Why do Your Final Accounts Become Disputes?

My consultancy practice was asked to advise on a dispute of some US$250M. This sum included variations, prolongation costs, acceleration costs, disruption costs, and delay penalties. The dispute emerged when the Contractor submitted his final account, which reminded me of the fact that a large proportion of disputes occur when the project is either nearing completion or when it has been completed. Here is my list of reasons why this is the case. As usual, I have adopted the FIDIC definitions for the participants in the contract, but this advice applies to all forms of contract. Contractors do not submit notices of claim and/or early warnings, thus preventing the Employer or Engineer from taking mitigating action or from making financial provisions. Contractors do not give notice when they consider that an instruction constitutes a variation that gives entitlement to additional payment, thus preventing the Employer or Engineer from reversing the instruction or making financial…

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FIDIC 2017 Editions and Claims

While you may have not had the opportunity to examine the 2017 editions of the FIDIC contracts, because you have not yet come across any projects that are using them, this situation will gradually change. Before too long, we will need to know what has changed and how it has changed. Therefore, I thought that it would be worthwhile to highlight the changes from a claims point of view. Sub-Clause 2.5 (Employer’s Claims) has been deleted in the 2017 editions and Employer’s claims are now dealt with together with Contractor’s claims under Sub-Clauses 20.1 (Claims) and 20.2 (Claims For Payment and/or EOT). The Employer is now obliged to give notice of claim no later than 28 days after the event or circumstances giving rise to the claim. This has now become a condition precedent to entitlement for both Parties. If the Engineer considers that a notice of claim was not given within the stipulated 28 days, he/she is obliged to give a notice of such within 14 days of receipt of the notice of…

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Q&A: Entitlements Under the FIDIC White Book

The following questions, related to contractual issues arising from COVID-19, were posed during our fifteenth Construction Clinic, held in July 2020. Andy Hewitt's responses have been summarised from the original. The entire webinar may be viewed on-demand on YouTube. Question 1 Question: (Part 1 of 3) This question is in several parts. It is related to the FIDIC consultancy contract, which is the White Book, in terms of management of a consultant on his project. The first part of the question asks what is allowable and what is not. [Note: this blog post on the Practical Law Construction Blog has more information on the White Book.] Answer: The White Book is not one of the contracts that I deal with on a regular basis, so I had a quick look at it. There's absolutely no definition of cost in the White Book. So, if it concerns a variation to the consultant’s services, redesigning something, designing variations, possibly being deployed on an extended period because the Contractor didn't…

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Q&A: Delays, Variations, and Revised Programmes

The following questions were answered by Steering Committee member, Lee Sporle during Construction Clinic 11, recorded on 9 June 2020. The responses have been summarized from the original. The entire webinar may be viewed on-demand on YouTube. Question 1 Question: We have a project timeline from January 2020 to July 2020. By March 2020, the project was running behind schedule by 60 days and we had an extension for 30 days. Our revised programme was submitted with a cut-off date in March 2020 and the new completion date set to August 2020 instead of July 2020, and the Contractor recovered his 30 days delay. We have another claim event started just after the data date of March 2020. Which version of programme update do we use to analyse the delay using the TIA method: the revised programme, which the Contractor has delayed due to the recovery made, or the normal update on the baseline programme, the revised programme, which shows the real Contractor delay at this time? Answer: OK. So,…

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Q&A: Prolongation Thickening Claims

In this blog post, ICCP President, Paul Gibbons, examines thickening of preliminaries. This blog post is an excerpt of a question answered in our eleventh Construction Clinic session, which took place in June 2020. The entire webinar may be viewed on-demand on YouTube. Question 1 Question: What is the meaning of thickening in a typical prolongation claim and how should it be claimed for? Answer: The calculation of thickening deals with the impact of additional resources, plant and overhead which the Contractor or Sub-Contractor might be entitled to. Assessing thickening claims requires an understanding of the “planned” resources, plant, overhead and comparing this to the “actual” resources, plant and overhead. This would result in a planned versus actual histogram. It is best to keep the resource discipline separate so that it can be easily presented and assessed. In simple terms, the ‘thickening’ is where you have more actual resources than that which you had planned to have. This…

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