How to Ensure Engineers' Responses and Instructions Do Not Result in Expensive Claims

A request was made by one of our blog followers to examine the Engineer’s duty to provide instructions and responses within a reasonable time. In my experience, failure of the Engineer to comply with such obligations often gives rise to claims, so this is definitely worth a blog post. This example uses the 1999 FIDIC Red Book, although other forms of contract contain similar provisions.

Sub-Clause 1.3 (Communications) states that ‘Approvals, certificates, consents, and determinations shall not be unreasonably withheld or delayed’ which immediately begs the question: what constitutes unreasonable delay? The contract itself provides guidance in many circumstances.

For example, Sub-Clause 14.6 (Issue of Interim Payment Certificates) provides that payment certificates shall be issued within 28 days of the Contractor’s Statement being received and 10.1 (Taking Over of the Works and Sections) obliges the Engineer to either issue the Taking Over Certificate or reject the Contractor’s application within 28 days.

Sub-Clause 1.9 (Delayed Drawings or Instructions) deals with less specific time frames and places an obligation on the Contractor to provide a notice ‘whenever the Works are likely to be delayed or disrupted if any necessary drawing or instruction is not issued to the Contractor within a particular time’. If the Engineer does not act within the required time and the Contractor suffers delay or incurs Cost, the Contractor is entitled to make a claim. Good contract administration will ensure that requests for information, submittals and the like contain a “response required by” date so that the Engineer is made aware of matters which may cause delay.

A particular response procedure that is often ignored by Engineers is the obligations under Sub-Clause 20.1 (Contractor’s Claims) and 3.5 (Determinations) when responding to claims. Firstly, the Engineer is obliged to ‘respond with approval, or with disapproval and detailed comments’ within 42 days of receiving a claim. He is also required to ‘consult with each Party in an endeavour to reach agreement’ and ‘give notice to both Parties of each agreement or determination, with supporting particulars’.

It should be noted that any failure by the Engineer to act in accordance with the Contract and which causes delay or the incurrence of Cost would entitle the Contractor to make a claim, so it is vitally important that the Engineer respects time frames.

This blog was written by ICCP Executive Officer and Fellow, Andy Hewitt

If you would like to learn more about claims, check out our training partner, Claims Class.

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How to Administer the Contractor’s Programme

One of our blog followers asked for some advice on the administration of the Contractor’s programme. The questions raised relate to fairly frequently occurring situations, so this subject is definitely worthy of a blog post. I have reproduced the queries below and I will refer to the FIDIC forms of contract and terminology when providing my advice.

Requested Advice:

A summary of general principles which would avoid the Contractor submitting erroneous programme updates, for example, don’t be bullied by the Engineer into submitting a programme based on the original completion dates and which therefore absorbs the impacts of delay events (thus losing entitlement).

So, let’s be clear what a programme update actually is. First, we must establish the Contractor’s programme, which is often referred to as the baseline programme. This programme should be the Contractor’s best estimate of the sequence and timing of how he intends to carry out the Works and should be based on the Contract at the time it was entered into. An update is where the Contractor records actual progress onto the baseline (or any subsequent revision to the baseline) to forecast the Time for Completion, at the time of the update.

I have witnessed many occasions whereby the Contractor is late submitting his programme and by the time he gets around to doing so, Employer delays have occurred. The Engineer then wants the Contractor to incorporate the delays into the programme and maintain the Contract Time for Completion. The message to Contractors here is, “do not delay in submitting your baseline programme”.

FIDIC Sub-Clause 8.3 (Programme) only allows the Engineer to give ‘notice to the Contractor stating the extent to which it does not comply with the Contract’. Consequently, the Engineer has no right to pressure the Contractor into including post-contract events.

Once the baseline programme has been established and delay events have occurred, or particularly if extensions of time have been awarded, the Contractor should submit a revised programme. This will then be the programme against which future progress updates are carried out.

