Table Of Content(cid:2)
EvaluatingContractClaims
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Evaluating Contract Claims
JohnMullenBSc(Hons),MSc,FRICS,FInstCES,FCIArb
and
R.PeterDavisonBA,MSc,DipArb
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ThirdEdition
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Thiseditionfirstpublished2020
©2020JohnWiley&SonsLtd
EditionHistory
2ndEdition:BlackwellPublishing2009
1stEdition:BlackwellPublishing2003
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LibraryofCongressCataloging-in-PublicationData
Names:Mullen,John,1959-author.|Davison,R.Peter,author.
Title:Evaluatingcontractclaims/JohnMullen,BSc(Hons),MSc,FRICS,
FInstCES,FCIArbandR.PeterDavison,BA,MSc,DipArb.
Description:Thirdedition.|Hoboken,NJ,USA:Wiley-Blackwell,2020.|
Revisededitionof:Evaluatingcontractclaims/R.PeterDavisonandJohn
Mullen.2009.|Includesbibliographicalreferencesandindex.|
Identifiers:LCCN2019017935(print)|LCCN2019018685(ebook)|ISBN
9781118918135(AdobePDF)|ISBN9781118917800(ePub)|ISBN9781118918142
(hardback)
Subjects:LCSH:Buildings–Maintenance–Costs.|Constructioncontracts.|
Constructionindustry–Lawandlegislation.|Remedies(Law)|Claims.
Classification:LCCTH425(ebook)|LCCTH425.D382020(print)|DDC
692/.8–dc23
LCrecordavailableathttps://lccn.loc.gov/2019017935
CoverDesign:Wiley
Setin10/12ptWarnockProbySPiGlobal,Chennai,India
10 9 8 7 6 5 4 3 2 1
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ToAnneandMelanie
Fortheirpatienceandforbearanceduringourlongabsencesonprojectslocallyand
internationally.
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vii
Contents
Reviews xvii
Preface xxi
Acknowledgements xxvii
1 Introduction 1
1.1 TheLegalBasis 2
1.1.1 FormsofContract 2
1.2 TheStandardofSubstantiation 4
1.2.1 SCLDelayandDisruptionProtocol 5
1.2.2 DirectandTimeConsequences 7
(cid:2) 1.2.3 DutytoMitigate 9 (cid:2)
1.3 Risks 12
1.3.1 DesignRisks 12
1.3.2 DesignReview 14
1.3.3 ProfessionalIndemnityInsurance 14
1.3.4 RiskAnalysisandManagement 14
1.3.5 RiskRegisters 16
1.3.6 RisksandRecords 17
1.3.7 ReimbursableRisks 20
1.3.8 Non-reimbursableRisks 21
1.4 SourcesofChange 22
1.4.1 TheProcessofAnalysis 22
1.4.2 InadequatePre-contractDesignandDocumentation 23
1.4.3 DesignDevelopmentandApproval 26
1.4.4 AccessorPossession 27
1.4.5 EarlyTakingoverorBeneficialUse 28
1.4.6 ChangesinEmployerRequirements 28
1.4.7 ContractDocuments 29
1.4.8 UnforeseeableOccurrences 30
1.4.9 BreachofContract 31
1.5 Summary 32
2 EstablishingtheBase 33
2.1 PlannedChange 34
2.1.1 OrderedVariations 36
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viii Contents
2.1.1.1 FairRatesandPrices 39
2.1.2 ChangesinQuantities 41
2.1.2.1 QuantitiesandConditions 43
2.1.3 PreferentialEngineering 44
2.1.4 ValueEngineering 45
2.1.5 UnconfirmedInstructions 46
