CONSTRUCTION CLAIMS FOR EXTENSION OF TIME, LOSS AND

EXPENSES, AND DISPUTE MECHANISMS

CHEW SIAK KOR

An assignment submitted in partial fulfilment of the

requirements for the award of Master of Project Management

Lee Kong Chian Faculty of Engineering and Science

Universiti Tunku Abdul Rahman

March 2017
MEBH 17103 CONSTRUCTION PROJECT CLAIMS MANAGEMENT

The case study development project is located at Malaysia with the use of FIDIC
Standard Form of Contract. The project is a construction development of an office
block. The development is foundation by bored pile and framed with reinforced
concrete structure without the construction of basement. The development is enclosed
by bricks and block walls, also with tinted anti-sunglass curtain walling. The building
is finished with marble flooring and wall and column lining for prestigious entrance.
The building is ventilated with full mechanical air-conditioning system. The contract
sum of the development is at RM 50,400,000.00 and it is measured based on SMM2
measurement rule.

Andy (2011a) identified that a successful claim requires several essential

elements. A claim shall be arranged and show with the sequence of Cause, Effect,
Entitlement, then Substantiation. In reference to Andy (2011), this report will be
arranging with the sequence of Cause, Effect, Entitlement, and Substantiation. This
sequence demonstrate the claimant entitled compensation. Also substantiate claimant
submissions with persuasive proofs (Andy, 2011).

Cause

Causes are the sources that give rise of an event, and lead to a claim (Andy
2011a). Refer to case study, the causes that give rise of the claim are as follow:

1. Due to concrete obstruction found underground of the development area.

Consultant redesign foundations with reinforced concrete rafts.
2. Seasonal heavy rain during December 2013 to January 2014. This caused
delay for the erection of structural works.
3. Main electrical supply delayed in installation by Statutory Authority.
4. Due to the delays above, there are public holidays fell within contract period.
5. A change in structural frame construction method. There’s no any impact
which is affecting the construction program scheduled earlier.
6. Due to the change in construction method, and mitigating the impact of change,
M&E works requires accelerations on works.

With all the 6 causes above, contractor apply 35 weeks of extension of time in
total. The unexpected underground condition requires redesign and there will be no

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construction work in progress during the redesign in progress. Exceptional weather,

especially heavy rain, will cause serious impact to construction works. Major
construction works and activities will be affected and cause to low productivity. Delay
of main electricity supply could due to poor coordination works from consultant and
contractor. Failed to make earlier appointment is part and parcel of consultant duty
which will cause to significant impact into construction activities.

Pubic holidays are not allowing contractor to proceed with construction works.
Therefore the contractor categorize as a delay. Changes in structural frame is related
to the issuing of construction drawings. Shall then be able to understand as a delay.
Acceleration to M&E works to rush up the schedule is not a cause for delay claim, but
a cause in relation to acceleration and disruption claims.

Making sure that the contractor is eligible to claim these causes, Andy (2011c)
advises the contractor to strictly follow the contract required procedures. As stated in
the case study, the contractor comply to FIDIC Standard Form of Contract, sub-clause
20.1, Contractor’s Claims, contractor submitted notice within 28 days from the day
when contractor aware of any of the causes which lead to delay. Within 42 days upon
aware, contractor shall then submit claims.

Effect (Delay Analysis)

Refer to Andy (2011a), In the case study, contract administrator granted

extension of time 19 weeks in total. The extension was granted by contract
administrator as follow:

1. During the unexpected underground condition was found, project team can
only work on small scope of works. Therefore granted 4 weeks in extensions.
2. Redesigning foundation system to raft foundation caused extra construction
works. 1 Week extension of time is granted.
3. Delay in steel works erection due to heavy rain had 5 weeks of extension.
Which this 5 weeks is concurrently proceed with extension for cable works.
4. The delay of cable works installation, including main cable, distribution board,
and main electricity supply. Contractor is granted for 13 weeks of extensions.
5. Delay in construction progress due to holidays within the contracting period.
Contract Administrator has granted 2 weeks of extensions.

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The unexpected underground condition resulting the earlier designed

foundation system unable to be used. Before the revised design is available, contractor
is not able to proceed with any construction works further. As foundation is the key
load transfer of the entire development. No building works can be done without the
need of appropriate foundation. To mitigate the impact of delay, contractor can only
do some housekeeping works onsite. Contractor can only tidy up with strategize use
of site layout, traffic control, upgrade pavement to receive heavy vehicle, precast in-
situ concrete spacer, earlier formwork erection for other building elements, and et
cetera. As mentioned in the case study, there are only little work progressed when the
unexpected underground condition was revealed.

Foundation Works
Building Construction Works

Legend
Original Working program
Previous scheduled
Delay
Figure 1.1 Delay to construction works due to unexpected underground conditions

Redesigning the foundation system from bored pile to raft foundation spend
time. Consultant needs to collect site condition data to substantiate their design to suit
for site condition. After data collection, consultant has to analyze the site condition in
identifying the best suitable design. After defining the possible foundation system,
consultant will design the foundation system with details including the size and shape
of the raft foundation, also the detail rebar layout and schedule. Consultant shall then
send out construction drawings for the contractor to proceed with the design. As the
graph below shows, the entire process is delayed from consultant. The delayed from
consultant drag the progress of contractor’s construction works.

