One of our blog readers asked for some suggestions as to how to effectively manage and minimise the submission of spurious contractor’s claims, which I thought would make an interesting subject for other readers, as well.

Consultants need to spend a lot of time and effort to manage and respond to contractor’s claims, so to avoid wasted effort, it is worth making sure that this time and effort is devoted to justifiable claims and is not wasted on reviewing and responding to claims for which the contractor has no entitlement, or to those that have not been submitted in an appropriate manner to enable a proper review and response to be made.

It must be remembered that the onus is on the claimant to prove the case and even though most contracts require the consultant to be fair and reasonable when responding to claims, this obligation does not extend to proving the contractor’s claim on the contractor’s behalf.

Most forms of construction contract support this obligation and require the contractor to submit a formal claim for additional time and/or payment. By way of illustration, FIDIC has this to say under Sub-Clause 20.1 (Contractor’s Claims): ‘Within 42 days after the Contractor became aware … of the event or circumstance giving rise to the claim …, the Contractor shall send to the Engineer a fully detailed claim which includes full supporting particulars of the basis of the claim and of the extension of time and/or additional payment claimed’ (emphasis added).

In my view, FIDIC is weak in this direction, as it does not make any attempt to define what comprises ‘a fully detailed claim which includes full supporting particulars of the basis of the claim and of the extension of time and/or additional payment claimed’, but in accordance with good professional practice, the Contractor must ensure that his claim adequately demonstrates he is entitled to an award by:

  1. Demonstrating the cause, i.e. the event that gave rise to the claim;
  2. Explaining and demonstrating the effect on the time for completion, his costs or the contract price;
  3. Ensuring a demonstrable cause and effect exists; for example, that that the delay actually affected the time for completion and by how much;
  4. Demonstrating that claims for additional payment for varied work have been calculated correctly;
  5. Demonstrating that claims for costs are based on actual costs incurred as a result of the event and have been calculated correctly;
  6. Demonstrating that the contract provides entitlement to an award for the event in question;
  7. Demonstrating that he has complied with any conditions precedent contained in the contract;
  8. Substantiating every statement made or fact relied upon in the claim for verification purposes;
  9. Ensuring that the claim submission is a stand-alone document with everything necessary for the respondent to properly examine the matter and make an award.

One would expect that contractors would know all this because it is just a case of good practice, but when inadequately expressed claims have been a leading cause of disputes for many years, clearly, they don’t.

So, how can you, as a consultant or employer, ensure that your contractors comply with these principles and how will this help to prevent the contractor from submitting spurious claims and wasting your time?

Firstly, you could include in your contract conditions specific requirements for claim submissions along the line of the above suggestions and make this a condition precedent to an award. This, of course, would only work on new projects and could not be introduced into existing contracts.

One method I have used very successfully is to meet with the Contractor at the beginning of the project and explain exactly what I consider to be ‘a fully detailed claim which includes full supporting particulars of the basis of the claim and of the extension of time and/or additional payment claimed’. Again, this could comprise the above suggestions and the contract will support you in this. At this point, you should advise the Contractor that these particulars are necessary to enable you to carry out your obligations and to make an award in a timely manner. You should also advise that any claims which do not comply with these requirements will be rejected on the basis that the claim does not adequately prove that an award may be made. Once you have persuaded the Contractor to ‘buy-in’ to this, both the agreement and the requirements for claim submissions should be recorded.

If the Contractor follows the guidelines, he must investigate the matters fully rather than adopting the tactic of ‘throwing everything at the wall in the hope that some of it sticks’. If his claim is not a just one, he will, during this process, realise that it’s not worth the effort of preparing and submitting a claim for which he has no entitlement. If he does, however, decide to submit a claim that is not in compliance with the agreement, you will be justified in responding by pointing out areas of non-compliance and advising that. consequently, the claim does not prove that an award is justifiable.

If you consider that the matter may carry entitlement and it is only the claim itself that is inadequately expressed, I would stop short at formally rejecting the claim, because having received the response, the Contractor may well resubmit with a more-detailed claim. You must remember here that, if the Contractor is properly entitled and his claim eventually demonstrates this, you will be obligated to make an award.

I hope this helps any consultants who are tasked with responding to claims.

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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