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Workshop 1028 BTA
Claims Process in the Construction Industry
Dr Moustafa Ismail
Dr. Moustafa Ismail, CFCC, MCInstCES, MCIOB
Claims And Dispute Resolution
Presented By: @moustafaabudief
https://www.linkedin.com/in/dr-moustafa-ismail-cfcc-mcinstces-
mciob-rmp-pmp-ficcp-ccp-93798a16/
Moustafa-ismaiel@hotmail.com
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Contracts And Claims Manager, Moustafa has Experience In Construction Projects,
Engineering, Contracts, Claims, Dispute Resolution, and Training Management For More
Than 30 Years In Egypt, Kuwait, KSA. Since 2005 he Is a member in number of
professional organizations and reviewer for International Certifications Exams.
Speaker Profile
Moustafa I. Abu Dief, Ph.D, CFCC™, PMP®, CCP, PMI-RMP, MCIOB
Dr. Moustafa Is Certified Forensic Claims (2010) Consultant In Addition To:
• Associate Prof. ABMS University- Swizerland
• Risk Management Professional PMI.Org - PMI-RMP, 2017
• Fellowship Justice Arbitration Academy, 2017
• Fellowship, Institute Of Construction Claims Practitioner, UK, 2016
• QMS/ Qa Management IRCA Certification, UK 2017/2022
• Chartered member MCIOB CIOB Chartered Institute Of Building, UK, 2017
• PMOC certification, 2014 - Certified Arbitrator – KSA- Kuwait- Bahrain- Egypt
• CCP - Certified Cost Consultant AACEI, US. 2008/2020 , 2008
• PMP, Certified. 2006-
• Chartered Member- Chartered institute of civil Engineers Surveyors, MCInstCES
• A. Royal institute of Chartered Surveyors
2 Workshop 1028 BTA Construction Claims 19 April 2019 Dr. Moustafa Ismail, CFCC, MCInstCES, MCIOB
Workshop 1028 BTA - Claims Process in the Construction Industry
CLAIMS MANAGEMENT IN CONSTRUCTION PROJECTS
Construction Claims Are Impacting The Construction Projects Success
And Adding Conflicts And Disputes Into The Project Life Cycle,
While Solving The Claims In Proper Time Shall Increase
The Project Success & Maintain Business Flow In The Industry.
Workshop 1028 BTA Construction Claims 19 April 2019 Dr. Moustafa Ismail, CFCC, MCInstCES, MCIOB 3
Contractual obligation
A party Breach of obligation
Damages to other party
Claim
Claims And Dispute Resolution
• Claims Types
• Claims Causes
• Claims Impact
• Claims & Changes
• Quantifications
• Claims Avoidance
• Dispute Settlement
Overview
Workshop Outlines:
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Workshop 1028 BTA - Claims Process in the Construction Industry
Process Applications
Workshop 1028 BTA Construction Claims 19 April 2019 Dr. Moustafa Ismail, CFCC, MCInstCES, MCIOB 4
Claims And Dispute Resolution
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Workshop 1028 BTA - Claims Process in the Construction Industry
Workshop 1028 BTA Construction Claims 19 April 2019 Dr. Moustafa Ismail, CFCC, MCInstCES, MCIOB 5
Introduction.
Although the construction project should be a beneficial endeavor to the project
stakeholders, many projects experience extensive contractual disputes due to unsettled
claims, which can culminate in disputes. Thereby, in order to achieve successful
project, prudent contract parties must be aware of all issues pertinent to construction
claims and claims settlement procedures, consequently protect the project from
suffering lengthy and expensive disputes.
Contractual obligation
A party Breach of obligation
Damages to other party
Claim
Claims And Dispute Resolution
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Workshop 1028 BTA Construction Claims 19 April 2019 Dr. Moustafa Ismail, CFCC, MCInstCES, MCIOB 6
Definitions.
“CLAIM” claim is a request for compensation not anticipated in the terms of the
original contract.
• A change order that is written, negotiated, and accepted without going outside the
project team is not a claim, while a disputed change order is a claim.
• Disputes can arise over schedule targets, performance guarantees, or any deviation
from the original contract terms that have significant commercial consequences.
• Claims also include owner requests for compensation for the contractor’s failure to
meet contractual terms.
• Nael G. Bunni,: claims & right to claim play a significant role in E& C relationship
Claims And Dispute Resolution
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Definitions – continue
• According to R. Max Wideman, (1990) a claim is “legitimate request for additional
compensation (cost and/or time) on account of a change in the terms of the contract", he
provided suggestions, in same context:
A claim is the last chance to bail out a losing job
A claim is an assertion to a contractual right
SIMPLY
• James G. Zack Jr., (2009) defined claim as: "claim" is a written demand or assertion
requesting additional time and/or money for acts or missions during the performance of
the work under the terms of the contract.
Claims And Dispute Resolution
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Definitions – continue
Counterclaim “a written demand or assertion made by a party, which can be
examined or disposed of in other party original caused action”. Ex. Employers claim
for delay D. Or:
for a claim of prolongation costs and re-payment of liquidated damages by sub
con- the main contractor levies a counterclaim for the payment of further
liquidated damages and contra charges
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Claims Types
1. According to legal base
2. According to liability
Claims And Dispute Resolution
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Claims Types according to legal base
Contractual claim: A claim under the contract, in which a particular contract clause
entitles one of the contract parties to claim when a certain event occurs.