Issue Construction Drawings

Foundation Construction Works

Legend
Original Working program
Previous scheduled
Delay
Figure 1.2 Delay to construction works due to redesign foundation

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The exceptional weather, heavy rain, not allowing the contractor to erect steel
structure works. The worse scenario in heavy rain could even blow off temporary
works erect onsite. Contractor may concern the structural steel works erect during this
period will cause to any unwanted incidents. Therefore avoid the erection works or
erect with extra care and slowing down the progress of works. Otherwise, the erection
of structural steel during the heavy rain might cause defect in construction work done.

The late cable works installation delayed the development site in getting power
supply. Late power supply from statutory authority caused construction works unable
to be executed with machineries. This will be majorly impacting the productivity of
construction work, as construction work relies much with machineries application.
The installation works for main cable, main distribution panel, and main electricity
supply have been delayed by statutory authority.

The delay in main cable and main distribution panel installation works will
cause significant result to site. When if the delay happened until the completion of
premix works done to roadworks. Trench excavation to work done premix will be
necessary to lay main cable. After complete installation, the backfilling and making
good of trench excavation will be done. However, there’s no resurfacing to roadworks,
and the quality of premix road will be degraded due to uneven surface. Contractor may
requires to spend extra construction cost to rectify the condition of roadworks.

Cable Works
Road Works
Roadworks Retification (NEW)

Legend
Original Working program
Previous scheduled
Delay
New Works
Figure 1.3 New works due to delay in main cable works

Holiday within contracting period will remove the chance of contractor to

work during daytime. Different construction site have varies restrictions in performing
construction works. Some of the construction site located within residential areas are
strictly prohibited for overtime working and also working during holiday and weekend.
This is the statutory regulation to comply, ensure minimum disturbance conducted to

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adjacent households. Therefore, holidays within the contract period will take out the
chance for contractor to perform construction works.

Entitlement

In the reference to FIDIC Standard Form of Contract, sub-clause 8.4 Extension

of Time for Completion, causes to initiate time claims includes the following factors:
“inclement weather, hoisting of storm signal, instruction issued to resolve discrepancy,
variation order, substantial increase in quantity of a work item, delayed possession of
site, disruption of regular progress, suspension of works, delay caused by third party”
( Kumaraswamy, 1997, cited at Eugenio, Victor, Jose, Helder, & Joaquin, 2013).
Reference to earlier definition defined by Kumaraswamy, the case study is fall under
time claim. Adrian (1993), and Horner and Talhouni (1996) mentioned that time claim
have to be substantiated by documents and quantified damages and losses (cited at
Eugenio et al. 2013). Such as inclement weather claim should take into account of the
combination of manpower productivity and environmental factors.

To make sure a contractual claim is legally acceptable, contractor at first have

to submit a notice within 28 days when aware as in FIDIC Standard Form of Contract,
Sub-Clause 20.1. The notice act as an alert to Employer, notifying of such expenses
incurred in order to proceed the works further. Contractor also requires to follow the
administrative procedures stipulated in the contract signed. It is advised to refer any
possibilities to initiate a claim under contractual terms. If there’s any disagreement,
escalated to disputes and conflict, contracting parties could therefore refer to
arbitrations and litigation processes. During the event of disputes and conflicts,
contractor may held up protest, but the working progress shall not be affected.

Contractor is entitled to give advice when there’s a possible event to initiate

claims. Employer shall then review and avoid making certain changes or else that
conduct the event. In the case such changes or event is inevitable, contractor have to
file and document any info relevant to the event, and use as supportive documents for
any claims. According to FIDIC Standard Form of Contract, Sub-Clause 20.1, any
interim claim shall submit within 42 days after aware. Refer to the case study,
contractor has proceed to notify Employer and submit time claim for extension of time.
Contract Administrator has also granted extension and support with summarizing
contractor’s notice submitted earlier.

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In FIDIC Standard Form of Contract, Sub-Clause 8.4 (Extension of Time for

Completion) stated “The Contractor shall be entitled subject to Sub-Clause 20.1
(Contractor’s Claims) to an extension of the Time for Completion if and to the extent
that the completion for the purposes of Sub-Clause 10.1 (Taking Over of the Works
and Sections) is or will be delayed by any of the following causes: (a) Variation
(Unless an adjustment to the Time for Completion has been agreed under Sub-Clause
13.3 (Variation Procedure) or other substantial change in the quality of an item of work
included in the Contract, (b) a cause of delay giving an entitlement to extension of
time under a Sub-Clause of these Conditions, (c) exceptionally adverse climatic
conditions, (d) Unforeseeable shortages in the availability of personnel or Goods
caused by epidemic or governmental actions, or € Any delay, impediment or
prevention caused by or attributable to the Employer, the Employer’s personnel, or the
Employer’s other contractors on the Site. If the Contractor considers himself to be
entitled to an extension of Time for Completion, the Contractor shall give notice to
the Engineer in accordance with Sub-Clause 20.1 (Contractor’s Claims). When
determining each extension of time under Sub-Clause 20.1, the Engineer shall review
previous determinations and may increase, but shall not decrease, the total extension
of time”. This sub-clause will frequently refer as support in the following passage to
aid as supportive clause for the case study.