2.2 UnplannedChange 47
2.3 ProgrammesandMethodStatements 47
2.3.1 TheStatusofProgrammes 47
2.3.2 ProgrammesandResources 52
2.3.2.1 MethodStatements 52
2.3.3 TheSCLDelayandDisruptionProtocol 54
2.3.4 APartialProgramme 55
2.3.5 LimitationsonLiability 55
2.4 Summary 56
3 EffectofChangeonProgrammesofWork 57
3.1 UseofProgrammes 58
3.1.1 ProvisionalSumsinProgrammes 60
3.1.2 TheBaseCost 63
3.2 UseofAs-BuiltProgrammes 64
3.2.1 SourcesofInformationforAs-BuiltProgrammes 65
(cid:2) 3.2.2 ConstantResource/ContinuousWorking 66 (cid:2)
3.2.3 RecordingofCompletion 67
3.3 ChangeWithoutOverallProlongation 67
3.3.1 WhoOwnstheFloat? 68
3.4 ProlongationoftheWorks 74
3.5 AnalysisofTimeandDelay 77
3.5.1 Introduction 77
3.5.2 BasicRequirements 82
3.5.3 FloatandAcceleration 86
3.5.4 ConcurrentDelays 88
3.5.5 ‘Doton’ 98
3.5.6 ConcurrencyandtheContractor’sFinancialClaims 100
3.5.7 DelayAnalysisTechniques 103
3.5.7.1 ImpactedasPlanned 104
3.5.7.2 TimeImpactAnalysis 108
3.5.7.3 CollapsedAs-BuiltAnalysis 111
3.5.7.4 As-PlannedVersusAs-BuiltProgrammes 113
3.5.7.5 WindowsAnalysis 115
3.5.7.6 Software 116
3.5.7.7 BuildingInformationModelling 118
3.5.7.8 CaseLaw 120
3.5.7.9 Conclusions 123
3.5.8 AssessmentofProductivity 125
3.5.8.1 TenderProductivity 126
3.5.8.2 AchievableProductivity 127
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3.5.8.3 ActualProductivityAfteraChange 127
3.5.9 SourcesofProductivityData 128
3.5.9.1 TheFundamentalPrinciples 128
3.5.9.2 RelevantQuantities 128
3.5.9.3 EquipmentandMethods 129
3.5.9.4 SustainableOutputs 130
3.5.9.5 RecalculationUsingEfficiencyFactors 130
3.5.10 EffectonContractor’sPlantandEquipment 131
3.5.10.1 WorkingPlantandEquipment 132
3.5.10.2 SiteFacilitiesandEquipment 133
3.5.11 DutytoMitigate 134
3.6 Summary 135
4 SourcesofFinancialInformationforEvaluation 137
4.1 TheContractProvisions 139
4.1.1 Cost 139
4.1.2 LossandExpense 141
4.1.3 ToAscertain 142
4.2 TenderDocumentsandInformation 145
4.2.1 EntireAgreements 146
4.2.2 MisstatementsandMisrepresentation 147
4.2.3 MistakesinTenders 148
(cid:2) 4.2.4 TheConditionsfor,andCharacterof,theWorks 149 (cid:2)
4.3 TenderCalculationsandAssumptions 149
4.4 CostRecords 151
4.4.1 IdentificationofInvoices 151
4.4.2 DiscountsandCreditNotes 152
4.4.3 BulkDiscounts 153
4.4.4 CodingSystems 154
4.4.5 TimingofCosts 154
4.4.6 CostTransfersandAccruals 155
4.4.7 FinalAccountsandEconomicDuress 156
4.5 AccountingInformation 158
4.5.1 FinancialAccounts 158
4.5.2 ManagementAccounts 159
4.5.3 ExceptionalItems 161
4.6 ExternalInformation 161
4.7 Summary 162
5 EvaluationoftheDirectConsequencesofChange 165
5.1 UnitRatesandPricesorActualCosts? 166
5.2 UnitRatesandPrices 167
5.2.1 TheFIDICFormsofContract 172
5.2.2 MeasurementofWork 173
5.2.3 DesignandBuild/ScheduleofRates 175
5.2.4 StatusofContractRatesandPrices 176
