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Problem #10
You said, ‘We are the Main Contractor engaged with the construction of a $650 million (project sum) commercial project in town. Due to a number of unforeseen circumstances, the project is now delayed and we are concerned about many issues including our need to submit a proper “Extension of Time” (EOT) claim and possibly a claim for “Loss and Expense” (LAE).
The Answer
You need to bear in mind that in every Construction Project, though being a chance to make huge profits, it could also end up a tragedy to suffer huge losses; and the aforesaid effects would obviously be amplified as the project sum becomes larger, as the Liquidated Damages to be payable by the Contractor for any delay would be amplified also.
Based on our experience with projects of Project Sum $650 million, the Liquidated Damage to be imposed on the Main Contractor under the Main Contract is normally in the range of $380,000.00 - $500,000.00 per day. As these would reflect the Loss of the Employer when such project is being delayed, as 3rd parties such as tenants / unit owners would be claiming against him in turn and it is not difficult for Employer to justify the loss amount or damage that he would suffer.
You need to know that for such a huge project (or even for other smaller projects), it is common for Employers to insert other Terms and Conditions to ensure that the Main Contractor would share the burden in the event of any delay. Thus the Main Contract could be drafted in such a way that effectively, the Main Contractor would bear the burden of some of the possible delays by the Employer or his Consultants; of course, the wording of such contract could be drafted in many forms and it would be too much for us to discuss here.
You may protest and say it is unfair, but you need to know that the Law or the Courts are not going to interfere on such Terms and Conditions for a Construction / Commercial Contract as far as they are not violating the Law. The Contractor is deemed to be of equal financial standing as the Employer and he should deem to be able to take care of himself by engaging a Contracts Consultant or any lawyer to help him to interpret the Contract provisions before he tenders for the job or conclude the contract with the Employer. The Law or the Courts are only sympathetic towards consumer in any Vendor-Consumer relationship.
In Dunlop Pneumatic Tyre Co Ltd v New Garage & Motor Co Ltd (1915) A.C. 79, Lord Dunedin held that:
“The fact that precise pre-estimation of the loss is difficult or impossible to determine does not render the assessment of the liquidated damages penal, “on the contrary” that is just the situation when it is possible that the pre-estimate damage was the bargain between the parties.” - This still remains as good law today.
Your entitlement to claim for EOT and /or LAE for your project would base on the provisions of the Main Contract and the provisions in Law (either statutes or common law precedents). Case Laws would come in to play a part to assist you in matters that not clearly specified in your Main Contract, which you would want to rely on to support your claims. Other technical considerations include issues concerning the critical path, concurrent delays and a mixture of delays contributing by the various parties to the overall delay, engineering considerations and possible confusing process in resolving the matters… You need to draft them in a concise “sweet and short” manner and not to cause possible confusion, avoiding all kinds of “market talk” and useless highlights.
Obviously, you need to present your aforesaid claims and substantiate with basic output from Project Scheduling Programs such as Microsoft Project or Primavera which I would not discuss further as it is a separate subject on its own.
With the aforesaid, you understand that the EOT and LAE Claims are the Specialist’s job and only one who is well-versed in Engineering, Contracts and Law could do them beautifully as this work requires one to argue and elaborate in writing all the items involved concerning not only in contracts and law, but also engineering to ensure that your claims are successful…
You asked, ‘Can I start to prepare for the EOT and / LAE claims at the end of the project?”
Well, you know that your Project Sum is $650 million, based on our experience with our previous clients, it is likely that the events that contributing to the various delays could amount to at least hundreds or even thousands by the end of the project. Don’t you think that by that time, it would be too late, not only it is difficult to sort out all the confusions, but your site team or the Employer or his consultants may not remember anything? I am sure you understand that construction project work is always very demanding and all the contractor’s staffs are always working under high stress to ensure that the project goes on schedule and the subcontractors coordinate accordingly; many of us are working with minimum rest whenever the project is on-going, thus even you have records, no one could ensure that these records could be used for the EOT and LAE claims. And by the time you want to claim, not many people could recall the delaying event, then that EOT claim item is as good as loss… Thus it is advisable for you to start to engage a Competent Engineering, Contracts and Legal Consultant to work on it as soon as there are delays emerging in your projects, so that she could quickly pick up all the missing facts and help you to argue them in writing, submit the claims and proceed with any discussion with the Employer or his consultants to ensure that your claims are successful. You need to bear in mind that any delay caused which you could not rebut successfully could end up a damage for you; where you need to pay liquidated damages to the Employer.
You need to submit EOT claims in stages and this work is an on-going process in a Construction Project. Obviously, you need the agreement / consensus of the Employer and his Consultants before you could be successful in your claims, and to avoid the undesirable consequences of “a soured relationship” where one party have to confront the other in possible Adjudication / Arbitration / Court Proceeding eventually when there is no agreement on who to bear the “delay responsibility”...
We have done the “Extension of Time”, “Loss and Expense” and the related claims successfully for many Contractors and Sub-contractors at an economical cost, you could contact us when you have such need.
Drafted by: Er. Goh Cheow Leng Maria First drafted on 10 September 2008. |
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To Contact us
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Telephone: +65 93384746 Fax: +65 62192358 Email: emmanuel.maria2000@yahoo.com.sg
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