In reference to sub-clause above, the next sub-clause in FIDIC Standard Form

of Contract, Sub-Clause 20.1 (Contractor’s Claims) stipulate “If the Contractor
considers himself to be entitled to any extension of the Time for Completion and/or
any additional payment, under any Clause of these Conditions or otherwise in
connection with the Contract, the Contractor shall give notice to the Engineer,
describing the event or circumstance giving rise to the claim. The notice shall be given
as soon as practicable, and not later than 28 days after the Contractor became aware,
or should have become aware, of the event or circumstance. If the Contractor fails to
give notice of a claim within such period of 28 days, the Time for Completion shall
not be extended, the Contractor shall not be entitled to additional payment, and the
Employer shall be discharged from all liability in connection with the claim. Otherwise,
the following provisions of this Sub-Clause shall apply. The Contractor shall also
submit any other notices which are required by the Contract, and supporting particulars
for the claim, all as relevant to such event or circumstance. The Contractor shall keep

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contemporary records as may be necessary to be substantiate any claims, either on the

Site or at another location acceptable to the Engineer. Without admitting the
Employer’s liability, the Engineer may, after receiving any notice under this Sub-
Clause, monitor the record-keeping and/or instruct the Contractor to keep further
contemporary records. The Contractor shall permit the Engineer to inspect all these
records, and shall (if instructed) submit copies to the Engineer. Within 42 days after
the Contractor became aware (or should have become aware) of the event or
circumstances giving rise to the claim, or within such period as may be proposed by
the Contractor and approved by Engineer, the Contractor shall send to the Engineer a
fully detailed claim which includes full supporting particulars of the basis of the claim
and of the extension of time and/or additional payment claimed If the event or
circumstance giving rise to the claim has a continuing effect: (a) this fully detailed
claim shall be considered as interim; (b) the Contractor shall send further interim
claims at monthly intervals, giving the accumulated delay and/or amount claimed, and
such further particulars as the Engineer may reasonably require; and (c) the Contractor
shall send a final claim within 28 days after the end of effects resulting from the event
or circumstance, or within such other period as may be proposed by the Contractor
and approved by the Engineer”. This sub-clause identify the contractor’s right to
initiate claim for compensation.

Substantiation

To make sure the contractor is entitled to claim for compensation of time and
money, evidence is necessarily (Andy, 2011a). Andy (2011a) stated that the types of
evidence are in various forms, as long as it is the level for court use. The common
form of evidence used for claim including project records, progress report, instructions
given for variation, drawings and specifications, meeting minutes, full contractual
clauses and terms, calculations, site photos, and et cetera.

In the case study, the contractor is requires to ensure this documents and
evidence are always well kept in the location which is accepted by the engineer. As
stipulated in FIDIC Standard Form of Contract, Sub-Clause 20.1, contractor is
required to submit these documents and evidence for engineer to assist in claim
evaluation. Engineer is allows to inspect and review these documents and evidence at
any time necessary to evaluate and the claims submitted by the contractor.

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Question 1

Before analyze the case study further, Edward & Wayne (2009) identified that
the events applicable for claims can be classify into ten (10) major categories.
Including Employer-caused delays in the work; Employer-ordered scheduling changes;
constructive changes; differing site conditions; unusually severe weather conditions;
acceleration of the work and/or loss of productivity; suspension of the work and/or
termination; failure to agree on change order pricing; conflicts in plans and
specifications; and miscellaneous problems.

Inside these ten (10) categories, the case study related categories are:
Employer-caused delays, constructive changes, differing site conditions, unusually
severe weather, acceleration of works, and loss of productivity. In reference to FIDIC
Standard Form of Contract, the sub-clauses relevant to case study are: Unforeseeable
Physical Conditions (Sub-Clause 4.12); Variations (Sub-Clause 8.4(a)); Exceptionally
Adverse Climatic Conditions (Sub-Clause 8.4(c)); Any delay, impediment or
prevention caused by or attributable to the Employer, the Employer’s personnel, or the
Employer’s other contractors on the Site (Sub-Clause 8.4(e)); and Adjustments for
Changes in Costs (Sub-Clause 13.8).

Where Employer-caused delays relates to the delay of statutory authority

install main electrical supply. Edward & Wayne (2009) stated, delays in responding
contractor’s field inquiries is one of the delays caused by Employer and is
compensable. This lead up the FIDIC Standard Form of Contract, Sub-Clause 8.4(e),
Any delay, impediment or prevention caused by or attributable to the Employer, the
Employer’s personnel, or the Employer’s other contractors on the Site. In the case
study, the contractor is therefore entitled to issue notice and further proceed with time
claim. Contract Administrator shall therefore evaluate and allocate sufficient
extension of time. Refer to case study, Contract Administrator has granted thirteen (13)
weeks of extension.

Constructive changes is referring to the changes in structural frame, cross

reference to FIDIC Standard Form of Contract, Sub-Clause 8.4 (a) Variations.
However, case study has stated that the variant in structural frame does not alter the
schedule. The timeframe for the earlier design structural system is same or similar to
the new proposed structural frame design. Contractor may have submit notice to

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inform Employer of such changes in the schedule, but no validity for time claim. The
impact of the change happens on the need to accelerate the M&E works where will be
discussed in following section.

