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.

  1. 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.
  2. 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 provisions.
  3. Contractors do not submit detailed particulars of claims within the contractual time frames and often leave the submission to the end of the project, thus preventing the Employer or Engineer from accurately assessing liability.
  4. Contractors do not submit evaluations of variations in a timely manner, thus preventing the Employer or Engineer from accurately assessing the cost of the variation and from making adequate provisions for payment.
  5. Contractors do not submit extension of time claims within the contractual time frames and often leave these to the end of the project, therefore, allowing the Employer to consider that he/she will be entitled to claim delay penalties.

One can assume that all projects are subject to budget constraints. Having denied the Employer the opportunity to mitigate costs or to manage the project budgets throughout the life of the project by submitting timely claims only to inundated the Employer with claims at the final hurdle, are Contractors surprised when the Employer does not want to, or possibly cannot pay what may be a huge project overspend? In this case, an Employer with no remaining budget, must manage things as defensively as possible. This often means disputing the Contractor’s final account, regardless of justification.

I know I say this often, but if Contractors wish to avoid such a situation, they must avoid waiting until the final stages of a project and submit their notices and claims in a timely manner throughout the life-cycle of the project.

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

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