Requested Advice:

Examples of when the Contractor could reasonably refuse to submit a programme update, i.e., if the Engineer / Employer has failed to review a previously submitted EOT claim.

Maybe the terminology had become confused here. If the poster is referring to an ‘updated programme’, FIDIC Sub-Clause 4.21 (Progress Reports) obliges the Contractor to submit a ‘comparison of actual and planned progress’ as part of the progress report. An update is the usual way of doing this.

If the query relates to a ‘revised programme’, both FIDIC Sub-Clause 8.3 (Programme) and 8.6 (Rate of Progress) oblige the Contractor to revise the programme if progress is not consistent with the prevailing programme. He cannot therefore simply refuse to do so.

If the Contractor has submitted an extension of time claim that has not been responded to, then it would be reasonable to include the claimed extension of time within the revised programme on the basis that entitlement exists until the claim is either rejected or reduced. The message to Contractor’s here is that you must submit your extension of timely claims in a timely manner, or you will be obliged to meet the prevailing time for completion or suffer the consequences.

Requested Advice:

Advice on how the Contractor can avoid being coerced into accelerating the progress of the Works – or – the conditions which the Contractor must ensure are in place before he agrees to accelerate (if the delay is non-culpable), i.e., ensuring that a prior acceleration agreement with conditions is in place before actually accelerating.

I am assuming that this is a situation whereby the Contractor is entitled to an extension of time, but the Employer wishes the Contractor to meet an earlier date. In order to achieve the earlier date, the Contractor must accelerate.

I have three pieces of advice here. First, acceleration costs are usually difficult to prove and to agree; second, this is especially so after the acceleration has taken place because at this time, the Employer or Engineer may lack any incentive to pay the Contractor for the acceleration measures; and third, never accelerate without a specific instruction to do so.

The Contractor only has the upper hand before he has instigated the acceleration, so this is the time to either agree on a cost of acceleration, or to at least agree on the principles of how the costs will be calculated at a later date. The agreement should be recorded before the Contractor takes any action.

I hope this rather long blog provides some useful advice.

This blog was written by ICCP Executive Officer and Fellow, Andy Hewitt. Andy has also written a detailed paper for members that discusses COVID-19 in relation to the FIDIC 1999 contracts (Red and Yellow Books). If you're an ICCP member, please login to the Member's Area to download. 

If you would like to learn more about claims, check out our training partner, Claims Class.

Enjoying the ICCP's articles? Why not sign up to our mailing list and receive new articles straight into your mailbox. Or, want access to a library of members-only content on contracts and claims, check out our Membership page and join the ICCP community today.


Top 10 Tips for Effective Letter Writing

One of the things that I notice upon reviewing the records to prepare a claim, reviewing claims on behalf of the respondent, or reviewing the particulars put forward in a dispute, is the poor standard of letter writing. This ranges from “could have been better” right through to “I have no idea what this letter means”. If your letters fall into this category, you are not doing yourself or your company any favours and you could be doing considerable harm. This blog, therefore, contains my Top 10 Tips for effective letter writing.

You are not writing the letter for your opposite number on the project. You are writing it as an accurate record to be relied upon in case a claim or dispute arises in the future. The letter must, therefore, be fully understood by someone who has no prior knowledge of the project or the matters in question.