For a claim when valid, the claimant may be entitled to:
Additional cost for test (7.4 FIDIC)
extension of time S.CL 8.4
liquidated damages -PC
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Workshop 1028 BTA Construction Claims 19 April 2019 Dr. Moustafa Ismail,
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• Financial reimbursement: Ex. FIDIC 1999
KSA -ASHGAL
Kuwait- PW con.
SC 2.5
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Claims Types according to legal base- continue
A claim arising out of or in connection with the contract
No designated remedy in the contract and the claimant has to establish the claim under the criteria of the applicable law to
be entitled to recover for a remedy.
Ex. Out of contract claim, Lost profit in the Saudi P. Contract.- FIDIC 20.1, 2.5 “ …or otherwise in connection with the
contract”
A claim under the principles of the applicable law: Common law claims
Such claim may arise either by any of the contract parties or against third party. Claim for common law damages are
possible. Ex. negligence, occupier’s liability, and breach of statutory duty. Ex. Mitigation- good faith- ethics- Profession.
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Claims Types according to legal base- continue
Quantum meruit claims- the principle is a party performed some work and is to be paid reasonably..
It does not usually arise if there is a contract with an agreed price,
Applicable for quasi contract (LOI), or the contract exists but void
Work outside the contracted project scope. New nature or new price( no similar item).
Ex. Letter of intent and work start.
Discussion:
A door is measured by no. and size 2.0 x 1.0 m, price is 4000 SAR- how much is 2.05 x 1.1 m door.
Ex gratia claim
(Out of kindness) a claim often put forward by the contractor but with little chance of success, unless the Employer is
expecting some benefit as a result, as to maintain the goodwill required to carry out the different project processes
successfully.- To keep business- ensure project continuity, avoid sucking project. (no acceptance of liability provided).
Ex. A Contractor is claiming price increase for non justified structural design change.
Claims And Dispute Resolution
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Claim Types according to liability
Directed acceleration - Constructive acceleration - Voluntary acceleration - Acceleration to mitigate delay
Claims And Dispute Resolution
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Construction Claims: Proving And Pricing Acceleration Claims
• Acceleration
Is the execution of work more quickly than previously anticipated.
It usually occurs in one of two forms:
o first, it occurs when t is e Contractor is required to accomplish the same work
within an intentionally shorter period. (can be instructive acc).
o Secondly, it occurs when it is required to accomplish increased, additional or
delayed work within the same period, that is, without granting (EOT).
This second The second side is complicated and usually dispute as the sequential effects
of additional, or delayed work are not smoothly acknowledged by the initiator.
Contractor’s related cost are always complicated for proving and estimating.
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Acceleration Categories
A. Instructive acceleration
the acceleration is said to have been "Instructive" /"express" or "directed"
1. When the Employer either recognizes the effects of delays on the construction
programme and requires the contractor to accelerate the remaining work.
2. OR the Employer intentionally shortens the contract duration without the occurrence
of any delays.
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Instructive acceleration features
Instructive acceleration is rarely disputed.
It is generally renowned that a contractor is entitled to complete within the contractual duration
Costs of acceleration incurred due to instructions by the Employer in order to shorten the duration
are to be agreed prior acc., starts. (e.g. FIDIC 1999S.CL 13.2 (Value Engineering) Red B.).
Similarly, acceleration directed to be carried out to overcome delay for which
the contractor is legally responsible (culpable delay), is generally accepted by the contractor
when the contractor acknowledges responsibility for the delays (see below). The contractor
may not be able to recover its acceleration costs if the delays were the contractor's
responsibility. The contractor accelerates to avoid the possibility of being ruled in breach of the
contract by completing the work late if it is later determined that the contractor was not due any
additional time.
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Workshop 1028 BTA Construction Claims 19 April 2019 Dr. Moustafa Ismail,
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Define bases of Claims
• Contractual claim- Facts and information are integrated to establish the claim and form the claim basis
and basis of entitlement.
Contractual obligation
A party Cause or breach
Damages Claim
Contract Clauses
Define, analyze breach
Bases of claim
Link
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Claims damages overview- Nature of damages for breach of contract
Compensatory by nature.
Damages for breach are intended to put the claimant back in the same position as if the requirements
of the contract had been performed.
Compensatory damages may be claimed under:
1. Expectation loss: the loss of the expectation or profit the claimant entitled.
2. Reliance loss: loss for expenses suffered based on the defendant's promise, wasted because of
the defendant breach;
3. Restitution: the value of any benefits that the claimant has conferred on the defendant.
4. Reimbursement: Employer (make good for contractor default).
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Workshop 1028 BTA Construction Claims 19 April 2019 Dr. Moustafa Ismail,
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Claims damages overview
Damages Categories
• Direct damages
such as the damage results from a project delay, in the form of project cost overrun, as a
summation of different losses such as, additional direct and indirect project cost elements.