Differing site conditions is one of the major event happened in the case study.
Contractor discover there are concrete obstructions underground, and is limiting
previously designed foundations. In reference to Unforeseeable Physical Conditions
(Sub-Clause 4.12) in FIDIC Standard Form of Contract, Contractor therefore submit
notices of delay, and allow Contract Administrator and Employer to be aware and
make appropriate decision for any change of designs. Upon receiving the notice of
delay, consultants and Contract Administrator have changed the foundation design to
raft foundation. Extension of time is therefore granted five (5) weeks in total, consist
of four (4) weeks allocated for low productivity due to obstructions, and one (1) week
extension for redesign and construction of new designed foundation.

Referring to the case study, unusually severe weather relates to heavy rain
affecting the erection of structural works. The entitlement for time claim stipulated in
FIDIC Standard Form of Contract is Sub-Clause 8.4(c) Exceptionally Adverse
Climatic Conditions. Contractor submitted notice of delay regarding to the heavy
raining weather since December 2013 to January 2014. Later stage, contractor submit
time claim for the compensation of extension of time due to the rain. Contract
Administrator then approved five (5) weeks of extension of time in the reference of
notice and claim submitted by the contractor.

However, there’s one argument-able point here whether shall the contractor
entitled for time claim regarding such weather conditions. It is commonly to have
heavy rain season during end and head of every year. Contractor should therefore plan
more sheltered or internal works programs. Cases such as seasonal flood at
Terengganu, heavy snow during winter season around the globe, are not consider as
unusual weather condition. With the aid of Building Information Modelling (BIM),
contractor is responsible to plan programs appropriately to suit with such seasonal
weather condition, not claim for extension of time.

Acceleration of work was discussed earlier, M&E works acceleration can be

relate to FIDIC Standard Form of Contract, Sub-Clause 13.8 Adjustments for Changes
in Costs. As stipulated in the case study, M&E works acceleration is due to the change

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of construction method for structural frame. Contractor has to submit notice and claim
on such acceleration, upon receiving the submission, Contract Administrator then
evaluate and discuss with Employer. The discussion shall concern whether is there of
such needs in work accelerations. Once there is confirmed mutual consent, Contract
Administrator shall then approved and grant the extension of time with analyzed and
evaluated result. In the case study, the extension is granted in five (5) weeks, and
concurrently execute with delays in erection of structural works due to heavy rain.

Loss of productivity is referring to public holidays fell within the contracting

period. Contractor submit notice and claim for time regarding to holidays. Contract
Administrator then evaluate and grant two (2) weeks extensions of time, as stipulated
in the case. However, the entitlement to claim extension of time due to holidays is in
doubt. As similar to above unusually severe weather, contractor is supposed to plan
programs and works to cope with these holidays. Contractor should not unforeseen
these events happen, and plan with alternatives in the earlier stages. Unless the public
holidays were declared by Prime Minister a day before, after the win of a sport games
or otherwise.

Construction work productivity been affected by public holidays shall not be

a ground to claim for extension of time. Unless the case study shown that the holidays
was felt in within delayed completion period. Therefore relating to Sub-Clause 13.8,
Adjustment for Changes in Costs. If it is beyond contractor’s control, and therefore
allowing a ground for further argument. In the case study, the Contract Administrator
does not support the approved claims of extension of time with relevant clauses and
referential documents. This practice is not encouraged where the claimed extension of
times found unreasonable and doubt being bias to contractor’s need.

Question 2

Referring to FIDIC Standard Form of Contract, Sub-Clause 8.4 Extension of

Time for Completion, the causes for contractor to initiate an extension of time claim
are: variations that are accord to Sub-Clause 13.3 Variation Procedures, and there are
changes in the quantity of the contract item; adverse climatic change and affect to
work program; unforeseen shortage of resources including human resources, material
resources, also change of government policies that affecting resources; and delays

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caused by employer and consultants to the work program. These causes allow
contractor to claim for extension of time, with the aid of supportive documents in
construction work program.

Keith & Nii (2014) have identified numbers of ways to quantify and support
time claim. The reasons to submit time claim are to practice extension of time and
relief contractor from liquidated ascertained damages, and the cost of prolongation
(Keith & Nii 2014). Contractor has to support their claim with rationale reasons,
supported by the aid of programming techniques, contract awareness, negotiation
skills, problem solving, mutual consent, and bargaining skills; submit their claims with
analysis and evaluation for timeframe entitlement, direct loss incurred, legal quantum,
and the loss and effort spent in avoiding the delays.

To be compatible with all the skills above mentioned, contractor has a much
firm need in composing program to define the sequence of works. At the earlier stage,
during the tender stage or before commence of construction works, contractor is
usually been request to provide program and plan. This allows the Employer to know
when will held at which construction stage, also to mitigate any risk that could
compromising any works in the critical path of the program. Any delays occur on
works fall within non-critical path shall entitled for claims on extension of time.