5.2.5 ErrorsinRatesandPrices 177
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5.3 TheValuation‘Fences’ 184
5.3.1 The‘Fences’ 185
5.3.2 ‘Conditions’and‘Character’ 185
5.3.2.1 ChangeinConditions 187
5.3.2.2 ChangeinCharacter 188
5.3.3 NewRates 189
5.3.4 ValuationofVariationsinQuantity 190
5.3.5 EffectofVariationsonOtherWork 196
5.4 InclusionofPreliminariesandGeneralItems 197
5.5 PercentageAdjustments 200
5.5.1 PercentagesinVariationValuation 200
5.5.2 ThresholdPercentages 201
5.5.2.1 CriteriaforJudgingChangeintheAmountofWork 202
5.5.2.2 WhichRatesAretoBeAmended? 203
5.5.2.3 WhatRulesApply? 203
5.5.3 PercentagesforDefectiveorIncompleteWork,etc. 204
5.5.4 PercentageCapsonAdjustments 205
5.6 ValuationUsingDayworkProvisions 205
5.7 UseofActualCosts 210
5.7.1 TheNECSuiteofContracts–Introduction 211
5.7.2 TheNECSuiteofContracts–ForecastorActualCost? 213
5.7.3 TheNECSuiteofContracts–DefinedCost 218
(cid:2) 5.7.4 TheNECSuiteofContracts–DisallowedCost 221 (cid:2)
5.7.5 TheNECSuiteofContracts–TheFeeandOtherAgreedRates 223
5.7.6 TheNECSuiteofContracts–Objectives 224
5.8 UnitCosts 225
5.8.1 LabourCosts 229
5.8.1.1 GangRates 229
5.8.1.2 Supervision 230
5.8.2 UseofNormsinEvaluation 231
5.8.3 PlantandEquipmentCosts 234
5.8.3.1 PlantandEquipmentCostRates 235
5.8.3.2 ExternalHireCharges 240
5.8.4 MaterialsCosts 241
5.8.5 OverheadsandProfit 243
5.9 SubcontractorandSupplierCosts 245
5.9.1 Subcontractors 246
5.9.1.1 NominatedorNamedSubcontractors 246
5.9.1.2 DomesticSubcontractors 249
5.9.2 PackageEquipmentSuppliers 250
5.9.2.1 ExampleofChangeCalculationforPackageEquipment 252
5.10 ValuationofOmissions 253
5.11 AddandOmitVariations 254
5.12 QuantumMeruit 257
5.12.1 NoContractorAgreementastoPrice 258
5.12.2 ContractOnlySaysReasonableSum 259
5.12.3 WorkOutsideofContract 259
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5.12.4 CardinalChange 260
5.12.5 HowtoCalculate 263
5.13 ValuationinAdvance 265
5.14 RequirementsforNotices 269
5.14.1 NoticeinRelationtoUnitRates 270
5.14.2 NoticeinRelationtoaQuotationorProposal 273
5.14.3 NoticeasaConditionPrecedentandOtherSanctions 275
5.14.4 FurtherConsiderations 277
5.15 Summary 278
6 EvaluationoftheTimeConsequencesofChange 279
6.1 Introduction 279
6.1.1 FactualandLegalBackground 279
6.1.2 FinancialEffectsfortheEmployer 282
6.1.3 FinancialEffectsfortheContractor 283
6.1.4 TheCausalLink 285
6.1.5 TheSCLDelayandDisruptionProtocol 287
6.1.6 Conclusions 289
6.2 Prolongation 289
6.2.1 WhatistobeEvaluated? 289
6.2.2 TheRelationshipBetweenExtensionofTimeandMoneyClaims 290
6.2.3 Time-RelatedCosts 295
(cid:2) 6.2.3.1 WhenDidtheDelayOccur? 295 (cid:2)
6.2.4 WhatCostsWereIncurredintheDelayPeriod? 297
6.2.5 TypicalHeadsofProlongationCost 298
6.2.6 TypicalHeadsofProlongationCost–Staff 300
