Claims Preparation: Top Ten Tips ICES – Abu Dhabi – 18 April 2011

1. Claims Preparation: Top Ten TipsICES – Abu Dhabi – 18 April 2011

2. Purpose of this Evenings Talk Top Ten Tips • Our view of the Ten most common problems that we come across in preparing / assessing claims • Address key issues and causes of these problems and their solution • Time for further discussion / debate at the end • Alternative issues • More detail

3. Introduction Claims – definition - a dirty word ? • Often perceived as an emotive topic – particularly by Employers • Often understood in the contractual context of something prior to a legal dispute • Objective must be to try and settle within the contractual environment / processes and without recourse to formal / legal dispute - Try to avoid escalation if possible • This evening will take you through how best to avoid the problem areas

4. Some Basics • A did or did not do B • B caused C to happen • C involved or affected the resources, D (and not for any other reason) • D cost E • E, under the Contract or at Law, is the liability of A

5. Some Basics... • A did or did not do B • B caused C to happen • C involved or affected the resources, D (and not for any other reason) • D cost E • E, under the Contract or at Law, is the liability of A ü

6. Some Basics... • A did or did not do B • B caused C to happen • C involved or affected the resources, D (and not for any other reason) • D cost E • E, under the Contract or at Law, is the liability of A ü ü

7. Some Basics... • A did or did not do B • B caused C to happen • C involved or affected the resources, D (and not for any other reason) • D cost E • E, under the Contract or at Law, is the liability of A ü ü ü

8. Some Basics... • A did or did not do B • B caused C to happen • C involved or affected the resources, D (and not for any other reason) • D cost E • E, under the Contract or at Law, is the liability of A ü üû ü ü

9. Some Basics... • A did or did not do B • B caused C to happen • C involved or affected the resources, D (and not for any other reason) • D cost E • E, under the Contract or at Law, is the liability of A ü üû üû ü ü

10. Make the Causal Linkage • A did or did not do B • B caused C to happen • C involved or affected the resources, D (and not for any other reason) • D cost E • E, under the Contract or at Law, is the liability of A ü üû üû ü ü

11. Claim Presentation / Attitude • Don’t be overly emotional - sometime necessary but as a rule emotion in claims is best avoided • Be courteous - avoid insulting language or adjectives • Be to the point – avoid verbosity (inversely proportional ?) • Be neat and particular - Treat a claim no different to an exam – keep it simple • Be reasoned and logical - Don’t ‘try it on’ • For every sentence that goes into your claim – ask ‘what does it add ? Is it necessary

12. Claim Presentation / Attitude... To do our work we all have to read a mass of papers. Nearly all of them are far too long. This wastes time, while energy has to be spent in looking for essential points... The aim should be reports which set out the main points in a series of short, crisp paragraphs. If a report relies on detailed analysis of some complicated factors or on statistics, these should be set out in an appendix... Let us have an end to such phrases as these : “It is important to bear in mind the following considerations... Most of these wooly phrases are mere padding, which can be left out altogether, or replaced by a single word.... Winston Churchill

13. Understand Your Contract • Stating the obvious ? • Track through your contract and understand the route and processes that relate to claims and variations • As much administrative as technical – set up your processes to match the Contract • Follow the contract – do not be lazy or try short cuts. Most standard contracts try to achieve a balance – they are written in a particular way for a particular reason – ignore those processes at your peril.

14. Understand your Contract... • Understand your scope of works • Get help - Try to enlist the support of those on site – at supervisor level • Explain to people what you are trying to do and how it can make the difference between profit and loss • If claims preparation is late then try to speak to those involved at the time – it is the technical people who were there who have the knowledge as to whether and how something changed • The more warning you have that something has changed or is costing time / money beyond the Contract then the more time you have to prepare and capture data

15. Notices • Get your notices in • Legal arguments under the Civil code about using administrative parts of a contract to escape liability / a good claim never dies etc. etc. • But why have the argument ? First line of contractual defence to a claim - remove it • Increasingly in certain jurisdictions there is a hardening of attitudes and timebars are being enforced – easy win for an Employer who doesn’t want to pay – take it away • Get your particulars in as soon as you can after your notices

16. Claims Must be Genuine “A claim is a submission by the contractor concerning any matter for which the contract expresses explicit entitlement for his benefit, be it time or money, or for which he reasonably considers the contract to afford him implicitly or tacitly.” Anon. • Must be genuine entlitlement • Something to give away in negotiation ? • If you are going to run part s of a claim that are ‘weak’ then at least be honest with yourself • Don’t go to arbitration on them !

17. Records, Records, Records “The essence of a claim is not its correctness or its contractual propriety, but rather its persuasiveness.” Philip Maton, Commercial Claimsmanship – with Special Reference to the FIDIC form of contract, CIOB, 1983 • Keep good records from day one • A claim with records is more likely to persuade “The degree of persuasiveness which must be achieved to succeed is on a preponderance of probabilities.” K L Scott, The Management of Contractual Claims, Studies in Contractual Claims 14, CIOB,1992 • Tipping Point (more likely than not)

18. Records, Records, Records... • Confirm scope and entitlement • Understand original vs. varied • Don’t forget omissions! • Don’t duplicate labour resource entitlement in other claims • Self-explanatory claim submission • ALL RELY ON KEEPING GOOD RECORDS!

