In the old days, a claim for disruption was a kind of generalised moan about things getting fouled up. These days, there are all kinds of ways of putting a figure on the costs. Here’s how it works
Whatever anyone might say about construction being less adversarial these days, contractors’ claims are still being made and settled by clients.
Claims are about successfully recovering losses that have been incurred by the contractor as a result of factors for which the client was responsible. One area of the claim that has always been notoriously difficult to prove but can represent a big proportion of the losses is disruption.
What is disruption? It is when work cannot be carried out in a logical, planned and efficient way. It is when trades end up out of sequence, working in the same area, tripping over each other and being less efficient than normal. Put simply, disruption is when there is a loss of productivity.
As an example of how disruption was traditionally (and poorly) dealt with, I remember years ago being presented with an exceptionally detailed claim by a contractor. It went through the extra costs incurred for such things as site staff and plant, all with detailed supporting documentation for the losses claimed. Right at the end, with no back-up, was one line of calculation which said: “Disruption – labour content of the works say £3m @ 5% = £150,000.”
The reason it was done like this was that disruption was seen as too difficult to prove. It was a black art on which little information was available. One of the most authoritative books on delay and disruption dedicated only 10 pages out of 650 to the subject. Most claims therefore used disruption as a tool to negotiate an increase in the overall level of recovery.
The industry now recognises that there are a number of ways of analysing and presenting disruption that can, to differing degrees, help to prove the loss. Which technique is used will depend on the data available from the estimate and the records available from the works. The main methods are as follows:
Without wanting to be overdramatic, I believe we are entering a period where these techniques are about to become new weapons in the claims war
• The measured mile. This compares the contractor’s actual productivity on an undisrupted part of the work with the productivity achieved on a disrupted part. The losses are calculated by assessing the cost of the increased labour used. The advantage of this technique is that it uses the contractor’s actual performance rather than a theoretical level of performance as a benchmark. It has gained some favour in the courts but does require access to a fairly comprehensive set of records of progress and of costs incurred and can be time consuming
• Industry guidelines. This uses published industry estimating data to calculate the labour resource for the work. The losses are calculated by deducting this assessment from the actual labour used. This is a good technique for use where there is no labour resource plan or an incomplete one. It can fall down if the published productivity data is not related to the project. Also, the productivity rates are often conservative so result in under-recovery of losses
• Expert opinion. An appointed expert assesses the losses by reference to their experience of productivity on similar projects. The expert relies on whatever documents, witness statements and other evidence can be found to formulate the claim. This brings practical experience to the claim but relies on subjective opinion
• Time and motion. Measuring actual performance and productivity on site. The data is used as a baseline from which losses are assessed. These studies can be convincing in that they are based on real observation. This can also supplement other techniques
• Global claims. This is where the contractor does not attempt to separate the disrupting events or link their cause and effect. The claim is therefore fairly crude and is for the difference between the tendered and actual man-hours. Historically the courts have not favoured global claims unless it is impossible to allocate liability or demonstrate actual loss in any other way. Allowing a reduction for an assessment of the contractor’s own inefficiencies may help to make a global claim more acceptable.
Without wanting to be overdramatic, I believe we are entering a period where these techniques are about to become the new weapons in the claims war. As with all wars, if one side adopts them, the other will have to follow in order to defend itself. Arm yourself with them, or prepare to be defeated!
Andrew Hemsley is regional operations director of Cyril Sweett