Construction Information Management: Proactive Tips to Increase Your Success Rate of Claims, a 5-Part Series – Part 5

Part 5:  Submittals and Responses: Prioritize, Track and Notify.

This is the final article in the 5-part series on pro-active measures to improve construction information management. Project participants in Ontario, Canada should take particular note, as legislation mandating adjudication of construction disputes is likely to take effect at the end of this year. All parties will need to have standard practices in place to capture information and maintain supportive documentation of issues and claims during construction.

Communications between various parties on a construction project consist to a large extent of submittals for which formal responses such as: “reviewed”, “reviewed as noted”, “revise and resubmit”, “rejected” and/or “approved”, are required. These include: design drawings, shop drawings, requests for information (RFIs), request for change orders, contemplated change orders, change directives, quotations, change orders, etc.

Contract general conditions typically identify the type of documents required to be submitted for review and/or approval as well as a schedule for submittals. The contract will often (but not always) include the required timing for responses; some contracts indicate only that the response must be in sufficient time so as not to affect the construction schedule. For contractors and subcontractors bidding on a tight construction schedule, it would be prudent to negotiate a required response time for review and approvals, and include such timing as a supplementary condition to the final contract.

Contractors and subcontractors need to ensure that they provide submittals in a timely manner in accordance with schedule and so that the other party has sufficient time to perform their review. Even if the contract stipulates a required response time, the submittal form should still indicate the due date for a response and identify if it is a priority item for the construction schedule. For example, some RFIs may need a quick turn-around time because the area is presently under construction. By indicating on the submittal form that a response time is needed no later than a specific date, it indicates that it is an issue of high priority and sets the groundwork for a follow-up notice of delay, if required.

Tracking formal submittals and responses has become simplified with the use of project management software, however there isn’t always consistency in the type of documents tracked or in the availability of the information databases to all parties. The onus remains on each party to maintain its own records and ensure that they meet their contractual responsibilities when it comes to timely submittals and responses.

In the absence of a project management software with built-in submittal databases, simple spreadsheets can facilitate the tracking of documents. Each category of submittal should have its own spreadsheet, with columns to identify the document number, description, date submitted, date response required, date response received, summary of response, further action required, affected schedule activity, etc.

Reviewing the list weekly and comparing the “date response required” to the “date response received” will give the project manager a quick overview of any late responses that may affect the schedule and the ability to prioritize such issues. It also provides the opportunity to issue written notice to the other party that its late response may result, or is resulting in delays. This is particularly important when it comes to fulfilling the delay notice provisions in the contract which stipulate that notice must be given within a certain number of days.

Late submissions and late responses to submittals can have a significant impact on the construction schedule, particularly when it comes to RFIs and changes that arise while the affected area is under construction, or long lead supply items. In order to support a claim for impacts due to either late submissions by a contractor or late responses from the other party, it is important to demonstrate that written notice was provided and that the late resolution of the issue(s) affected not just the individual schedule activity but the critical path as well. The information compiled in a tracking database or spreadsheet is extremely useful in performing a schedule delay analysis to prove impact.

Keeping accurate and up-to-date records and prioritizing submittals assists with project management as well as with the substantiation of claims. As discussed in the other parts of this series (links are provided below), being proactive in keeping detailed project records is good practice, whether you anticipate claims on the project or not.  If you do find yourself on a project that ends up with disputes, successful resolution often depends on the quality of information captured during the work.

This blog was authored by ICCP Fellow, Adele Wojtowicz, Construction Claims & Risk Management Consultant, ProEdge Construction Services Inc

Previous articles written in this series on Proactive Tips To Increase Your Success Rate of Claims can be found here:


Construction Information Management: Proactive Tips to Increase Your Success Rate of Claims, a 5-Part Series - Part 4

Part 4:  “...Read All About It!"  Get Your Issues Minuted.