19. Appropriate Methodology / Classification • What type of claim do you have ? • Select an appropriate methodology for that type of claim • Understand the correct type of damage that flows from that claim – price or cost ? • Check the Contract – it may stipulate – eg. EoT methodology / measure of loss

20. Appropriate Methodology / Classification “A claim for an extension of time may or may not be associated with a claim for financial compensation or for that matter with a delay in a particular part of the works that, because it does not lie on the critical path, does not adversely affect the time for completion.” Nael G. Bunni, The FIDIC Forms of Contract, Third Edition, 2005 • A delay to work may not be a delay to the Work – classification - prolongation to the Project / to Work / disruption ? • Time? Money? Time and Money? • Notify of delay event • Notify of intent to claim additional monies as a result

21. Appropriate Methodology / Classification • Understand preliminaries and overheads • Site overheads and Corporate overheads • BQ preliminaries – don’t use rates / use cost • Mobilisation, Recurring and Demobilisation • Common to simply add up recurring costs • Arbitration or Courts would require damages based on actual costs supported by relevant information and documents in substantiation

22. Disruption - Generally “Disruption may be defined as the effect of an event or a number of events on the efficiency and loss of productivity of the execution of the works, irrespective of whether or not there had been a delay to a critical activity.” Nael G. Bunni, The FIDIC Forms of Contract, Third Edition, 2005 • Late design information • Delayed or un-coordinated instructions • Damage caused by other contractors • Overzealous inspections or testing • Delayed or hindered access

23. Disruption – Global Claims Global Claims “Any claim advanced on a global basis must state that it is not possible to disentangle cause and effect. Before it is possible to state this, there should be a genuine attempt to analyse the claim to disentangle cause and effect. Thus, the global claim should be seen as a ‘last resort’ rather than the first.” Jeffrey C Brown, CIOB, Construction Papers, No. 56 – Prolongation and Disruption, 1995 “The failure even to attempt to specify any discernible nexus between the wrong alleged and the consequent delay provides ‘no agenda’ for the trial.” Lord Oliver, Wharf Properties and Another v Eric Cumine Associates and Others (No 2) [1991] 52 BLR 1

24. Disruption – Types of Disruption Two Types of Disruption: • Non-Critical activity • Activity takes longer, but within float • Costs more because of inefficiency • No Extension of Time • Critical activity • Continuous, extensive and cumulative disruption • Contractor entitled to monetary cost of disruption and Extension of Time

25. Disruption - Evaluation Proper Evaluation of a Claim for Disruption requires: • An identification and analysis of each operation; • Cause and manner in which disruption occurred to be established; • Figures for anticipated output, resources planned and time required to achieve completion of disrupted operations as calculated in the tender have to be shown to be achievable; • The effect of any inefficiency on the part of the disrupted party in carrying out the works should be properly calculated and its effect included in calculations of disruption suffered; • Number of hours actually logged in the time sheets for the disrupted operation has to be shown to be accurate.

26. Disruption - Substantiation “Where records are available and are correct, then the cost of disruption can be simply calculated as the number of manhours actually worked less that originally anticipated at tender, multipied by the cost of the particular resource disrupted per hour... Alternatively, sample months to show progress in a month unaffected by disruption contrasted with progress in a month which suffered loss of productivity and inefficiency through disruption.” Paul Newman, Loss and Expense Explained,1994 • Calculation of anticipated output figures of labour and equipment at tender • Monitor and record disruption events • GOOD RECORDS OF LABOUR AND PLANT HOURS!

27. Acceleration Cost may include: • Working additional hours • Providing additional labour • Providing additional or different equipment • Advancing the date of delivery of manufactured elements N.B - Accelerating the works might also include the loss of productivity.

28. Delay Analysis - Generally CIOB Managing the Risk of Delayed Completion in the 21st Century

29. Delay Analysis – How Should Delay be Analysed? • What does the contract say? • When is the delay analysis being carried out? • What data is available? • What skills are available? • What budget is available? • What time is available?

30. Delay Analysis - Methodologies • Impacted As-Planned • As-Built But For • Time Impact Analysis • As-Built Snap-Shot • As-Planned versus As-Built

31. Delay Analysis - Float • What Does The Contract Say? • Are There Any Applicable Legal Precedents? • Have Any Project Precedents Been Set? • Are You Able to Reach Agreement?

32. Top ten tips!

33. Top Ten Tips • Good presentation • Fully understand the contract and scope of works • Appropriately discharge contractual obligations in every respect • Ensure that all appropriate notices are submitted • Claims should be genuine and demonstrable • Quantum claims should be supported by the appropriate information • Update claims and notices as necessary • Monitor and accurately record the full impact of disruption events • Select a delay analysis methodology which is appropriate • Keep good records

34. Please feel free to ask Questions