• Consequential damages,
such as the indirect damages result from an event like delay or acceleration, lost profit, market
reputation, cash flow interest, and time value of money are the main items in the course of
consequential damages.
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Claims damages overview- continue
Types of Damages- injured
• Contractor's Damages
some of the damages pertinent to the following events: delay, acceleration, disruption, improper site
conditions, scope changes, termination, and some specific circumstances a claim for lost profit.
• Employer's Damages
Are in the forms: Delay, liquidated damages, damages for termination, and lost profit is also a prime
element in the Employer’s claims.
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Claims damages overview- continue
Types of Damages- injured
• Contractor's Damages
some of the damages pertinent to the following events: delay, acceleration, disruption, improper site
conditions, scope changes, termination, and some specific circumstances a claim for lost profit.
• Employer's Damages
Are in the forms: Delay, liquidated damages, damages for termination, and lost profit is also a prime
element in the Employer’s claims.
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Claims damages overview- continue
Proving damages
i. claimant party has to identify the cost components would be impacted due specific event i.e.
direct and or indirect costs
ii. Analyze and separate the costs according to time effect and the relation with the impacted
project activities,
iii. claimant has to link each cost to the claims particulars.- i.e Sus. Of work, T related cost.
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Claims damages overview- continue
Damages evaluation methodologies
Damages are evaluated in different approaches;
i. Total cost method
ii. Modified total cost method
iii. Discrete Cost Method
iv. Jury verdict
v. Quantum meruiet
vi. Measured mile approach
TCM: Criticized
TCM. Damages = (total cost incurred) – (Estimated cost of the work)….1
MTCM Damages = (Adjusted total cost incurred) – (Estimated cost of the work)….2
Disruption Damages = Actual cost of disrupted work – Should cost of non disrupted work
= Cost of disrupted work- actual cost of same work non disrupted
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Claims damages overview- continue
Damages methodologies- continue
Right Termination: Employer’s Termination Damages
Recoverable damages =
Cost of new contractor - Price of the terminated contractor……………………………….……..1
OR
Recoverable damage =
Total reasonable cost to complete the project - Price of the terminated contractor……….......….2
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Workshop 1028 BTA Construction Claims 19 April 2019 Dr. Moustafa Ismail,
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Claims damages overview
Damages methodologies- continue
Righteous Termination: Contractor’s Termination Damages
Contractor recoverable damages
= Contract price – Estimated cost of performing the project by the contractor………..1 ???
OR
Recoverable damage = Contract amount – Project estimate to complete……….......….2
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كفاة العطاء( : ١ ١)المادة رقم ش ع -
فترض ف المقاول أن كون قد استكمل معلوماته قبل تقدم عطائه وتأكد من أن األسعار الت دونها ف قائمة
الكمات وفئات األسعار تكف لتغطة جمع التزاماته المترتبة عله بموجب العقد وغرها من األمور واألشاء
-أثناء تنفذ األعمال -وف حالة ما إذا اعترضت المقاول . الضرورة إلنجاز وصانة األعمال بشكل متقن وسلم
أة صعوباتا مادة أو عقبات غر عادة لم كن ف إمكان أي مقاول مجرب توقعها عقال فإن عله أن قوم فورا
من تارخ اكتشاف هذه الصعوبات والعقبات بإخطار المهندس أو ممثله خطا وف معاد ال تجاوز عشرة أام
ف الموضوع إلى صاحب العمل متضمنا رأه ف التكالف وعلى المهندس ف هذه الحالة أن قدم تقررا بذلك
اإلضافة الت تكبدها المقاول بسبب تلك الصعوبات والعقبات إذا تأكد من وقوعها وذلك للنظر فه من قبل
صاحب العمل وتقرر ما راه مناسبا بشانه على أنه إذا لم تقدم المقاول ف خالل العشرة أام )القانون الواجب
.المنكورة بإخطار المهندس والمطالبة بالتعوضات سقط حقه ف هذه المطالبة-(طبق ؟ -التطبق
Case Study
Differing Site Conditions
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Claims damages overview: Ex.
• Proving and evaluating damages for differing site conditions:
• Different damages may occur, such as:
Suspension of the work or some specific activities;
Deterioration in the overall productivity; and
Delay, disruption, and acceleration damages
Generally, the damages cause cost overrun like:
o Increased labor and equipment cost due to loss in productivity;
o Increased material cost, as new procurement resource to substitute planned material.
o Additional subcontractor costs, payment to the subcontractor for additional expenditure,
and or the reimbursement claimed in the subcontractor claim (pass-through claim).
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Workshop 1028 BTA Construction Claims 19 April 2019 Dr. Moustafa Ismail,
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Cost segregation
• Estimating claims damages, analyzes deferent cost elements, which are usually a combination of some of the
following elements;
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Workshop 1028 BTA Construction Claims 19 April 2019 Dr. Moustafa Ismail,
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Construction Delays EOT
Workshop 1028 BTA - Claims Process in the Construction Industry
Construction Delays
• Delay may occur because of different risk events, employer risk event (ERE), and
contractor risk event (CRE) in which the protocol (SCL) defines both as follows:
ERE, an event or cause of delay, which under the contract is at the risk and
responsibility of the owner (Employer).