6.2.7 TypicalHeadsofProlongationCost–Labour 302
6.2.8 TypicalHeadsofProlongationCost–TemporaryBuildings 303
6.2.9 TypicalHeadsofProlongationCost–TemporaryServices 304
6.2.10 TypicalHeadsofProlongationCost–TemporaryWorks 304
6.2.11 TypicalHeadsofProlongationCost–PlantandEquipment 305
6.2.12 ExampleofAdditionalActivityCosts 307
6.2.13 RelevanceofTenderedPreliminariesandGeneralCostRates 310
6.2.14 IncreasesinCosts 313
6.2.15 Off-SiteOverheadsandProfit 315
6.3 LiquidatedRatesforDelayDamages 315
6.3.1 ChallengestotheRateofDelayDamages 317
6.3.2 DelayDamagesasa‘Penalty’ 320
6.3.3 ActualDamagesforDelay 323
6.3.4 TheDate(s)fromWhichDelayDamagesRun 324
6.3.5 ProcedureandPrerequisites 324
6.4 Disruption 325
6.4.1 LegalBasisofaDisruptionClaim 327
6.4.2 TheFactualBasisofaDisruptionClaim 330
6.4.3 EvaluatingtheCostsofDisruption–Introduction 332
6.4.4 RecordsofTimeLost 334
6.4.5 The‘MeasuredMile’ 338
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xii Contents
6.4.5.1 IllustrativeExampleofanEarnedValueApproach 343
6.4.6 ComparingTenderedandActualOutputs 344
6.4.6.1 TenderedAllowances 344
6.4.6.2 ActualOutputs 346
6.4.6.3 OtherPotentialDistortingFactors 347
6.4.6.4 Back-CheckingtheResults 349
6.4.6.5 ConclusionsonCostsLessRecoveryApproaches 351
6.4.7 FactorsAffectingProductivity 353
6.4.7.1 ExcessiveOvertime,etc. 354
6.4.7.2 WeatherConditions 356
6.4.7.3 IntroductionofAdditionalResources 356
6.4.7.4 LackofManagement 357
6.4.7.5 ChangesinRatioofLabourtoPlantandEquipmentMix 358
6.4.7.6 CondensingofActivities 359
6.4.7.7 ResequencingActivities 359
6.4.7.8 BreaksinContinuity 360
6.4.7.9 ChangesinPersonnel 360
6.4.7.10 ContractorInefficiencies 361
6.4.8 CumulativeImpactClaims 362
6.4.9 TopDownorBottomUp? 365
6.4.9.1 The‘TopDown’Approach 365
6.4.9.2 The‘BottomUp’Approach 367
(cid:2) 6.4.10 The‘Rump’oftheContractor’sLosses 367 (cid:2)
6.4.11 HypotheticalIllustrativeDisruptionCalculation 369
6.4.12 PreliminariesThickeningClaims 373
6.4.13 ConsequentialFurtherDelayEvents 376
6.4.14 SummaryofDisruption 379
6.5 Acceleration 380
6.5.1 AccelerationUndertheContract 382
6.5.2 AccelerationbyExtra-ContractualAgreement 386
6.5.3 AccelerationasaComponentofDelayand/orDisruptionCosts 390
6.5.4 InducedorConstructiveAcceleration 391
6.5.5 TheCanadianCases 394
6.5.6 AccelerationtoReducetheContractor’sCulpability 400
6.5.7 FinancialQuantificationofAcceleration 401
6.5.8 SampleAccelerationCosting 404
6.6 GlobalClaimsandSimilarTerms 406
6.6.1 PotentialDefinitions 406
6.6.1.1 ‘GlobalClaim’ 406
6.6.1.2 ‘TotalCostsClaim’ 409
6.6.1.3 ‘TotalLossClaim’ 411
6.6.1.4 ‘CompositeClaim’and‘Rolled-UpClaim’ 412
6.6.2 GlobalClaims 414
6.6.2.1 Introduction 414
6.6.2.2 AHistoricalPerspective 416
6.6.2.3 TheCurrentPosition 432
6.6.2.4 LillyandMackay 438
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