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11 July 2018

Project Lifecycle – 6. Design Delay Claims

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Last week we discussed the various tools to use to make sure you can claim for time lost during the design period.

I’m a firm believer that when you suffer delays in construction, the priority is to get an Extension of Time and following that, to recover the money associated. The question is – how do you recover the money? What can you include and how should a claim be presented?

First and foremost, it’s important that your submission is all-encompassing and leaves no questions left to answer – it should include as a minimum, a chronology of the events and append all your notices.

I like to follow a detailed structure in design claims and therefore include the following:

  1. Executive Summary – A concise summary (no more than a page) of what happened and the problems this caused.
  2. Contract Review – Some notes on the contract, your obligations and the key clauses you’re referring to for time and money recovery.
  3. Chronology of Events – Detail what happened and when with reference to notices. All your notices (whether letters, emails, IRS’) must be attached.
  4. Programme Impact – Show how this impacted time.
  5. Financial Impact – Then analyse the costs.

The structure of the document is very important. I put costs after the detail as you should yield the best results if you first highlight that you understand the contract, the programme and most importantly can substantiate the events with notices.

A Design Claim is a Loss and Expense (L & E) claim. With L & E, it’s important to realise that theoretically you cannot make profit and instead, the Legal position is that you should be “be put back in the position you were in before the event happened” for example:

If you’re delayed by one week and the cost of this is one manager at £1,000 you recover £1,000 and are back to the position you were before the delay. You don’t get to add profit.

The reality is that L & E is technical and quite a contractual way or recovering money. In order to do it, you need to tick a lot of boxes – that is why the structure of the claim document is important.

As you’ll see above, by the time you get to the actual Loss and Expense (point 5), points 1 to 4 have confirmed that:

  1. You understand the contract and your obligations
  2. You can detail the Relevant Events and show where you gave notice
  3. You can show the impact on the programme

If you have done this, your client cannot respond and say, “when did you give notice”, “where are the records of you notifying us” – everything is there in one document. If you’ve done this, it is much likelier the conversation will turn to money, more quickly.

So what can you include in terms of cost?

As already mentioned, claims are restricted to ‘direct’ L & E so you can only claim losses that ‘flow directly’ from the Events – some examples being:

  • Extension in Design Prelims (i.e. Design and Project Manager) – your resource working longer on the design through no fault of their own
  • Additional Drawing Office Hours – for example, if comments were received late or with inappropriate remarks on them and you had to resubmit drawings
  • Additional Drawing Office Hours – if information was missing or if RFI’s were responded to late, you could claim for the hours relating to this

Finally, simply add this to your variation list and refer to it as something like “Loss and Expense relating to the Design Phase”. The sooner you add this to your Application the sooner you’re likely to be paid so don’t hesitate to include costs as soon as you incur them.

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Loss and Expense and LAD’s in JCT Contracts