CRE, an event or cause of delay, which under the contract is at the risk and
responsibility of the contractor
Workshop 1028 BTA Construction Claims 19 April 2019 Dr. Moustafa
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Workshop 1028 BTA - Claims Process in the Construction Industry
Construction Delays Factors
Project
Delay
Factors
Consultants
Factors
Contractors
Factors Project
Type
Factors
Contract
Type
Factors
Factors
Owners
Factors External
Factors
Workshop 1028 BTA Construction Claims 19 April 2019 Dr. Moustafa Ismail, CFCC, MCInstCES, MCIOB 32
Workshop 1028 BTA - Claims Process in the Construction Industry
Construction Delays
Delay Factors
1. Factors pertinent to Owners - Financial ability, credibility, and Priority on
construction time; decision making, client characteristics, (public, private);
possible changes to initial design, owner project customers.
2. Factors pertinent to Consultants- Completeness and timeliness of project
information, constructability of design, staff experience, and provision for ease
of communication, slow response and decision making.
3. Factors pertinent to contractors- Experience of P. management team, planning
the work, project, technicians experience, subcontractors, financial ability,
material, suppliers management.
Workshop 1028 BTA Construction Claims 19 April 2019 Dr. Moustafa
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Workshop 1028 BTA - Claims Process in the Construction Industry
Construction Delays- continue
4. Factors pertinent to contract type- suitability to project duration and price, use
of standard form of contract and selection of proper contract type RYGBW.
5. Factors pertinent to project type- function or end use, (commercial, residential,
industrial, …etc.), complexity and project deliverables characteristics; location (city,
town, remote) and ground condition.
6. External Factors/risks- Weather and environmental concerns, regulations and
government permits, problems with neighbors, force majeure, civil commotion, and
wars, strikes, ..etc.
Workshop 1028 BTA Construction Claims 19 April 2019 Dr. Moustafa Ismail,
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Workshop 1028 BTA - Claims Process in the Construction Industry
Construction Delays- continue
Categories of delay responsibility:
1. 1st Owner (or owner’s agents) is responsible.
2. 2nd Contractor or subcontractors are responsible.
3. 3rd Neither of contractual party is responsible.
4. 4th Both contractual parties are responsible.
Workshop 1028 BTA Construction Claims 19 April 2019 Dr. Moustafa
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Workshop 1028 BTA - Claims Process in the Construction Industry
Construction Delays- continue
Categories of delay types:
Independent delay
Concurrent delays
Excusable delays
o Excusable reimbursable-ERE
o Excusable n-reimbursable- no
LD, no delay damage
In- Excusable delays – CRE”culpable”
Critical delays TIA
Non- critical delays-
Disruption
Special delays Serial delay - Pacing delay - Dominant delay
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Delay Type categories
Delay liability
Delay criticality
Delay occurrence
Expected delay claim by contractor: Ex.
Workshop 1028 BTA Construction Claims 19 April 2019 Dr. Moustafa
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ASHGAL
المطالبات ٢-٤٤ :ش ع
إلى برسل أن المقاول على
شهر كل ف مرة المهندس
كاملة بصورة فه شرح حسابا
الخاصة المعلومات ومفصلة
المتعلقة المطالبات بجمع
عتبر الت اإلضافة بالنفقات
وسائر فها حقا له أن المقاول
الت واإلضافة الزائدة األعمال
وفقا المهندس بها أمر
بتنفذها المقاول وقام لصالحاته
خالل الشهر السابق، وال لتفت
ألي مطالبة تتعلق بدفع قمة
لم إذا األعمال هذه مثل
الخاصة المعلومات تتضمنها
تضمنها ولم عنها المنوه
.النكر سالف الشهري الحساب
Workshop 1028 BTA - Claims Process in the Construction Industry
Delay claim by contractor: Ex. Red FIDIC 1999
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Changes HINT ASHGAL-عقد األشغال السعودى تقوم التغرات والمطالبات (: ٤٤)المادة
:التغرات ١-٤٤
على المهندس أن قوم بتحدد القمة إن وجدت، والت رى أن تضاف أو تحسم من المبلغ المنكور ف العطاء بسبب أي عمل زائد .أو إضاف جرى تنفذه أو إلغاؤه بناء على أمره
وجري تقوم مثل هذا العمل وفقا للمعدالت المنكورة ف العقد إذا رأى المهندس أنها قابلة للتطبق، أما إذا كان العقد ال تضمن أة معدالت تنطبق على العمل الزائد أو اإلضاف فعلى صاحب العمل والمقاول أن تفقا على تحدد األسعار العادلة لذلك.
الالئحة التنفذة
إذا لم كن لألعمال اإلضافة بنود أو كمات مماثلة ف العقد ، تم العرض على لجنة فحص العروض أو اللجنة المختصة 58-4 -فان لم وافق المتعاقد على ما تنته . بالشراء بحسب األحوال ، لدراسة التكلف بتلك األعمال، ومناسبة األسعار المقدمة من المتعاقد
إله اللجنة ، تم التعاقد على تنفذها بواسطة مقاولن آخرن ، وفقا ألحكام النظام وهذه الالئحة.
