Developing a commercial recovery strategy for an NEC water project

We supported a water sector contractor facing a difficult commercial position on an NEC project. Our forensic review examined the reasons for increased costs, the basis for challenging delay damages and the potential routes to recovery through the employer and the supply chain.

Background

The contractor was delivering a substantial treatment works upgrade and faced a forecast loss, continuing delay damages and the cost of temporary pumping and generation. Design changes, procurement delays and subcontractor interfaces had become intertwined with disagreements about sectional completion. The delay damages under review ran into several hundred thousand pounds.

The client needed to understand which costs arose from employer events, which might be pursued through subcontractors and which remained its own risk. Our appointment was to examine those distinctions and develop a practical recovery strategy, supported by the contract and project records.

Our approach

We began by reviewing the budget, costs and forecasts by cost head and period. Staff, plant, materials, subcontract packages and design costs needed to be considered alongside the delay damages and the continuing temporary works. This helped identify the sources of the forecast loss and the records and resource assumptions requiring further examination before costs could be advanced as a claim.

We then worked back through the contract baseline. Tender drawings, specifications and later design information were compared to establish what had originally been included and how the requirements had developed. A register identified missing drawings and information needed from the client. We brought the relevant records together for external legal advisers to consider questions of document precedence, notification and contractual entitlement.

The review also required a chronology of individual events. One workstream concerned an access walkway that had been instructed and then withdrawn. Although the abortive costs had been agreed, the time consequences remained disputed. The access staircase had been incorporated into the walkway design; reverting to a standalone arrangement required changes to its configuration. We traced the instructions, drawing revisions and correspondence to explain that sequence and the outstanding time issue.

For a separate control equipment procurement issue, we examined the sequence of instructions, approved supplier availability, design development, approvals and manufacture. This allowed the order date to be considered within the wider procurement history. The work identified both the evidence supporting the contractor’s position and the matters that required further explanation.

A central part of the review concerned delay damages. We set the sectional completion requirements alongside the remaining testing, commissioning, documentation and handover obligations. Separately, we examined the operator’s use of the works and whether that provided a basis for reassessing the deductions under the contract’s take over provisions. This required evidence of the nature of that use and the effect of outstanding work, rather than an assumption that the plant’s use established contractual completion.

We prepared an internal position paper setting out the strengths, weaknesses and information needed to progress that argument, together with a draft early warning and contractual notice. The documents distinguished the request for recognition of take over and reassessment of damages from the obligations still to be completed.

The supply-chain review considered design responsibilities, programme obligations, warnings, delivery records and interface issues. Potential subcontract recovery was tested against the contractor’s own actions and the relevant contractual limits. The resulting tracker separated matters worth progressing from issues for which the evidence or contractual basis was weak, and recorded the next decision or document needed for each route.

Outcome

Our work gave the client a structured recovery plan, issue chronologies and supporting draft documents for the principal commercial matters. It could consider the employer and subcontract positions separately, assess the strengths and limitations of each route and identify the further evidence needed.

The client chose to use the work to support a negotiated position rather than instructing us to progress the proposed steps. The value lay in turning a difficult overall loss position into specific commercial options, with a clearer understanding of the arguments available and their limits.