Construction management personnel invariably feel as though much of their time is spent in an endless cycle of meetings. No question face-to-face meetings are necessary in building teamwork, fostering open dialogue, troubleshooting problems and resolving issues: all elemental keys to a successful project. If a project devolves into something less than successful in the troubleshooting and resolving of issues and ends up in a dispute or claims situation, the manner in which the issues were documented in meeting minutes can be important.

In Part 1 of this series, the importance of information captured on daily site diaries was discussed. As with diaries, minutes of meetings can sometimes be overlooked for the significant role they can play in analyzing and substantiating claims. Issues often get discussed in meetings and recorded in minutes that are not documented elsewhere. A party may give verbal notice of a problem, question, change, extra or delay event at a meeting and may fail to follow-up with a written notice within the time period specified in the contract, relying on the fact that it was raised and discussed in a meeting.

The minutes of meetings carry weight in a dispute and/or claims situation as providing an objective record of what was discussed and agreed by the parties, as well as a record of work progress and issues that occurred during the course of the project. It’s therefore important that attendees ensure that their input, issues raised and any agreements and action items are accurately portrayed in the final record.

While the party authoring the official minutes is generally agreed to early on in the project, it is best practice for all attendees to take their own notes. Discrepancies between what was discussed and what was recorded in the minutes can occur. An author uses their best efforts to capture issues and action items as they are discussed, however on occasion it can happen that an issue significant to one party may not have been captured accurately, or in fact at all. Sometimes the way in which minutes are written can make them appear to be skewed, or conversely, can be overly objective and miss capturing the significance of a party giving notice of a problem, change or delay event.

Attendees should pay particular attention to any “fine print” at the end of the minutes that stipulates a limited time period to register any errors or omissions with the written record; the clause typically states that failing any objection within X amount of days, the “minutes shall be deemed to be accurate as written”.  If you find inaccuracies, be sure to go on the record in writing to request the appropriate correction and include a suggested wording to the specific item that reflects your recollection or your notes from the meeting, even if your requested corrections may not end up being incorporated in the final minutes.

Also, be sure to follow up on any unresolved issues, changes, delays, etc. with written notices as per the terms of the contract; having it recorded in the minutes is generally not sufficient to fulfill notice provisions.

Attendees should download and retain a copy of all minutes of meetings, even if they are kept on a multi-user online platform maintained by the author of the minutes. Don’t assume that you will always be able to have access to a database controlled by another party. Also, rather than have supervisory personnel retain minutes on their personal computers, designate a file folder in your company project directory for all minutes of meetings and ensure that it is kept up-to-date. You might be surprised at how this important document is overlooked, and in a dispute situation trying to gain access to them or obtain historical copies can be difficult.

As illustrated in the previous articles of this series (links are provided below), being proactive in keeping detailed project records is good practice, whether you anticipate claims on the project or not. If you do find yourself on a project that ends up with disputes, successful resolution often depends on the quality of information captured during the work.

This blog was authored by ICCP Fellow, Adele Wojtowicz, Construction Claims & Risk Management Consultant, ProEdge Construction Services Inc

Previous articles written in this series on Proactive Tips To Increase Your Success Rate of Claims can be found here:


Can We Make Sense of Concurrent Delays?

Perhaps the answer to the title of this column is obvious. After all, if it were clear, then this would be a short column and to be honest this topic has kept me on my toes (and, thankfully, others) for years:

“Extra time is an endless source of disputes. Nineteen of the 20 teams in the English Premier League are convinced that the extra time Manchester United gets at the end of each game at Old Trafford (so called “Fergie time”) never makes a fair and reasonable allowance for the delay and disruption that took place in the preceding ninety minutes. Awards of extra time in construction and engineering contracts cause almost as much trouble.” (Time For Completion, Michael Curtis QC, Construction Law Journal)

So what are we talking about here?

Let’s imagine that a main contractor is building a hotel under a JCT Standard Building Contract and there are delays arising from late provision of design information from the employer and inability to resource materials by the contractor. These delays have overlapping impact. On the face of things, you might say there is concurrent delay. The question would then be whether the contractor is entitled to an extension of time for the employer risk event given that they were in delay too.