There are four techniques available for quantifying or proofing the need of
extension of time compiled by Lane (2005, 2006): as planned versus as built, as
planned impacted, time impact analysis, and as built but for analysis (Keith & Nii,
2014). As planned versus as built is comparing the planned program with actual
program proceed onsite. There’s no need for critical path and no allowances for
contractor’s delayed. The analyze result is therefore not reliable and not useful. As
planned impacted approach using the program planed at the early stage to add on the
delays in within employer’s responsibilities as stated in contract. This approach is
highly theoretical and allows contractor to claim extension of time without concern
with contractor’s liabilities (Lane, 2005, 2006; cited at Keith & Nii, 2014). It is slightly
bias to contractor’s use.

Time impact analysis magnify only a snapshot of event and proceed with
analysis. The analysis is to use program planned earlier and update with delays occur
onsite. After updating the program, then will study on the events individually. The

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shortfall of this approach is the analysis couldn’t take up the overall picture into
consideration, therefore overlooked some significant effect of the delays. As built but
for analysis records the actual timeframe of the work progress onsite. After the record,
contractor then start analyze which events are employer’s liabilities. Contractor then
claim for extension of time with the proofs documented with this approach. This
approach only magnifies the delays caused by employer, and it does not define the
original planned program and project end date.

Society of Construction Law recommend the use of time impact analysis to

solve most of the documentation and quantifying extension of time. Davison and
Mullen (2009:39) also stress that delay analysis should be done on updating planned
program with events occur during the construction. In reference to Keith & Nii (2014),
time impact analysis can be separated into simple time impact analysis and
sophisticated time impact analysis. The advantages to use simple time impact analysis
are low cost and easy, and ease in getting mutual consent. Shortfalls in using simple
time impact analysis are the theory does not very well supporting actual conditions,
and tribunal does not accept this approach as a proof.

The use of sophisticated time impact analysis have several pros, such as take
contractor’s progress into consideration, measure contractor’s intention plan for the
delays, and lesser theoretical assessment. However, the disadvantages in the use of
sophisticated time impact analysis including complicates tribunal verification, and
poor supportive information has been adopted.

There’s another approach introduced by Malaysia Pertubuhan Akitek Malaysia

(PAM) Standard Form of Contract. In reference to clause 23.5(b), ‘Any other Relevant
Events which in the Architect’s opinion will have an effect on the Contractor’s
entitlement to an extension of time’. Also look into clause 3.7, ‘…The Works Program
may be used by Architect to monitor progress and the Architect is entitled to rely on
the Works Program as a basis for the assessment of extension of time and the effect of
the delay and/or disturbances to the progress of the Works’. In the Works Program
submitted, Architect will refer and analyze critical path of work program to identify
the impact of the delays.

Critical path analysis is mapping out all the activities in order to complete a
project, and relates their relations. Time spend of each working activities will be

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allocated, the dependencies between activities will be map out to identify the relations
of each activities (Wikipedia, 2017). The most critical activities will be mapped out
from project start date to project end date, enable Architect to identify the shortest time
possible to complete the project. Architect then determine whether any of the delay
cause any impact to these critical activities. Only if proven that the delays accord to
PAM Standard Form of Contract, clause 23.5 and 3.7, also been documentary
supported by contractor on the occurrence of the delays. Architect shall then consider
to grant extension of time with the supporting clause 23.8.

In the situation when the delays occur concurrently within the same or similar
timeframe, Furst et al (2001) introduced several approaches to identify and evaluate
the time claim (Keith & Nii, 2014). The approaches are Devlin approach, dominant
cause approach, and burden of proof approach. Devlin approach is bias to contractor’s
favor where judge would define the delays done by Employers or consultants and grant
the extensions for contractor.

Dominant cause approach is to identify the main source of delays and define
which party has the most weight in contributing the delay source. The one party
contribute the most heavy cause of delay has to bare the consequence of contributing
delay. Either grant extension of time, or accelerate the work with own cost. Burden of
proof approach requires both parties to proof themselves with lesser burden in the
concurrent delay. Both parties have to clarify their work is less burden compared to
another party by supporting documents. Whichever party proofed burden the most will
bare all consequences of delay contribution.

In reference Keith & Nii (2014), there are some legal cases, Balfour Beatty
Building v Chestermount Properties (1993) and Henry Boot construction v Malmaison
Hotel (Manchester) (1999), judge make decision relevant to Devlin approach. When
there is concurrent delays, any delays happened due to contractor, Employer,
consultants, and/or other relevant project team, contractor is entitled to claim for
extension of time. As long as there are proof shown one of the project team other than
contractor involved with the delays, will therefore grant contractor eligible for
extension of time.

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For concurrent delays, there is a legal maxim widely employed in the courts of
USA. In the situation when the concurrent delays occur, it have to be proven that the
delays is not solely contributed by any one of the party. The delays must have
contributed by both employer and contractor. In this case, any parties involved in the
delays are not allowed to be benefited from their own mistakes. Society of
Construction Law agree with this approach and elaborate further with suggestions.
Society of Construction Law suggest that when both parties involved in the concurrent
delays, contractor have to separate the causes of delays. After proven with separation,
contractor shall not claim for additional loss and expense on his own delays. Employer
will then not entitled to impose Liquidated Ascertained Damages in regards to delays
committed on his behalf. Contractor should select the theory that suit their case most
and argue firmly with the aid of theories (Knowles, 1992; cited at Keith & Nii, 2014).

