Claims
Employer's and Contractor's Claims
FIDIC Red book, 2017 – Clause 20.1
Employer's and Contractor's Claims
FIDIC Red book, 2017 – Clause 20.1
Type 20.1(a) and 20.1(b) Claims relate exclusively to four entitlements ( Cl 20.1 :
reduction in Contract Price and Extension of DNP, Cl 20.2 : additional payment and EOT )
only one of which is common to both:
Type 20.1(c) is for any Claim that is not for one of the four entitlements in types 20.1(a)
and 20.1(b).
Employer's and Contractor's Claims
FIDIC Red book, 2017 – Clause 20.1(c)
FIDIC Claim process – 2017 FIDIC Red book
There are four essential steps to the Claims process:
Step 1 - Notice of Claim (Cl 20.2.1)
Step 2 - Engineer’s Initial Response (Cl 20.2.2)
Step 3 - Fully Detailed Claim (Cl 20.2.4)
Step 4 - Agreement or Determination of the Claim
(Cl 20.2.5)
FIDIC Claim process – 2017 FIDIC Red book
The Engineer has a significantly expanded role in determining
claims and disputes, and in encouraging greater collaboration
between the Parties (Cl 3.7.1 – Consultation to reach agreement).
Where the Engineer is required to determine any matter or claim,
the Engineer is obliged to consult with both Parties and
encourage the parties to reach agreement within 42 days
(Cl 3.7.3 – Time Limits) .
If no agreement is reached within the 42-day time period, the
Engineer has a further 42 days to make ‘fair’ determination on
the matter or claim. If the Engineer fails to make a determination
within this period, the Claim will be deemed to be rejected (Cl
3.7.3 – Time Limits).
CLAIMS
FIDIC Red book - 1999
Cl 20. 1 - If the Contractor considers himself to be entitled to any
extension of the Time for Completion and/or any additional payment,
under any Clause of these Conditions or otherwise in connection with
the Contract, ….
Main areas which permit the Contractor to claim EOT or additional
payment or both;
Clause Time Costs Profit
1.9 - Delayed Drawings/Instructions Yes Yes Yes
2.1 – Right of Access Yes Yes Yes
4.7 – Setting out Yes Yes Yes
4.12 – Unforeseeable physical conditions Yes Yes No
4.24 – Fossils Yes Yes No
CLAIMS
FIDIC Red book - 1999
Main areas which permit the Contractor to claim EOT or additional
payment or both (page 90 to 93 of FIDIC guide);
Clause Time Costs Profit
7.4 – Testing Sometimes Depends Depends
8.4 – EOT Yes No No
8.5 – Delay by authorities Yes Silent Silent
8.9 – Consequences of Suspension Yes Yes No
10.2 – TO Parts of the Works No Yes Yes
10.3 – Tests on Completion Yes Yes Yes
11.8 – Contractor to search No Depends Depends
12.4 – Omissions No Yes No
CLAIMS
FIDIC Red book - 1999
Main areas which permit the Contractor to claim EOT or additional
payment or both;
Clause Time Costs Profit
13.7 – Changes in legislation Yes Yes No
16.1 – Suspend the Work Yes Yes Yes
17.4 – Consequences of Employer’s Risks Yes Yes some
19.4 – Consequences of Force Majeure Yes Sometimes No
CLAIMS
FIDIC Red book - 1999
Employer’s Claims - Cl 2.5
Generally under four categories
- Delay Damages
- Costs arising from Termination of the Contract
- Costs arising from defective work
- Prolongation of the Defects Notification Period
CLAIMS
FIDIC Red book - 1999
Employer’s Claims
Clause Time Costs Profit
4.19 – Electricity, Water & Gas No Yes No
4.20 – Use of Employer’s Equipment No Sometimes No
7.5 – Rejection & retesting No Yes Yes
7.6 – Remedial Work by others No Yes Yes
8.6 – Rate of Progress No Yes Yes
8.7 – Delay damages No Yes Yes
9.4 – Failure to pass tests on completion No Yes Yes
11.3 – Extension of DNP Yes No Yes
11.4 – Failure to remedy defects No Yes Yes
CLAIMS
FIDIC Red book 1999
Employer’s Claims
Clause Time Costs Profit
13.7 – Changes in Legislation No Yes Yes
15.4 – Payment after termination No Yes Yes
17.1 – Indemnities No Yes Yes
18.1 – Failure to insure No Yes Yes
18.2 – Cancelled insurance No Yes Yes
CLAIMS
Loss and expense (JCT 2016 Cl.4.20 to 4.24)
Usually (but not always) claimed at the same time as an extension of
time.
