so much problems in the industry with this attitude. This is unethical because you are not pricing as per the specification.



What will you do if one day you have to Turnkey a project. ????

Jonker



Refer to your statement that "Claims should have been avoided in the first place"



If a Contractor follows your statement but his Client is unreasonable to settle these Claims then where the Contractor go? He waves off his claims?



Claim is actually prerogative of the Contractor as per Contract as well as his profit so such submissions are made to the Client to get his genuine and contractual right either during execution or completion stage of the project.



There are very rare chances that claims have settled during execution whereas mostly the claims are settled in Final Account.

The point is that is why we are planners, ie to foresee problems, and to try and plan how to avoid them. Sometime delays cannot be avoided, then early warnings must be given and all corrective measures put in place. There should not be any unresolved issues at the end of the project, unless one or both of the parties is unreasonble.

I have been involved with a few serious claims, and found the amount of work/effort put into them out of proportion with the effort that should have been put into the projects in the first place to have avoided the claims. As for litigation or arbitration, I have never got that far. The claims was always settled as soon as the correct documentation was in place. What this tells me is that the claims could have been avoided in the first place.

Roger,



Very true what you say, maybe I should have said - in the event of an entitlement arising.........

I think claims are not the norm. try and plan without them

was enjoying my beers till you guys came along

I think this thread stinks, but will climb in tomorrow, and add my views

Andrew,



You are correct with your comment record keeping, but the basis of any claim are the facts - or factual documentation and the contract. The records only supplement and quantify the claim showing the effect in terms of time and money.



But I still agree with good record keeping.



Roger

Sorry folks, saw this thread and thought it hadn’t been really fully answered. My answer is keep good records, more records and even some more records you never thought you’d need!!! Then you have the basis to make a claim or as I’d prefer to think - a valid entitlement to recover costs.