موضوع للمناقشة وإرسال الردود لألكامة عناة د مصطفى إسماعل
لماذا؟ -هل حق للمالك إلغاء بعض األعمال فى حدود نسبة العقد بغرض تنفذها بمعرفته بسعر أقل
Workshop 1028 BTA - Claims Process in the Construction Industry
Workshop 1028 BTA Construction Claims 19 April 2019 Dr. Moustafa Ismail, CFCC, MCInstCES, MCIOB 40
Changes HINT ASHGAL - العقد الكويتي
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Workshop 1028 BTA Construction Claims 19 April 2019 Dr. Moustafa Ismail, CFCC, MCInstCES, MCIOB 41
Claims HINT ASHGAL - العقد الكويتي
Workshop 1028 BTA - Claims Process in the Construction Industry
Workshop 1028 BTA Construction Claims 19 April 2019 Dr. Moustafa Ismail,
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A window is measured by no. (item) and size 2.0 x 1.0 m, price is 4000 SAR.
How much is 2.05 x 1.1 m door in an instructed change?
Case Study
Different additional Item
Workshop 1028 BTA - Claims Process in the Construction Industry
Schedule analysis techniques;
Workshop 1028 BTA Construction Claims 19 April 2019 Dr. Moustafa
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Workshop 1028 BTA - Claims Process in the Construction Industry
Schedule analysis techniques; continue
Workshop 1028 BTA Construction Claims 19 April 2019 Dr. Moustafa Ismail, CFCC, MCInstCES, MCIOB 44
http://www.virginiadot.org/business/resources/const/aace_recommended_practice_forensic_schedule_impact_analysis-29r-03.pdf
Workshop 1028 BTA - Claims Process in the Construction Industry
Delay Damages Anatomy
• Contractor’s Damages
o Increase in Material Costs due to Escalation
o Increase in equipment costs
o Cost of extended supervision
o Extended job site expense (filed overhead)- Ethics, mitigation, direct, indirect
o Unabsorbed Home Office Overhead
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Additional supervision cost= Cost of actual duration – cost of supervision for contract duration
Workshop 1028 BTA - Claims Process in the Construction Industry
Delay Damages Anatomy- continue
• Owner's Damages
o Liquidated damages
o Lost rental income, escalation for material
o Extended overhead, and liability for third party claims
o Consequential damages, including lost profits, interest, loss of business value, and
changes in production costs.
o Finance charges
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Workshop 1028 BTA - Claims Process in the Construction Industry
Executive implementation regulations for the Saudi procurement law
انحكيخ انشتشبد انبفسبد نظبو انتفزخ انالئحخ
ـ4/9/1427 تبسخ (58/و) سقى انهك ثبنشسو انصبدس
HINT-
األسثؼ انتبسؼخ انبدح :
انتضايبتب تفز ف انحكيخ انجخ إخالل إن استبدا ، انتضايبت تفز ػ انتخه نهتؼبقذ جص ال .
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Workshop 1028 BTA - Claims Process in the Construction Industry
ASHGAL Contract- KSA- Delay Clause
HINT-
انتأخش غشايخ :(٣٩) سقى انبدح;-
انت انذح ػ ثغشايخ هتضو ي انؼم نسحت داػب انؼم صبحت ش نى انحذدح اناػذ ف كبيال تسه انؼم إتبو ػ انقبل تأخش إرا
يذت ػه انؼقذ قخ ثقسخ رنك نهششع انيخ انتكهفخ يتسط أسبط ػه تحتست نهتسهى، انحذد انؼبد ثؼذ انؼم إكبل فب تأخش
ه؛ نب فقب
خسخ أ يب ػشش خسخ انذت أكثش تجهغ حت تأخش و كم ػ انيخ انتكهفخ يتسط سثغ ثقذس انتأخش يذح ي األل انجضء ػه غشايخ -أ
.اال يذح ي (%٠) انبئخ ف
يب ثالث انذت أكثش انجضءا جكهى حت تأخش و كم ػ انيخ انتكهفخ يتسط صف ثقذس انتأخش يذح ي انثب انجضء ػه غشايخ -ة
.انؼقذ يذح ي (% ١٠) انبخ ف ػششح سجخ أ
انفقشح ف ػهب انصص انذت ألكثش تبل تأخش و كم ػ انيخ انتكهفخ يتسط كبيم ثقذس انتأخش يذح ي انثبنث انجضء ػه غشايخ -ج
.(ة)
انتأخش انجضء أ انؼم صبحت سأ إرا أ ػه انؼقذ قخ ي (% ١٠) ثبنبئخ ػششح سجخ انفشضخ انغشايبد يجع تجبص أ جص ال
يب ػه سئب تأثشأ ؤثش ال أخش يفؼخ أ إستؼبل ف إستجبكب سجت ال إلتبئ انحذد انؼبد ف األكم انج ػه ثبنؼم اإلتفبع غ ال
.انتأخشح األػبل قخ ي (% ١٠) انبئخ ف ػششح سجخ انغشايخ إجبن تجبص فال فس انؼم ي تى
انتبخش ػه انتشتجخ اإلششاف تكبنف ;(٤٠) انبدح
انقبل خضع فتشح خالل انششع تفز ػه انششف أتؼبة ثتحم انقبل هضو انسبثقخ انبدح ف ػهب انصص انغشايخ إن ثبإلضبفخ
…………انقبنخ ػقذ قخ ي يئخ سجخ أ دس ثجهغ كب إ انششف ػقذ ث قض يب أسبط ػه األتؼبة ز تحست نهفشايخ
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Workshop 1028 BTA - Claims Process in the Construction Industry
: غرامة التأخير ومواد القانون المدني المصرى
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Workshop 1028 BTA - Claims Process in the Construction Industry
: غرامة التأخير ومواد القانون المدني المصرى
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Workshop 1028 BTA - Claims Process in the Construction Industry
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Case Study
Incomplete tender study by
Contractor
Notice of missing item in re-measured contract
Notice of missing Drawings in
tendering stage
Workshop 1028 BTA - Claims Process in the Construction Industry
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Case Study
Incomplete tender Information
The Contractor Failure to communicate or request
additional information for missing Drawings/items/
specifications in tendering stage
Workshop 1028 BTA - Claims Process in the Construction Industry
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Case Study
Inclusion of General Statements
The Contractor shall be responsible to supply and install
all required works to complete the item as per the
specifications and contract documents.
