I want to talk about how to establish the but-for position in a DSU claim. Typically within any Delay in Start Up (DSU) claim that we are asked to assess, the claimant starts off with the position that the project was on schedule prior to the occurrence of the insurable or property damage event. More specifically, the claimant alleges that the first delay event that occurred on the project was the delay caused by the property damage event.
Well we all know that construction is a complicated business, and, in my experience, it is very rare indeed for a major construction project to only have a single cause of delay. Indeed on some projects that we have prepared delay analyses on, for EPC contractors, the number of delay events can potentially be in the dozens!
With this in mind, it is self-evident that the starting point when assessing any DSU claim is the position, or the delay suffered immediately prior to the occurrence of the property damage event i.e. the but-for position. Clearly, any delay suffered prior to the occurrence of the property damage event cannot have been caused by the event itself and therefore should not form part of the claim.
So how do we determine the but-for position?
Well as ever it depends on the quality of the information provided by the insured, but on the basis that the insured has provided updated schedules, monthly progress reports and other relevant progress information, then ideally, we would adopt the following simplified strategy.
- Rectify the latest baseline in existence prior to the property damage event occurring, by removing all constraints and include any missing logic or activities.
- Interrogate the project records to identify progress immediately prior to the property damage event and identify any potential other delays events.
- Incorporate the progress and delay events into the schedule.
- Modify the duration and / or sequence of the remaining work activities to reflect any delays, mitigation, or acceleration measures known at the but-for date.
- Reschedule at the but-for position date and ascertain the delay to the start up or completion date.
By adopting the above approach you should be able to validate the veracity of the reported progress and hence the forecast start up or completion date, at a point immediately prior to the property damage event occurring.
It should also be possible to compare the abovementioned but-for schedule, with the claimants’ own schedule and identify any differences. If needed, these differences can then be discussed with the claimant and quite possibly a but for schedule agreed between the parties. Which is good for all concerned!
Only by doing this will you be able to accurately assess the actual status of the project at the date of the insurable event and safeguard that the insured is reimbursed exactly what he is entitled too, no more and no less.
But that’s not the end of it; to determine the final period of interruption or delay caused by the property damage event (and hence his loss) you also need to consider the mitigation measures implemented during the period of the repair, the duration of the repair work, other concurrent delays, the critical path, and the effect of the waiting period.
Whilst the but-for position is only part of the picture, it’s an important part and by adopting the above approach, it will go a long way to amicably resolving the claim.