The first point is fairly easily dealt with – there is no such thing as concurrent delay. It would be incredible for two events to occur at precisely the same time that cause delay. The SCL Delay and Disruption Protocol describes this as “true concurrent delay”.

The Protocol helpfully also adds: “The term ‘concurrent delay’ is often used to describe the situation where two or more events arise at different times, but the effects of them are felt (in whole or in part) at the same time. To avoid confusion, this is more correctly termed ‘the concurrent effect’ of sequential delay events.”

That terminology suits the purpose, so let’s have a think about “the concurrent effect” of two events and how the law deals with them.

For several years there has been debate about whether the consequences should be apportioned, whether the “dominant cause” approach is the correct one and many other weird and wonderful solutions to this conundrum. Yet as interesting as those are, there isn’t room to weigh them up here.

What we do have though is the courts following an “effective cause” approach (for example, in Adyard Abu Dhabi v SD Marine Services [2011] EWHC 848 (Comm)). In very broad terms this means that where there are two sequential delay events, one being employer risk and the other contractor risk and the delay effect runs concurrently, the one that occurred first is considered the “effective cause”.

The contractor will be sitting pretty if the effective cause was the employer risk event since they will be entitled to the extension of time. Not so though if their risk event reared its head beforehand.

Some might be choking on their coffee whilst reading this and screaming “what about Walter Lilly v MacKay?”. It was a recent tussle over that case that led me to write on this very subject. The Walter Lilly case was dependent on the wording of the contract:

“In any event, I am clearly of the view that, where there is an extension of time clause such as that agreed upon in this case and where delay is caused by two or more effective causes, one of which entitles the contractor to an extension of time as being a Relevant Event, the contractor is entitled to a full extension of time. Part of the logic of this is that many of the Relevant Events would otherwise amount to acts of prevention ...” Walter Lilly & Co Ltd v Mackay and anor (No.2) [2012] BLR 503, per Akenhead J.

So it won’t always follow that where there is concurrent effect the contractor will be entitled to an extension of time. Unfortunately, that is the often held belief.

But what does all of this really mean?

First, it could be the case that the contractor will get extra time if the same contract is used as in Walter Lilly, or one with similar provisions. However, under a different contract this may not necessarily be the case.

Some brighter people than me have also identified that the authorities have left open the possibility for causation to be considered (in the sense of showing, as a matter of fact and law, what caused the delay), irrespective of which event occurred first. This is partly due to the leading authorities not considering causation at length, but also partly due to the wording of the contracts in question.

There is also room for arguing an “intervening cause”, if an event that occurred after the first event (the effective cause) then took over as the effective cause. Again, this is something that has foundations in English law but has not yet been applied to this type of scenario.

Until then, what can I say in summary? Well, in short, the Walter Lilly case doesn’t mean that a contractor will always be entitled to an extension of time where there are two concurrent effects. And it’s also worth noting that this all becomes a whole lot easier with the right contract clauses.

This blog was authored by Jonathan Parker of Quigg Golden Solicitors and has been reproduced with his permission.  It has previously featured in Construction Manager Magazine.


Construction Information Management: Proactive Tips to Increase Your Success Rate of Claims, a 5-Part Series – Part 3

Part 3:  “Extra, Extra, …!” – Dealing with Extra and Changed Work

Despite the best efforts of design professionals to establish a well-defined scope of work at the beginning of a project, there is no escaping the fact that extra work and changes inevitably occur. How they are dealt with during the course of the work can have a major impact on cost and schedule.  Here are a few keys that can help expedite the processing of extras and changes and mitigate the development of prolonged disputes that can lead to substantial claims and schedule impacts.