Main cost/obligation
Implied obligations/cost
Total Cost
Event analysis- Q
In your project, describe the Role of the Contract parties if an Unforeseen
physical conditions were experienced on the site- the project contract is
based on the FIDIC Red Book, 1999- Provide any necessary assumption:
• Case 1 you represent Contractor’s Project manager/ Contract manager.
………………………………………………………………………………
………………………………………………………………………………
……………………………………………….
• Analyzed by Eng: Workshop 1028 BTA Construction Claims 19 April 2019 Dr. Moustafa Ismail, CFCC, MCInstCES, MCIOB 54
Event analysis- Q
In your project, describe the Role of the Contract parties if an Unforeseen
physical conditions were experienced on the site- the project contract is
based on the FIDIC Red Book, 1999- Provide any necessary assumption:
• Case 2 you represent the Engineer:
………………………………………………………………………………
………………………………………………………………………………
……………………………………………….
• Analyzed by Eng: Workshop 1028 BTA Construction Claims 19 April 2019 Dr. Moustafa Ismail, CFCC, MCInstCES, MCIOB 55
Workshop 1028 BTA - Claims Process in the Construction Industry
Head/ Home Office Over Head
• Home office overhead represents group of different cost elements in the normal conditions. They
include the elements that contribute in different projects under construction, such as :
Payroll Personnel
Home office rent and expenses.
Human resources personnel. Advertising and marketing
Corporate Computer Support Company insurance costs.
Construction Management Utilities, telephone, fax and computers.
Executive and administrative salaries Human relations costs.
Legal and accounting expenses Costs for the HO , Interest on company borrowings
Travel for home office staff. Entertainment
Bid costs
Bad debt, depreciation of firm assets Professional Fees Contributions
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Workshop 1028 BTA - Claims Process in the Construction Industry Claims And Dispute Resolution
Head/ Home Office Over Head
• The contactor’s home office costs that support all projects in identified ratios as shown in the
figure , are allocated to a certain delayed project, consequently recovered based on a daily rate
applied to compensable delay period .
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Claims And Dispute Resolution
Estimation of Head/ Home Office Over Head
The home office overhead damages are complicated cost item to estimate, inserting the need for
developing formulaic approaches that approximate the effect of the extended construction
duration on the Contractor’s home office overhead costs.
1- Eichleay Formula
Contract Billings X Total company overhead in period A = Overhead Allocable to
Contract
Total Billings in period A
Allocable Overhead = Overhead Allocable to Contract per day
Actual days of performance
Per Period
A
Per Day
Owed
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Workshop 1028 BTA - Claims Process in the Construction Industry
Claims And Dispute Resolution
Estimation of Head/ Home Office Over Head
2- Hudson Method
Planned Home office overhead&profit X Contract Price = Home Office Overhead
Owed
Contract Duration in days
= Allocable Overhead per day x Owner-Caused Delay in days
3- Emden (Canadian) Formula
(Total Overhead & Profit / Total Company Turnover) / 100 X Contract price X
Original Contract Period
Owner-Caused Delay In days = Home Office Overhead Owed
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Workshop 1028 BTA - Claims Process in the Construction Industry
You are the project Contractor for a private school construction project which includes hundreds of
activities, valued 4.50 M SAR and the contract is FIDIC Red Book 1999, the value of the school
buildings is 4.0 M SAR while the fence and car shades are 0.50 M SAR, total duration 8 months
Discuss the following in case you are the project Contractor
1. If the Employer released an IPC IN 86 days from the day of properly submitted by the Contractor-
discuss clauses late payment- value/ EOT if any
……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………....
