Sometimes we are asked by clients, why was our claim not successful? There are potentially many reasons for this, but from our experience, the most common and significant reasons that occur time and time again, can easily be identified.
We consider there are four major causes:
Number 1: Effects not proven
Clauses in contracts allow for contractors to claim for the impact of client ‘events’, which can include “acts of prevention or impediments”, breaches of contract by the client, or variations to the work.
If a contractor alleges that the client has caused a delay then this must be clearly demonstrated, typically by detailing or explaining how the event caused the delay. What is trickier is proving the effect of this client-caused event on the contractor’s schedule of work.
Contractors may have hundreds of activities going on at the same time, and identifying the single event that is causing a delay to a milestone or a completion date requires factual delay analysis.
Delay analysis has become something of a cottage industry, with a multitude of textbooks, articles and academic opinion available on delay analysis methodologies. Some of these approaches focus too heavily on “entitlement” and the “theoretical effects” of delays, but in claim negotiations such strategies are rarely successful.
We recently handled a claim in which a contractor whose approach greatly exaggerated the delay actually caused by our client, and failed to take the contractor’s own delays into account. This resulted in protracted negotiations and the contractor ultimately having to go back to square one to properly demonstrate entitlement.
The most effective approach is a pragmatic one that focuses on demonstrating what actually happened, based on contemporaneous records.
Number 2: Lack of contemporaneous records
The process of writing a claim can be summarised in the following steps: identifying the relevant records, collating them chronologically, and then writing your story up.
As such, it is vital that progress reports, letters, minutes of meetings, notices, variations, records of resources on the project, schedule updates, and actual costs are carefully kept throughout the duration of any project.
All too often, contractors fail to keep these records, leaving them without contemporaneous proof to evidence the facts about what actually happened in support of a claim.
Claims based on opinion (i.e. without detailed records to support them) are far easier for clients to defend – especially if the client has good records. This is particularly the case on the continent, where formal dispute resolution procedures are more inquisitorial than accusatorial, and more reliance is placed on the documents rather than verbal evidence.
Kenzie worked on an arbitration for a client where the contractor recovered just six per cent of the total claim. The problem was a lack of records to support key arguments and a reliance on witness testimony. Much of this witness evidence was not even referenced in the final award by the arbitrators, who time and time again referred to the contemporaneous records of the project.
Look out for my next blog on causes 3 and 4.