1) Read the Contract. This can’t be said often enough

There are provisions for dealing with extras and changes, including those issues discovered by the contractor that are not identified via a change directive or change notice.  If a contractor believes any work to be extra to its scope it has an obligation to notify the other party in writing with the pertinent details, usually within a specified time period. Pay particular attention to the timing requirements in the contract and if all details are not immediately available to submit a quote for the additional cost, give prompt written notice to the other party to reserve the right to claim while the issue is being investigated.

2) Produce Proper Documentation

Contractors need to be provided with enough detailed information on an extra or change request in order to estimate the level of effort and resources required, as well as to obtain quotes from subcontractors and suppliers. Any ambiguities or missing information can result in a prolonged resolution process and delay the implementation of the change or extra work, which can in turn impact the construction schedule.  For their part, contractors and subcontractors need to provide the consultants/owner with any requests for further information or notices of schedule implications along with well-substantiated quotations in sufficient time so that the consultants and owner can act upon receipt of that information. Check the contract for any timing obligations with respect to submissions and responses.

3) Set up a Tracking Mechanism

Losing track of the status of extras/changes can happen. If you’re not using some type of project management software, keep a spreadsheet that captures the following:

  • originating document date and number (i.e., change notice, change directive, request for information, drawing number & revision, etc.),
  • quotation number and amount,
  • date quotation submitted,
  • date response requested,
  • potential schedule impact,
  • date response received and nature of response (approved, revise & resubmit, rejected, etc.),
  • and present-day status.

Update your tracking record weekly and bring the list to meetings to inquire about any outstanding information or approvals. Also, be sure to follow-up with any required written notices of delay or claims within the time periods specified in the contract.

4) Address Schedule Implications and Prioritize Accordingly

Contractors should include on their quotations any anticipated impacts to the schedule including long lead delivery items, and identify when authorization to proceed is required in order to mitigate delays.  Create a priority list of those outstanding extras/changes that are impacting or will imminently impact the schedule, and if necessary follow up with a notice of delay in accordance with the timing requirements of the contract.  Be sure to include the extended time and extended duration cost on the final change order, or reserve the right to claim for those costs if the impact is not yet calculable. This can become important to support a future claim should scope issues remain unresolved or end up having an unforeseen impact on the schedule.

5) Expedite Payment of Extras and Changes

Owners and general contractors should establish adequate contingency funds for extras and changes before construction commences in order to ensure that the contractor or subcontractor can be kept in a positive cash flow situation.  Keeping a contractor and subcontractor financially fluid by expediting approval and payment incentivizes them, and relieves them of the burden of financing these additional costs.

All parties to a construction contract understand that extras and changes will happen; the key is for everyone to do their part to process them efficiently in order to avoid impacting the work progress and prolonging disputes, both of which that can lead to expensive and contentious claims at the end of a project.

This blog was authored by ICCP Fellow, Adele Wojtowicz, Construction Claims & Risk Management Consultant, ProEdge Construction Services Inc

Related articles written in this series on Proactive Tips To Increase Your Success Rate of Claims can be found here:

 


BCIPA: High Court Confirms That a Valid Payment Claim Requires a Reference Date

At the end of last year, the High Court delivered its first judgment on security of payment legislation: Southern Han Breakfast Point Pty Ltd (In Liquidation) v Lewence Construction Pty Ltd [2016] HCA 52. The decision confirms that the existence of a reference date under a construction contract is a precondition to the making of a valid payment claim (and, in turn, a precondition to the making of a valid adjudication application and determination)

The Facts

Southern Han Breakfast Point Pty Ltd  and Lewence Construction Pty Ltd  were parties to a contract for the construction by Lewence of an apartment block in New South Wales.

The Contract provided for Lewence to claim payment progressively from Southern Han by making a progress claim on the eighth day of each month for work completed up to the seventh day of that month.

On 27 October 2014, Southern Han gave Lewence a notice purporting to exercise its right under the Contract to take out of Lewence’s hands all of the work remaining to be completed.  Lewence treated the giving of that notice as repudiation of the Contract by Southern Han and, on 28 October 2014, purported to accept the repudiation and terminate the Contract.