  1. The letter should be a stand-alone document. In other words, a reader with no prior knowledge should be able to understand it without reference to any other documents.
  2. Quotations are very powerful, so rather than describing things in your own words, use quotations from other records or the contract. When you do use quotations, make sure that you identify them as such.
  3. Never use abbreviations or acronyms. Even if these are in general use on the project, they may not be understood by someone who is unfamiliar with the project. It takes hardly any additional time to type the words out in full and this is time well spent.
  4. Avoid the use of words such as ‘they’, ‘him’ and ‘it’ when referring to the parties, people or companies, because this often leads to misunderstanding and confusion. Use the contractual names – ‘the Employer’. ‘the Contractor’, ‘the Engineer’ or their actual names.
  5. When referring to the contract, use the names of clauses as well as the clause numbers. ‘Sub-Clause 20.1 (Contractor’s Claims)’ is much more effective and helpful than just ‘Sub-Clause 20.1’, which relies on the reader having intimate knowledge of the contract.
  6. When possible, substantiate facts put forward and statements made in the letter. ‘As recorded under Minute 12.3 of the Site Meeting Minutes held on 14 August 2019, we were instructed to suspend work in Area B’ is better than ‘We were instructed to suspend work in Area B on 14 August 2019’.
  7. Be specific. Phrases such as ‘This is for your information and action’, ‘we reserve our rights’ or ‘please do the needful’ are meaningless. Specifically state what action is necessary, what rights you are entitled to, and what ‘the needful’ actually is.
  8. It is a fact that if you proofread your own work, you will read what you think you have written, rather than what you have actually written, so have your letter proofread by a colleague. As well as checking for typos, poor grammar, and poor choice of language, your colleague should also be able to point out any passages that are not properly explained or understandable. For this reason, it is preferable to have a colleague from a different discipline carry out the proofreading.
  9. Finally, this advice applies equally to the compilation of minutes, reports, claims responses, determinations, decisions, instructions, and anything else that will form part of the project records.

This blog was written by ICCP Executive Officer and Fellow, Andy Hewitt. Andy has also written a detailed paper for members that discusses COVID-19 in relation to the FIDIC 1999 contracts (Red and Yellow Books). If you're an ICCP member, please log in to the Member's Area to download. 

If you would like to learn more about claims, check out our training partner, Claims Class.

Enjoying the ICCP's articles? Why not sign up to our mailing list and receive new articles straight into your mailbox. Or, want access to a library of members-only content on contracts and claims, check out our Membership page and join the ICCP community today.


Contractors: Are your claims responded to correctly?

EC Harris’ (now Arcadis) Global Construction Disputes Report has, for many years, cited inadequately expressed claims as being one of the top five causes of disputes in the construction industry.

Although the reports do not specifically mention it, I suspect that inadequate and unfair determinations should also be somewhere near the top of this list. This is because I frequently hear complaints that a claim has not been responded to either fairly or in a meaningful way.

So, what is the problem?

If we consider the FIDIC forms of contract as fairly typical of the widely-used forms of contract, we can see that the Engineer has the following obligations when responding to claims:

  • Respond to the claim within 42 days - Sub-Clause 20.1 (Contractor’s Claims);
  • In a case of rejection, respond with detailed comments - Sub-Clause 20.1 (Contractor’s Claims);
  • Include sums that the Engineer considers to have been reasonably substantiated as being due in interim payment certificates - Sub-Clause 20.1 (Contractor’s Claims);
  • Consult with each party to attempt to reach an agreement - Sub-Clause 3.5 (Determinations);
  • Make a fair determination in accordance with the Contract - Sub-Clause 3.5 (Determinations);
  • Give notice to parties with detailed particulars - Sub-Clause 3.5 (Determinations).

It should be noted that the above are obligations, which means that if the Engineer does not fulfill them, he will place the Employer in breach of contract. In other words, this is a serious matter. So, why do those responsible for administering the contract frequently not comply with them?

If you are a consultant responsible for responding to the contractor’s claims, what should you do to comply with your obligations? If you are a contractor, what are your rights when your claims are dealt with incorrectly?

First, the Engineer should review the claim and make an assessment that is in compliance with the contract. He should then meet with the parties to explain his findings and also to allow the parties to provide additional information or particulars and to express their own points of view. If necessary, he should revise his findings to take into account the additional information received. Finally, he should issue detailed particulars of his assessment of the matter, so that both parties may fully understand how he has reached his conclusion.