It is the "money" side of a contractor's claim for delay and disruption
(that is, a claim for the cost of inefficient working and employing more
resources).
A contractor may roll-up all the unattributed costs and claim them from
the employer as loss and expense. If the claim does not break down the
sum claimed between the contractor's various complaints, it is called a
“global claim or, sometimes, a "total cost" claim.
What the contractor may
claim from the employer
A contractor may claim against the employer for more time and money
(loss and expense) and for the cost of changes to the works (as
variations or as a quantum meruit).
A claim for an extension of time to the completion date
A claim for loss and expense
A claim for loss and expense is usually made at the same time as an extension
of time.
It is the "money" side of a contractor's claim for delay and disruption (a claim
for the cost of inefficient working and employing more resources).
Standard form contracts usually allow the contractor to claim for delayed or
disrupted work. The contractor should comply with the contract procedure.
A contractor may roll-up all the unattributed costs and claim them from the
employer as loss and expense.
If the claim does not break down the sum claimed between the contractor's
various complaints, it is called a "global claim" or, sometimes, a "total cost"
claim.
Common heads of loss and
expense claimed include:
prolongation costs;
finance charges;
loss of profits;
general disruption; and
wasted management time.
What the employer may claim
from the contractor
The employer may have a claim against the contractor for poor quality
or defective works, or damages because the project is delayed.
A contractor who is responsible for design and construction of the
works may be liable for a defect that is caused by negligent design, by
poor workmanship, by poor materials or a mixture of all three.
Claims for overheads and
profits
A claim for overheads and profits could be based on a percentage of the
value of all of their projects over that period of time
Contractor must show that they had other work which could have been
done in the period of delay, when instead an individual has spent
additional time on the project in question
Could use a formula
How can a formula be used to
calculate OHP?
It isn’t acceptable if there is a danger that it will overstate the actual
loss incurred
Evidence will be required to back up the claim
The best known formula is Hudson’s, but Emden’s is also used
h x c x pd
100 cp
Where h = H.O percentage (total OHP / total turnover)
C = contract sum
Cp = contract period
Pd = period of delay
What about interest and
finance charges?
Loss of interest that might have been earned if the money claimed had
been invested
Calculated on a compound interest basis
Global claims
Usually each head of claim needs to be established
However sometimes it is too difficult to extricate the events from one
another.
◦ London Underground v Kenchington Ford and Others – concerned a large
number of Requests for Information
Criteria for global claims established by
◦ J Crosby and Sons v Portland UDC – contractor claimed EOT on the basis of
many separate events, some of which gave and entitlement to EOT and some
didn’t. Court upheld arbitrators agreement to roll them up in a Global claim.
◦ Global claims are thus allowed where it is too difficult to separate individual
events
Global claims can not be used
Where the contractor cannot justify his claim but can only show a
shortfall in income
◦ Bruno law vs US – many incidents used by the plaintiff were isolated and non
sequential and couldn’t have caused the overall delay claimed
Presentation of a claim
Contractor should provide substantiating information
◦ Better if information required is detailed by QS / CA
◦ Cause should be linked to effect
◦ Amounts claimed should be linked to relevant matters in the contract
◦ Invoices, labour returns, pay slips, detailed schedules of plant and equipment
◦ Generally only actual losses can be claimed, rather than approximate or
assessed amounts
Each relevant matter must be dealt
with separately and must
Describe the occurrences
Date time and place of occurrences
Relevant matter, referred to by contractual clause number
Effect of the occurrence and any relevant facts
Delaying effect of activity immediately affected
Indicate the mitigating action taken
Set out financial heads of claim
All on the basis of “he who asserts must prove”
Evidence can include
Programmes
Cost records
Correspondence
Records of site meeting
Site and other diaries
Labour returns
