Establishing disruption claims

To recover these costs the contractor has to establish its activities were disrupted by a breach of, or an event under the contract that provides for compensation or recovery of loss. Thereafter the contractor must measure and prove the extent of disruption and its financial effect.

Approaches commonly used to assess disruption

The task of measuring disruption is often difficult due to insufficient records. Initially the disruption may have appeared trivial so it was not recorded. Alternatively, multiple events may have acted cumulatively to make the underlying cause(s) difficult to detect. Under such circumstances contractors frequently apply an arbitrary percentage to labour cost or make a claim based on the difference between tender labour cost and actual labour cost. Both approaches have flaws and tend to have limited success in dispute forums.

A better approach is to use a commonly accepted methodology for assessing disruption such as ‘measured mile’ or ‘earned value’. In the UK the preferred approach is the ‘measured mile’ which compares productivity achieved on disrupted elements of work with similar works that were unaffected – the difference being the measure of disruption. Although the measured mile approach has yet to receive judicial approval in the English courts [1] it is the approach recommended by the Society of Construction Law Delay and Disruption Protocol and is regularly accepted by adjudicators in adjudication proceedings. Records are however key. 

Where the ‘measure mile’ cannot be used?

In practice it can be difficult to find two like-for-like elements of work on a project where one is disrupted and the other completely unaffected. As a consequence a similar project may be used to compare productivity but different circumstances will often make this inappropriate. Where comparison is not possible a ‘time and motion study’ may assist. Here the disrupted process is broken down into basic individual activities. The standard time for each activity in the process is confirmed by the study and the extra time associated with additional or modified activities is established. Such an exercise can be effective but is not possible or appropriate in all cases.

Even where assessment is virtually impossible a nominal sum may still be due. In Cleveland Bridge UK Ltd v Severfield Rowan Structures Ltd [2012] WHC 3652 (TCC) the claimant’s expert was unable to use any of the normal approaches to evaluating disruption but the court found that it was inevitable there must have been some disruption. In assessing the disruption it was held that, “it would be wrong…to base any assessment of the probable disruption cost on [the difference between the planned number of shifts and the actual number] - ‘the balance’ by reason of the absence of detailed evidence attributing a lack of production or productivity to CBUK’s breaches of contract. What the Court can and should do in circumstances where it is satisfied on a balance of probabilities that some (more than de minimis) disruption must have occurred as a result of CBUK’s breaches is to make a reasoned assessment albeit based on the minimum probably so attributable”. This is an example of the general principle in English law that where it is shown that some substantial loss has occurred, the fact that an assessment of the loss is difficult because of its nature is not justification for refusing to award damages or awarding a nominal sum [2].

Managing the process

Records often exist but lack relevance. Site supervisors who are generally tasked with keeping labour records often receive little guidance on what information should be recorded and in any event are often under pressure to get the job built. To address this problem contractors are increasingly trialling hand-held devices which can guide users as to the information needed, enabling it to be recorded instantly and relatively simply (see Systech’s Site Diary App and Project Record Keeping service for example). The early identification of disruption allows it to be managed more effectively and crucially should also prevent claims being time-barred through late notification which is an increasingly common problem faced by contractors (see NEC3 clause 61.3 for example).

Prospective vs retrospective approach

The NEC3 contract throws up further issues for consideration. There are no separate provisions for claims so any disruption must be quoted in compensation events (CE’s). CE’s however are generally quoted on a forecast cost or prospective basis as opposed to the retrospective approach commonly used for assessing disruption. This presents a problem – whilst disruption is difficult to assess with hindsight it is almost impossible for the contractor or the PM to assess prospectively. Clause 61.6 allows the PM to state assumptions for CEs which can be adjusted at a later date but this clause is seldom used.

Difficulties in assessing the impact of CE’s on staff and labour productivity is leading to NEC3 contracts increasingly being amended to include a fee percentage for ‘site staff’ which is added to each compensation event to cover preliminaries thickening. Disruption to labour is not addressed in the same manner so when and if claimed it can prove contentious, leading to quotations being rejected and assessments made by the PM. Interestingly, the contractor may refer a PM assessment to adjudication for review under clause W2.3(4) by which stage a retrospective ‘measured mile’ type approach (supported by records) may prove successful even where disruption was not envisaged beforehand. 

Communicating your disruption claim effectively

A well-presented measured mile claim with supporting records should make the agreement of disruption relatively straightforward but unfortunately this is not always the case. Often key decision makers lack the time or technical skills to fully appreciate the interaction between the different events. As a consequence contractors are increasingly adopting 3D visualisation techniques to support their claims which allow the message to be more easily processed and is often seen as less confrontational. Used in the right context it can be highly effective (see the Systech Visualisation service).

Conclusion

Disruption clams can be difficult to substantiate but there are practical steps that can be taken to improve the likelihood of success. The use of technology can improve record-keeping and presentation but early identification and appropriate records remain key.

References:
1 Keating 9th Edition; page 307
2 Keating 9th Edition; page 307