Analyzed by Eng. …………
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Event Analysis Case Study
Delay in Payment
Workshop 1028 BTA Construction Claims 19 April 2019 Dr. Moustafa Ismail, CFCC, MCInstCES, MCIOB
You are the project Contractor for a private school construction project which includes hundreds of activities, valued 4.50 M SAR
and the contract is FIDIC Red Book 1999, the value of the school buildings is 4.0 M SAR while the fence and car shades are 0.50
M SAR, total duration 8 months Discuss the following in case you are the project Engineer/Employer
1. What are the requirements for releasing the 1st IPC
2. The period of the letter of guarantee?
3. Can the letter of guarantee be decreased?
……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………....
the first installment of the advance payment after the later of after issuing the
• within 42 days Letter of Acceptance or
• within 21 days after receiving the 4.2 [Performance Security)
Analyzed by Eng. …………
61
Event Analysis
Case Study
Advance payment
Workshop 1028 BTA Construction Claims 19 April 2019 Dr. Moustafa
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Claims And Dispute Resolution
Claims management processes
Claim preparation
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Claims And Dispute Resolution
Claims management processes
Claim Presentation
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Workshop 1028 BTA - Claims Process in the Construction Industry
Claims And Dispute Resolution
Claims management processes
Claim Settelment
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Workshop 1028 BTA - Claims Process in the Construction Industry
Workshop 1028 BTA - Claims Process in the Construction Industry
Claims management processes Application of Claims in
Construction
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Realize the claim: contractual- principles of Law
The Contractor is expected to be the proactive party to realize an event may raise a claim(delay-add cost)
The E & consultant should be aware and expect the seeds of claims.
The contractor should serve a claim notice.( 28 -10 d).
The Engineer has to interfere and work with the Employer and the contractor to resolve.
The contractor has to comply with the Eng. advice and provide the proper solution
C to submit interim particular for claims of the events having continuous effect.
The contractor submits the claim particulars, detailed cost and time impact. 42d
The Eng. Review and request more info., decide ASAP(42).
Settlement/dispute
Records
Records
Records
Records
Workshop 1028 BTA - Claims Process in the Construction Industry
Notice of claim
• As a minimum it should include
Identify the event
The start of the event
Causes of the event
Expected duration or time impact
Cost and time relevant impact
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Records
Maintain Contemporary records
Contractual/other obligation
A party Cause or breach
Damages Claim
LINK
Workshop 1028 BTA - Claims Process in the Construction Industry Claims And Dispute Resolution
Dispute settlement
• Litigation
• Alternative dispute resolution mechanisms(Arbitration- Med- Conciliation, etc.).
Arbitration – Litigation
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A Quarry by:
Dr. Hesham Saad,
concerning the above mentioned subject ,
the most valid definition of the force Majeure is that " it is act of the God", so regarding to
Egyptian Economy as a case study so can the Floating Exchange Rate, be considered as case
of force Majeure ?
Workshop 1028 BTA - Claims Process in the Construction Industry Claims And Dispute Resolution
Future Claims.
Historical records and case studies revealed some features pertinent to successful claim management; the
following are some useful tips to successful claims management, which is a part of a non-exhaustive list,
including different project stakeholders in disordered arrangement:
1. Properly define the contract type suitable to the project;
2. Implement the suitable contract type with detailed procedures to manage all expected project
circumstances, time, cost, payments, claims, dispute resolution;
3. Project parties should distribute/share the project risk by the principle of: the suitable party.
4. Successful contracting does not include two opposed parties, one is risk averse, the other is risk prone.
5. Complete contract documents, prevent, eliminate, and or allow for proper claim management if arises;
6. Construction contract should include express provisions to reference the contract basic principles, in the
domain of project management and contract administration, such as PMI, AACEI, FIDIC, AIA, AAA, and
the Egyptian law no 101/ 1996, 89/ 1998, and 5/ 2005.
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7. Implied terms are fertile ground for disputed interpretation, it is preferable to be optimized.
8. The implied terms mainly depend upon the law and general contracting specifications, in the country at
which the project is performed, therefore, the project parties have to understand implied terms early.
9. Contract exploratory clauses are burning issues in claims process; certain defined circumstances recall
for implementing them and it need sophisticated attorneys to utilize them.
10. Special concerns should be given to changes, delays, extra work and all matters, which appear to be
"out of the ordinary" and, therefore, are potential items for a future claim.
11. OPA are prime inputs in the initiation phase, lessons learned provide valuable advice to stakeholders.
12. Project change and risk management are common factors for successful claim management;
13. Identify early changes and risk events;
14. Utilize the project contract in all project phases, processes, work packages, tasks, and activities;
15. Contract parties have to apply PM processes and comply with contract and all agreed plans as well
16. Project communication management must always take priority.
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17. Keep detailed records simultaneously when an event, which gives rise to a claim, occurs.
18. Prioritize and highlight the advice of Max Abrahamson in his book Engineering law and The ICE
Contract , as he gave special emphasis to on the project records and wrote A party to a dispute,
particularly if there is an arbitration will learn three lessons (often too late):the importance of records,
importance of records and importance of records
19. Records show the facts and consequently eliminate debates and conflicts.
20. Give notice , consider time bar clauses of intention to levy a claim, prompt notice is preferred.
21. Comply exactly with any requirements instructed by the Engineer regarding records & any evidences.
22. Submit a claim in god faith with all available facts & information within specified time limit, usually 28
days of in FIDIC, and 30 days in the Saudi Arabian Public Work Standard contract.