Edward & Wayne (2009b) identify that contractor should quantify a claim with
legitimate and verifiable claim items. A not verifiable claim will spend consultant
extra time in managing and delay the claim to be executed. Contractor then suffer from
costly waiting, and worsen the relationship with Employer (Edward & Wayne, 2009).
Referring to FIDIC Standard Form of Contract, Sub-Clause 20.1 Contractor’s Claims,
contractor need to identify the events that give rise of the claim for loss and expenses
in according to sub-clauses in FIDIC Standard Form of Contract.

As in FIDIC Standard Form of Contract, Sub-Clause 20.1, contractor have to

submit the claim for loss and expense with the aid of supporting documents to proof
such events caused by employer. After submitting notice of claim within 28 days when
contractor aware of the loss and expense, contractor shall submit interim claim within
42 days. Interim claim must be furnished by onsite records which could substantiate
the claim value. When contractor complete the works in regards with the event,
contractor have to submit final claim within 28 days after completion. It is strongly
recommended for contractor to submit claim of extension of time together with claim
of loss and expenses (Andy, 2011).

Refer to FIDIC Standard Form of Contract Sub-Clause 20.1 and PAM

Standard Form of Contract Clause 23.4, contractor need to show the relevant event for
the claim of loss and expense. Contract administrator will then analyze the events
whether entitled for the claim of loss and expense. In PAM Standard Form of Contract,

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contract administrator will refer to clause 23.8. Whereby in FIDIC Standard Form of
Contract, the sub-clauses define the events include: Delayed Drawings or Instructions
(Sub-Clause 1.9); Right of Access to the Site (Sub-Clause 2.1); Setting Out (Sub-
Clause 4.7); Unforeseeable Physical Conditions (Sub-Clause 4.12); Fossils (Sub-
Clauses 4.24); Testing (Sub-Clause 7.4); Variations (Sub-Clause 8.4(a));
Exceptionally Adverse Climatic Conditions (Sub-Clause 8.4(c)); Unforeseeable
shortages in the availability of personnel or Goods caused by epidemic or
governmental actions (Sub-Clause 8.4(d)); Any delay, impediment or prevention
caused by or attributable to the Employer, the Employer’s personnel, or the
Employer’s other contractors on the Site (Sub-Clause 8.4(e)); Interference with Tests
on Completion (Sub-Clause 10.3); Adjustments for Changes in Legislation (Sub-
Clause 13.7); Adjustments for Changes in Costs (Sub-Clause 13.8); Contractor’s
Entitlement to Suspend Work (Sub-Clause 16.1); Consequences of Employer’s Risks
(Sub-Clause 17.4); Consequences of Force Majeure (Sub-Clause 19.4).

As stated in the case study, contractor already submit claim for extension of
time, subsequently also applied for loss and expense claim. In the case study, contract
administrator already award contractor for extension of time. With the awarded
extension of time, contractor shall then look into the claim for loss and expenses. The
case study implement FIDIC Standard Form of Contract for the construction work.
Therefore, contractor have to refer to events stated in the FIDIC Standard Form of
Contract for the entitlement for loss and expense.

The sources of delays as stipulated in the case study can be relate to delay
events stated in FIDIC Standard Form of Contract. Discover of underground concrete
obstructions and leads to low performing progress relates to Sub-Clause 4.12,
Unforeseeable Physical Conditions. Redesigning suitable foundation to overcome
unforeseen foundation condition is a Variation in reference to Sub-Clause 8.4 (a).
Heavy rain condition which delay the erection of structural steel works is in the
reference of Exceptional Adverse Climatic Conditions, Sub-Clause 8.4 (c). Delay
installation of main electricity supply by the Statutory Authorities including
installation of main cable and main distribution board with power supply links to Sub-
Clause 8.4 (e), Any delay, impediment or prevention caused by or attributable to the
Employer, the Employer’s personnel, or the Employer’s other contractors on the Site.
For Sub-Clause 13.8, Adjustment for Changes in Costs, includes both delay sources,

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holidays fall in within delayed completion date, and acceleration works requires to
M&E works to suit with changes in structural frame.

Upon proven the events on site is related with FIDIC Standard Form of
Contract. Contractor shall immediately submit a claim with reasons that employer is
liable to pay; unforeseen circumstances which give rise for claim entitled events;
supported with records, plan and programs, and cumulative effect of instructions given;
and also detailed calculation in quantifying the claim (Keith & Nii, 2014). Keith & Nii
(2014) introduced seven approaches in quantifying claims, there are: on-site
establishment costs; head office overheads; interest and financing charges; increased
cost; profit; loss of productivity; and cost of claim preparation. Keith & Nii (2014)
also mentioned that it will always be simple to claim direct consequences of the events
with the aid of supporting documents.

In on-site establishment costs, contractor is required to record down anything

relevant to the event. All the relevant details including supervisory staff and
administrative staff, site accommodation and welfare, construction equipment and
tools, site services such as telephone, water, and electricity expenses shall all be
recorded down. The next approach is head office overheads. Contractor have to show
the records regarding to fail in recovering head office overheads. Contractor may also
adopt formulas such as Hudson formula, Emden formula, and Eichleay formula in
legitimate their quantified claim. In Amec Building Limited v Cadmus Investment
(1996) case, the court will add up weekly cost and define the cost in average, and then,
multiplied by the numbers of weeks delayed (cited at Keith & Nii, 2014).

