Unit 10: Contract Administration: Loss and Expense D39PZ: - PowerPoint PPT Presentation

...last week (or things you should now understand)  the difference between the Date for Completion and the Completion Date  the SBC/Q process by which the Date for Completion / Completion Date can be changed (i.e. “Adjustment of the Completion Date”) to award an “extension of time.”  the situations under which an extension of time would be granted  the nature and contractual purpose of Relevant Events  the nature and purpose of Liquidated Damages D39PZ: Procurement and Contracts 1

Unit 10: Contract Administration: Loss and Expense D39PZ: Procurement and Contracts 2 2

Claims for loss and/or expense Claim submission procedure Claim assessment procedure “Heads of Claims” D39PZ: Procurement and Contracts 3

“Claims?” SBC/Q does not accommodate “claims” other than insurance claims* Application for payment of Loss and Expense (cl. 4.23) SBC/Q allows the Contractor to make an application for payment of loss and/or expense cl. 1.10.1 (Effect of FInal Certificate) does mention “claims” - it shouldn’t D39PZ: Procurement and Contracts 4

In practice: “Claim” = Application for payment of Loss and Expense  We will adopt industry use of the word “claim” to represent an application by the Contractor for payment of Loss and/or Expense.  Note that a “claim” relates to money only - not time. D39PZ: Procurement and Contracts 5

Claims for loss and expense Claims:  are submitted to the Employer by the Contractor  are requests for additional payment due to:  the Employer’s non -material breach of the Contract due to: o action (or inaction) of the Employer (or its agents) o action (or inaction) of parties brought to the project by the Employer  are the Contractor’s request(s) for payment of loss and expense it did not expect to encounter.  are often associated with delays or variations D39PZ: Procurement and Contracts 6

Claims for loss and expense  Claims may arise for several reasons, including:  delays and extensions of time  disruption caused by the Employer or it’s agents  variations to the Contract  changes to the nature of the project  Overall, claims arise when the Contractor is required to perform work (or perform work using a method) that was not anticipated when the Contract was agreed. D39PZ: Procurement and Contracts 7

Claims for loss and expense  Claims are often viewed negatively - this should not be the case.  If the Contractor has genuinely incurred loss and/or expense due to the Employer’s actions, then they should be able to recover these costs.  SBC/Q gives the Contractor the right to recover these costs.  Contractors are fully entitled to submit claims, provided that:  they are not spurious  they are submitted in accordance with the requirements of SBC/Q. D39PZ: Procurement and Contracts 8

Claims principles  Claims are a form of damages, but it is important to note:  Liquidated damages (for example): o The Contractor compensates the Employer to cover the Employer’s costs incurred due to late completion. o The Contractor is in non-material breach.  Claims for loss and expense: o The Employer compensates the Contractor to cover the Contractor’s unexpected costs incurred due to the Employer’s actions (or inactions). o The Employer is in non-material breach. D39PZ: Procurement and Contracts 9

Claims principles  The process by which the Contractor must submit a claim for loss and expense is defined by cls. 4.23 to 4.26.  Although the Contract makes the submission of a claim possible, the Contractor's right to adjudication and litigation still remains (cl. 4.26).  The Contractor’s right to submit a claim arises from the Employer’s non -material breach of the Contract.  The Employer will settle the claim by paying damages to the Contractor to return it to the position it would have been in had the Employer’s breach not occurred. In other words, the Contractor’s unexpected costs will be paid by the  Employer. D39PZ: Procurement and Contracts 10

Claims principles  The Contractor cannot claim for loss and expense arising from:  its own actions; or  events that could not be foreseen by either party . o Recall that many Relevant Events justifying an extension of time cannot be foreseen (and cannot, therefore, be mitigated by either party). D39PZ: Procurement and Contracts 11

Extension of time vs. Loss and expense  There is no direct link between extensions of time and claims for loss and expense  Extensions of time:  Granted if a Relevant Event occurs that requires the Contractor to be given more time to complete the Works.  Loss and Expense:  Claims for payment are made by the Contractor to recover unexpected loss or additional expenditure due to delay or disruption caused by others.  An extension of time does not always justify a claim. D39PZ: Procurement and Contracts 12