On 4 December 2014, Lewence served a purported payment claim on Southern Han for work carried out under the Contract up to 27 October 2014. Southern Han responded by providing a payment schedule to Lewence indicating that the scheduled amount Southern Han proposed to pay was nil.

Lewence then attempted to make an adjudication application. In its response, Southern Han submitted that the adjudicator lacked jurisdiction to determine the application. This argument was rejected by the adjudicator and the adjudicator proceeded in determining the application.

Southern Han sought a declaration from the New South Wales Supreme Court that the adjudicator’s determination was void. It argued that, as a result of the events of 27 and 28 October 2014, no reference date for making a progress payment could have arisen under the Contract after 8 October 2014 and therefore the document Lewence served on Southern Han on 4 December 2014 was not a valid payment claim under the Building and Construction Industry Security of Payment Act 1999 (NSW).

The primary judge at first instance made the declaration sought by Southern Han. Lewence appealed to the Court of Appeal, which set aside the Supreme Court’s declaration. Southern Han then appealed to the High Court.

The High Court Decision

The High Court allowed the appeal, confirming that the existence of a reference date under a construction contract is a precondition to the making of a valid payment claim under the Act and that, in the circumstances of the case, no reference date existed at the time Lewence made the payment claim.

The High Court rejected the argument that Lewence’s right to make progress claims under the Contract survived either suspension or termination of the Contract. First, if the Contract was suspended by Southern Han, the High Court found that this included a suspension of all of the contractual rights and obligations in relation to payment under the Contract, which included Lewence’s right to make a progress claim under the Contract for work carried out up to the time of the work being taken out of its hands. On the other hand, if the Contract was terminated by Lewence, the High Court found that there was nothing in the Contract to indicate an intention between the parties that Lewence’s right to make progress claims survived termination, therefore preventing a future reference date from arising.

The High Court also rejected Lewence’s argument that section 8(2) of the Act provided an alternative reference date from which Lewence could make the progress claim. Section 8(2) provides that a reference date means either a date determined by the contract or, if the contract makes no express provision, the last day of the month. The High Court found that, where a construction contract makes express provision for how reference dates are to be determined (i.e. when progress claims can be made), claimants cannot rely on this section of the Act to calculate alternative reference dates on and from which progress claims can be made, even where a reference date does not arise under the relevant clause in the contract. Because the Contract expressly provided for when progress claims could be made (on the eighth day of each month for work done to the seventh day of that month), Lewence was accordingly unable to argue that an alternative reference date had accrued pursuant to the Act.

The High Court therefore found that the adjudicator’s decision was void as no new reference date existed to support the payment claim, making the adjudication application invalid.

Comment

The decision provides greater certainty as to when payment claims are valid and effective in triggering the adjudication process established by the Act.

In particular, the decision confirms that contractors will lose the ability make payment claims under the Act where:

  • the contract is terminated;
  • the contract provides for when progress claims can be made, but does not expressly state that the right to make progress claims survives termination; and
  • the right to make a progress claim has not yet accrued at the time of termination, in that a new reference date has not yet arisen at the time of termination.

In these circumstances, contractors will have to rely on other legal methods to receive payment, such as suing for damages under the Contract.

Contractors should take care when terminating or suspending contracts to ensure they are not compromising their rights under the contract, such as the right to make a progress claim for outstanding work. Correspondingly, principals should have regard to this case when considering how to deal with progress claims submitted by the contractor after the contract has been terminated or suspended.

The provisions of the Act considered by the High Court in this case are very similar to those in the Queensland security of payment legislation (the Building and Construction Industry Payments Act 2004 (Qld)), as well as other in other jurisdictions, and accordingly this decision is likely to apply.

This blog was authored by Rocco Russo, Lisa Valentine, Emma Allatt and Miranda Klibbe of Cooper Grace Ward Lawyers and has been reproduced with their permission.