Interest and financing charges approach allows the contractor to claim interest
incur due to the project prolongation. In reference to the Amec Process & Energy v
Stork Engineers & Contract (2002) case, the contractor had financed the project work
with the support from external credit facilities and also parent company loan (cited at
Keith & Nii 2014). Which therefore the contractor faces both losses in compound
interest paid to external credit facilities, and parent company lost in opportunities of
returned investment. Judge Thornton defined that the contractor have entitlement to
claim for compound interest payable for external credit facilities, and also the interest
on capital that would have otherwise invested for returns.

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MEBH 17103 CONSTRUCTION PROJECT CLAIMS MANAGEMENT

Increased costs approach relies on the supporting documents shown by

contractor. Contractor have to show the actual cost incurred due to the extra works or
extended project period. Profit approach requires contractor to show loss of
opportunities in earning profit due to the prolongation of the project period. In
reference to the case of Hadley v Baxendale (1854), contractor need to proof that the
delay in project period prevent the contractor for earning profit from other projects
(Keith & Nii, 2014).

In loss of productivity approach, contractor have to define the inefficiency use

of labor and machineries resources. Keith & Nii (2014) recommend the contractor to
proof the inefficiency by comparing the planned production rate with actual
produc/tion rate in the use of the resources. Costs of claim preparation approach is
applied in Amec Process & Energy v Stork Engineers & Contract (2002) case (Keith
& Nii, 2014). Where Judge Thornton define recoverable cost in fees, charges,
disbursement, expenses, and remuneration. Employing external professional in
preparing claims fell within all these categories, and therefore entitled to be
reimbursed.

Refer to case study, the extension of time has been awarded in the reference to
the Sub-Clauses in FIDIC Standard Form of Contract, contractor shall then entitled to
spend extra time and effort to complete project works within the site. Edward &
Wayne (2009) stated that the contractor have to proof maintaining site establishment
with the head office facilities more than the earlier planned. Seven approaches
mentioned above, contractor may consider to use all except interest and financing
charges. The events stated in the case study does not show any interest and financing
relevant scenarios. With the aid of other six approaches, as long as is proven,
contractor shall therefore submit claim for loss and expenses.

Question 3

As stated in case study, there are acceleration works requires in M&E works
to suit with changes in structural frame. As the change of structural frame is Variations
under Sub-Clause 8.4 in FIDIC Standard Form of Contract. The required acceleration
works have to be relevant to Sub-Clause 13.8, Adjustment for Changes in Costs.
According to Sub-Clause 20.1, Contractor’s Claims, contractor may claim

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MEBH 17103 CONSTRUCTION PROJECT CLAIMS MANAGEMENT

acceleration works under additional payment (Edward & Wayne, 2009). Edward &
Wayne (2009) identify that the employer request to accelerate the works to rush up the
progress delayed by employer will cause the contractor additional cost.

Contractor will suffer from additional cost in extended working hours,

additional cost for extra labor, additional mobilization of plant and machineries, loss
of efficiency due to congested work site, loss of production due to heavy work
sequence. These additional costs are not adequately compensating the contractor with
the rates agreed in the contract (Edward & Wayne, 2009). Edward & Wayne (2009)
stated that acceleration works have to be claim as additional payment with different
terms in evaluation. Keith and Nii (2014) identified that there are three factors to put
into the consideration of evaluation.

With the as planned resources, there are delays due to unforeseen

circumstances; the progress remained same but there are accelerated performance with
the adjustment in resources; and the project could ends as planned, but the contractor’s
resources required to keep on site longer than necessary (Keith and Nii, 2014). Edward
& Wayne (2009) reminded that the evaluation has to be supported by records
established on site. With the aid of proofs and calculations done, claim for acceleration
or disruption is recoverable (Edward & Wayne, 2009).

Contractor have to make sure that the procedures stipulated in Sub-Clause 20.1
Contractor’s Claims is followed. The notice shall be sent within 28 days when the
contractor identify the need to claim for acceleration and disruption. The contractor
have to try mitigate the possibility of raising the claim with effort. Including setup
discussion with employer, making sure that the employer has a chance to avoid the
event. Within 42 days after the submission of the notice, contractor shall submit
interim or final claim of the acceleration and disruption. The claim has to be furnished
with sufficient information including records established on site.

As Edward & Wayne (2009c) identified, claims for acceleration works shall
not be measure only as simple as extra working hours multiply by cost of extra hours.
Studies found that when a person had been working overtime constantly for more than
50 hours per week, the productivity performance will fall. In order to quantify the
claim for acceleration and loss of productivity, contractor may look into few elements
to look into claim build-up amount (Edward & Wayne, 2009c). Elements to include

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MEBH 17103 CONSTRUCTION PROJECT CLAIMS MANAGEMENT

such as extended project overhead, unabsorbed home office overhead, labor escalation,
material escalation, labor loss of productivity, subcontractor claims, profit and
overhead, unresolved changes, interest on money, and additional bond premium.