Types of claim  Contractual claims  Follow the procedures defined by the Contract o Usually settled quickly and simply  Common law claims  Result from breaches of implied Contract terms o Can be recovered using the Contract or litigation  Quantum meruit claims  If no prior agreement of cost  Ex gratia claims D39PZ: Procurement and Contracts 13

Limitations on entitlement  Contractors can only claim for:  Loss and/or expense arising from a Relevant Matter o Note: Relevant Matters ≠ Relevant Events  Loss and/or expense which cannot be recovered by other contractual means (cl. 4.23).  Costs incurred by the Contractor when working in a reasonable manner. o The Contractor must have taken all reasonable steps to avoid additional costs. D39PZ: Procurement and Contracts 14

Relevant Matters vs. Relevant Events  Relevant Events justify additional time  Relevant Matters justify additional payment  Relevant Events include uncontrollable circumstances. Relevant Matters do not  The Contractor cannot be expected to recover costs from the Employer caused by an event that neither party could control D39PZ: Procurement and Contracts 15

Relevant Matters Cl. 4.24 defines the Relevant Matters as: Relevant Matter Clause number Variations cl. 4.24.1 Postponement of the Works or instruction cl. 4.24.2.1 to spend an undefined Provisional Sum Inspection of the Works cl. 4.24.2.2 Contradictions in the Contract Documents cl. 4.24.2.3 Dealing with antiquities found on site cl. 4.24.3 Inaccurate Approximate Quantities cl. 4.24.4 Action (or inaction) of the Employer cl. 4.24.5 or it’s agents D39PZ: Procurement and Contracts 16

Relevant Events Caused by? Relevant Matters 2.29 .1 Variations Employer 4.24 .1 Variations .2 CA's instructions to: .2 CA's instructions to: .2 .1 correct a discrepancy in the Contract Documents Employer .2 .3 correct a discrepancy in the Contract Documents (cl. 2.15); (cl. 2.15) .2 .1 postpone part of the Works (cl. 3.15); Employer 2 .1 postpone part of the Works (cl. 3.15); .2 .1 execute work represented by an undefined Employer .2 .1 execute work represented by an undefined Provisional Sum (cl. 3.16); Provisional Sum (cl. 3.16); .2 .1 completing works that would have been under a Contractor Schedule 2 Quotation had the Contractor not objected to it being so (cl. 5.3.2) .2 .2 opening up of works for inspection if work found Employer .2 .2 opening up of works for inspection if work found to be in accordance to be in accordance .3 deferment of possession of the site Employer .4 discovery of antiquities on the site (cls. 3.22.1, Neither .3 discovery of antiquities on the site (cls. 3.22.1, 3.22.2) 3.22.2) .5 execution of work described by an inaccurate Employer .4 execution of work described by an inaccurate Approximate Quantity Approximate Quantity .6 suspension of the Works by the Contractor due to Employer non-payment .7 actions or inactions of anyone employed by the Employer .5 actions or inactions of anyone employed by the Employer Employer .8 actions of a Statutory Undertaker Neither .9 exceptionally adverse weather conditions Neither .10 loss or damage caused by a Specified Peril Neither .11 civil commotion, terrorism Neither .12 strike Neither .13 a change in Statute directly affecting the Works Neither .14 force majeure Neither

Claims for loss and/or expense Claim submission procedure Claim assessment procedure “Heads of Claims” D39PZ: Procurement and Contracts 18

Claim submission procedure D39PZ: Procurement and Contracts 19

Claim submission procedure  Procedure is defined by cl. 4.23  Contractors must:  Submit all claims in writing as soon as the Contractor becomes aware that “regular progress has been or is likely to be affected” (cl. 4.23.1)  Submit full documentation of the sources of the costs claimed (cl. 4.23.2)  Provide additional information if requested by the CA or QS to value the amount of damages due (cl. 4.23.3)  Submit claims to the CA rather than the QS D39PZ: Procurement and Contracts 20