Later, it may be necessary to repeat some of the above steps after the assessment is revised, but by doing so, this will bring the parties closer together and hopefully agreement will be reached. In such cases, the Engineer has done a good job.

Finally, it is my firm belief that the Engineer’s assessment should be prepared for the benefit of both parties and it should be adequately explained and reasoned to such an extent that both parties will be convinced that if a dispute were raised, it would fail.

This blog was written by ICCP Executive Officer and Fellow, Andy Hewitt

If you would like to learn more about claims, check out our training partner, Claims Class.

Enjoying the ICCP's articles? Why not sign up to our mailing list and receive new articles straight into your mailbox. Or, want access to a library of members-only content on contracts and claims, check out our Membership page and join the ICCP community today.


The Coronavirus – are we Entitled to Make a Claim?

The global hot topic this month seems to be the coronavirus and my consultancy practice has received lots of questions from clients so today, we thought we’d take a look at some of those questions and share our thoughts with you.

The usual question we are asked is:

“We are obtaining labour/materials/plant/equipment from China and the supply is being delayed. Are we entitled to claim for an extension of time and additional costs?”.

Our answers, as usual, have been along the lines of “it depends on your particular contract, but possibly”.

I know that this is a bit of a lawyer’s answer, but it really does depend on several things. Let’s however, have a look at what the FIDIC Red and Yellow Books, 1999 Editions, have to say on the subject.

Firstly, Sub-Clause 8.4 (Extension of Time for Completion) provides that an extension of time is warranted in the case of ‘Unforeseeable shortages in the availability of personnel or Goods caused by epidemic or governmental actions…’. This seems to provide a fairly clear entitlement to an extension of time, but not the payment of costs.

Secondly, FIDIC also possibly provides entitlement to an extension of time under Sub-Clause 19.4 (Consequences of Force Majeure). This is however arguable because to be considered as a force majeure event, the conditions contained in Sub-Clause 19.1 (Definition of Force Majeure) must be satisfied and it is not certain that they are. Undoubtedly, there is enough uncertainty here to anticipate a strong defensive argument from the other side of the fence, so a persuasive argument must be included in any claim.

Sub-Clause 8.4 (Extension of Time for Completion) does not provide entitlement to the payment of Costs, so the matter of Costs is dependent on the virus being considered as a force majeure event. Even if agreement is reached about the virus being a qualifying event, there is however another hurdle to overcome because Sub-Clause 19.4 (Consequences of Force Majeure) requires the event to have occurred in the Country. “The Country: is defined in FIDIC as ‘the country in which the Site (or most of it) is located, where the Permanent Works are to be executed.’ So, it seems that, unless the project is in a country where the virus has occurred and has a direct effect, then Costs may not be awarded. Once again, there, may be an argument if the government of the country has introduced measures that have affected the project.

There are of course other considerations to be made before a claim is justifiable, some of these include:

  • How has the virus affected the Contractor and his subcontractor’s activities?
  • What activities have been or are likely to be delayed?
  • Are the affected activities on the critical path?
  • Can the effect of the delays be demonstrated to predictably have an effect on the Time for Completion?
  • Have appropriate notices been given in a suitable format?
  • Does the Contractor have contemporary records to substantiate and ascertain the effects of the delays?

All of the above, of course, is just good professional practice when it comes to investigating and preparing claims, but it’s surprising how many contractors fail to comply and then wonder why their claims are rejected or, at best, take a long time to resolve.

This blog was written by ICCP Executive Officer and Fellow, Andy Hewitt. Andy has also written a detailed paper for members that discusses COVID-19 in relation to the FIDIC 1999 contracts (Red and Yellow Books). If you're an ICCP member, please login to the Member's Area to download. 

If you would like to learn more about claims, check out our training partner, Claims Class.

Enjoying the ICCP's articles? Why not sign up to our mailing list and receive new articles straight into your mailbox. Or, want access to a library of members-only content on contracts and claims, check out our Membership page and join the ICCP community today.