23. Parties need not to wait the consequences of an event to occur, but give notice before. ”wait and see”
24. If the event has continuous effect, give claim notice and submit an interim account of claim regularly .
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25. Consider and strive for proper schedules as they are convincing record to show delays occurrence,
in addition, it shows the planned work sequence & is essential to prove delay & disruption claims.
26. The claimant has to stick to the original purpose of the claim.
27. Show all facts and cards in the first submission.
28. The claimant is searching an entitlement.
29. Claimant needs to prove his entitlement to recover damages not to prove that other party is wrong.
30. The claim is not a personal issue; it is just dealing with facts.
31. It is recommended conforming to the claims contractual provision.
32. The recipient of a claim needs simple facts and clear general view of the whole event to make his
recommendations in the procedure of claim settlement.
33. Information has to be integrated and thorough as possible.
34. Settling the claim in first attempt is preferable, claimant needs to demonstrate all success chances.
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35.Claims are ethical issues; the project parties should exercise the appropriate mitigation process and do
best endeavors in response to any disruptive event, despite the liability of the other party.
36. The contractor should avoid performing additional work prior agreed change order and the owner has to
limit the verbal instructions and the scope changes as possible.
37. The contractor should make appropriate notice as a response to instructions issued which constitutes a
change & resolve the issue with the owner through the agreed change process & procurement plan.
38. The contractor has obligation to visit and investigate the site conditions before pricing a tender and he
must comply with that , despite the limitations bounding his obligations, for example it is not expected from
the contractor to dismantle an existing structure to investigate the underground conditions.
39. Oral communications should be confirmed in written in reasonable period, to maintain complete records.
40. The Consultant/ Engineer has to timely review the project records, any information may be of the
interest the project staff.
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41. The (Consultant/ Engineer) should comply with his commitments & deal impartially in the project.
42. Claim presentation documents need an Index to enable the recipient for timely select and retrieve critical
and conclusive records.
43. Owners should avoid opening ends and negligence of contractors needs, in order to eliminate the
damages my arise due to such conduct. For Ex, the owner should grant appropriate extension of time due
to ERE “delay” to avoid putting the project completion in the complicated situation, "Time at Large".
44. When an event occurs that may entitle the contractor to recover losses, the contractor must not take any
actions that may lead to additional loss.
45. Claims need substantiation of the cause and effect of what is considered disruptive action.
46. Small to medium projects may suffer more risk in the claiming process because of the lack in project
management in such projects, i.e., weak records, lake in scheduling, cost management, etc.
47. Smart project manager can share in simplifying the claiming process and eliminating project conflicts by
identifying and updating the project risks carefully.
48. Utilize electronic record keeping systems, computers, digital cameras, and cellular phones, etc.
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49. The contractor should prepare accurate and comprehensive daily construction reports. Any issue that
affects productivity should be identified in the daily reports.
50. Project managers should possess reasonable experience in construction claim management in
addition to procurement management to optimize the circumstances that yields claims & project conflicts.
51. Project human resources need consistently training on development and advances in PM technology.
52. Legal advice is essential and smart practitioners deliberately seek it in the right circumstances.
53. Government and public sector owners need to lead the project management processes in a proactive
manner in order maintain full monitoring and controlling in project different phases and master all proper
ethical and contractual performance in bilateral coordination with the contractor.
54. Elegant & competent parties search for subject matter expert for technical advice, when needed.
55. Construction industry is increasingly incorporating and assimilating the culture of claims & owners need
to set aside old culture depending on claimant will lose any anticipated future business chance with owner.
56. Finally, project parties need to prioritize, appreciate, and respect all aspects relevant to project records
and documentation.
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References.
1. Alnass, K., Khalil, A., and Nassar. G., (2014) Guideline for preparing comprehensive extension of time
(EOT) claim, HBRC Journal Vol. 10, Issue 3, pp. 308–316.
2. Amos, J. (2004) Skills and knowledge of cost engineering, 5th ed. Copyright ©2004 by AACE International
3. Bramble, B. and Callahan, T., Construction Delay Claims, 4th edition, Wolters Kluwer Law & Business
Cushman , R. and Tortorello, D. (1992) Differing site conditions Claims, Construction Law Library.
4. David, D., Smith, V., and Sims, J. (2005) Building Contract Claims 4th ed.© David Chapel
5. Wickwire, J., Driscoll, T., Hurlbut, S., and Groff, M. (2009) Construction Scheduling: Preparation,
Liability, and Claims. 3rd. ed. Frederick, MD: Aspen Pub.
6. Zack, J. (2015) Trends in Construction Claims and Disputes, Cost Engineering Vol. 57, No.2 pp. 24-37
7. Robert Frank Cushman, Esq. Cushman, John D. Carter, Paul J. Gorman, (2008) Proving and Pricing
Construction Claims, third edition.
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Claims And Dispute Resolution
Workshop 1028 BTA Construction Claims 19 April 2019 Dr. Moustafa Ismail, CFCC, MCInstCES, MCIOB 78
End of Workshop
Thank you
السالم علكم ورحمة هللا وبركاته
Workshop 1028 BTA - Claims Process in the Construction Industry
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