Question 4

Refer to the case study, contractor submitted claim for extension of time in the
earlier stage. Contract Administrator then granted the total of 19 weeks of extension
of time. Subsequently, contractor also submitting claims for loss and expenses and
acceleration and disruption claim. However, there’s no guarantee on these monetary
claims are eligible. In the event that the claim for acceleration and disruption was not
been accepted. Contractor shall review the needs of raising a dispute. Eugenio et al.
(2013) defined that the process of a claim can be evolves into five distinct stages.

PHASE 1 PHASE 2 PHASE 3 PHASE 4 PHASE 5

Problem Disagreement Dispute Conflict Litigation

Level of resolution: Internal Level of resolution: External

Figure 1.4 Process of claim evolution. Source from Construction Management, Eugenio et al. (2013)

As in Figure 1.4, there are five phases of claim evolution. Phase 1, Problems,
is a normal event that been dealing on site in a daily manner. Phase 2 is Disagreement,
whereby the problem can only be deal with the aid of heavy discussion, serious
negotiations. Phase 3 Disputes occur when the disagreement cannot be solve on site.
Usually it will involve consultants of the project team to settle the disagreement. When
the disputes still not able to be solved within the project team, the claim will then
evolve to the next phase. Phase 4, Conflict, will requires external expertise such as
attributors and/or adjudicators to evaluate and analyze the entire disputes. In reference
to Construction Industry Payment and Adjudication Act 2012, the decision made by
adjudicator is enforce until revised by arbitration, court, or agreement. Whereby it
means if the case decision made by external expertise is not satisfying, any party may
request to review by court. Therefore, the claim level will bring up to Phase 5,
Litigation.

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MEBH 17103 CONSTRUCTION PROJECT CLAIMS MANAGEMENT

When the acceleration and disruption claim is not accepted, the claim reached
phase 2, disagreement. Contractor is advised to arrange a discussion session with
involving parties, including employer, contract administrator, architecture, engineer,
M&E sub contractor, and also other stakeholders involving in the project. This is the
best suitable and advisable approach. Having a discussion can be low to no cost, and
the loss of opportunity cost can be manage to minimum. The discussion session can
be very low time consuming. Whereby both parties can easily arrange their schedule
and sort out the issues quickly.

When the discussion still failed to reach a mutual consent, any parties may
raise the issue further to the next phase, dispute. Some of the disputes resolutions have
been introduced by Kuala Lumpur Regional Centre for Arbitration (KLRCA) into
Malaysia construction industry. Alternatives dispute resolutions including arbitration,
adjudication, and Mediation. For monetary issues, any parties is recommended to raise
the issue with Construction Industry Payment and Adjudication Act (CIPAA 2012).

As CIPAA 2012 is a local Act enforced as a solution for disputes in monetary

term. Any parties may arise the issue or disputes to be solved by an adjudicator. As
long as the contract of the construction project and the documents relevant to the issues
are all in written form. As stated in CIPAA 2012 Part 1 Clause 2, the act applies to
disputes arise under a writing relation construction project. The adjudication process
may immediately be raised during the construction period. This will serve the purpose
of the enforcement of the Act. Ensuring there are appropriate cash flow within the
construction industry. Eliminating the informal practice of delay or non-payment to
work done. The decision made by adjudicator is not final, but it will be able to make
sure the construction process on-going. Any parties found the decision made is
unsatisfying, the party may raise the dispute to arbitration process.

Similar to other approaches, arbitration, adjudication, mediation, and litigation

are all involving external parties in solving the disputes. The case and all the relevant
information including evidence and documents are all reviewed by the external parties.
The processes are formal, tedious, and time consuming. The evidence and documents
will required to be more details and persuasive. As the external parties are not familiar
with the condition and the situation at the site. Extra time will be required for the
external parties to understand well on the case situation.

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MEBH 17103 CONSTRUCTION PROJECT CLAIMS MANAGEMENT

Instead of spending extra cost, time, and effort in preparing for the above said
disputes resolutions. In the situation that the claim has not yet beyond disagreement.
It is always best to have discussions among the relevant parties. Submitting notice and
claims are always the procedures for the contractor’s entitlement to initiate contractual
claims. There is no restriction in FIDIC Standard Form of Contract stating that any
disputes in regards to failure in applying claims shall not host discussions. Contractor
is recommended to conduct a discussion, and demonstrate effort in reaching a mutual
consent on the claims.

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 REFERENCES

Andy, H., 2011a. Construction Claims & Responses effective writing &
presentation. , pp.49–75.

Andy, H., 2011b. Construction Claims & Responses effective writing &
presentation. , pp.35–46.

Andy, H., 2011c. Construction Claims & Responses effective writing &
presentation. , pp.10–33.

Andy, H., 2011d. Construction Claims & Responses effective writing &
presentation. , pp.147–174.

Edward, R.F. & Wayne, D.R., 2009a. Construction Project Administration. , pp.323–
331.

Edward, R.F. & Wayne, D.R., 2009b. Construction Project Administration. , pp.322–
354.

Edward, R.F. & Wayne, D.R., 2009c. Construction Project Administration. , pp.332–
341.

Eugenio, P. et al., 2013. Construction Management. , pp.273–279.

Keith, P. & Nii, A., 2014. Construction Cost Management. , pp.269–287.

Wikipedia, 2017. Critical Path Method.