Construction claims: entitlement

We have dealt with the preparation of construction claims for various issues, from routine prolongation assessments through to more complex loss of factory overheads claims. The reason we are running this mini-series is because we often see attempts of varying quality prior to our involvement, so we hope these practical tips will help those preparing and responding to claims.

And where better to start than at the start? If there is no entitlement, then there is no claim, so it makes sense to start with entitlement and provide you with some top tips and practical guidance.

Read the contract

An obvious but often misunderstood issue. You cannot make the contract say what you want it to say after you have agreed to it. You might think it’s unfair that it doesn’t say what you want it to say, but the words of the contract are the words of the contract. You need to work with what you have agreed to, for good or for bad.

In the JCT 2024 Standard Building Contract, it is Relevant Events (listed at clause 2.20) and Relevant Matters (listed at clause 4.20) that provide entitlement to recover time and cost, respectively. In the NEC4 Engineering and Construction Contract (ECC), the events giving rise to both time and cost entitlement are listed at clause 61.

When you review a contract, and before you sign a contract, you should thoroughly check any amendments to these contract clauses. In effect, the standard form will represent the industry-standard risk allocation, and any amendments will change that risk profile.

Sometimes that shift in risk transfer can be dramatic, so be careful, and if you decide to take the risk, then ensure that your programme and price allowances reflect the fact that you have taken that risk. If your programme and price are the same regardless of risk transfer, then there is a high chance that you are giving away risk for free, and, in my experience, that tends not to be very sustainable.

Trigger the contract clause

If an event occurs which entitles you to time and/or cost, then you should notify this in accordance with the contract. A common issue we see is a lengthy letter with a lot of emotion, documenting a lot of issues but not actually, or clearly, saying what the event is and what contract clause is being triggered.

Contrary to popular belief, a delay notice does not need to be extensive. If you were to really simplify it, then you should record that an event has occurred, describe what that event is, explain why it is a change to what was agreed, and state the contract clause that gives rise to your entitlement.

Too often we see situations where someone has tried to provide every last detail, and by the time they have issued the notice, they are either out of time or the issue has moved on. It is inefficient, so try and set up templates early in the contract which have placeholders for the pieces of information you need to provide. If you do this, then you can train the wider team to provide information to you in the format that you need to raise a notice.

Think of it a bit like a machine. The more you standardise what needs to be done, the more people know what needs to be done, and the more efficient and effective the machine performs.

Say what has changed

It is not enough to say something has or hasn’t happened. Yes, record that fact, but you are notifying a breach of contract, so you need to say what duty the other party held and why it has been breached.

A classic example is access not being provided. There is a notice that says access has not been provided, but it does not reference the access date that was agreed upon in the contract or, even worse, no access dates were agreed upon at all. In the latter example, how can there be a breach of an obligation if there is no obligation? A conundrum we are often presented with and asked to wave the magic wand.

When you issue a notice, describe the duty and the breach, and then you might not always be in a position to state what the impact is and therefore what time and cost you are seeking. The reason for this is, unless you are absolutely razor sharp with your programme updates and reconciliation, then the chances are you will do the programme work monthly and determine what events have impacted the critical path and the period of that impact.

Due to the latter, and depending on what the contract allows you to do, you should try and notify all issues quickly and then follow up in the same month with the impact of each event. It might be that some events are 0 days because they had a non-critical impact on the programme.

Through that process, which we will explore in our upcoming articles, you can focus in on the events that had a critical impact, and when it comes to extension of time discussions, you can focus on the events that had an impact.

Final reflections

If there is no entitlement, then there will be no time and cost recovery. It is nearly always the case that your entitlement will start with a notification, followed by particulars, negotiation and (hopefully) resolution.

The process of notifying events needs to be set up from day one and work like a machine during the project. You need project team members to feed information to you in the format that you need to put together notices efficiently.

When it comes to providing particulars and analysis to support your claim, the volume process of issuing notification turns into a much more skilled and sophisticated process. Over the next 3 weeks, Matthew Klinefelter BSc IEng MICE MCIArb will collaborate with us on articles focused on delay analysis.

Look out for that, and in the meantime, enjoy the rest of your week.

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