The blame game

Demonstrating that disruption has occurred on a project can be tricky. That is because it requires proof that loss has actually occurred and that this resulted from factors for which the employer is contractually responsible.

Yet, as we all know, there are very few projects involving services work that do not get disrupted in some way. Changes by the employer (or main contractor), working out of sequence, trades working concurrently, and hence literally tripping over each other, overtime working and, last but not least, the morale of the labour, can all disrupt a build, leading to a loss of productivity. This needn’t necessarily result in delay, although it often can.

There are various techniques available to assist the preparation of a disruption claim. Whether disruption becomes an issue really depends on whose fault it is, the extent and how much ‘substance’ there is in the contract. If there is a strong basis for any of these, the next step is to select the right claims method, and this will partly depend on the available information (records), the amount in issue and the relationship between the parties.

The ‘measured mile’ technique compares the actual productivity achieved on an undisrupted part of the project with the productivity on a disrupted part. Damages are calculated by totting up the cost of the additional labour used. The key advantage of this technique is that it uses actual performance as a benchmark, not theoretical, to establish the level of damages. It has also gained favour in the courts. It does, however, require fairly comprehensive records of actual progress and the costs incurred.

The ‘global claim’ comes in many forms but can be summed up as one where the contractor does not satisfactorily highlight the actual cause and effect of disrupting events. The claim therefore ends up as the difference between tendered, and actual, man hours. Historically the English courts have not favoured this technique because it does not allocate liability or demonstrate the extent of the actual loss. In the case of John Doyle Construction Ltd verses Laing Management (Scotland) [2004] it was decided in the Scottish courts that a global claim, although possible, would fail in all but exceptional circumstances. Such circumstances would include the impossibility of allocating liability or actual loss in any other way, and the contractor making due allowance for his own inefficiencies.

A successful claim is far likelier where accurate records have been kept – so don’t neglect them! A simple disruption schedule is the most powerful

Where the ‘industry guidelines’ method is employed, estimating manuals are used to estimate the planned labour for a particular scope of work. Damages are worked out by subtracting the costs of the planned labour resource from the actual labour used. The disadvantage of this is that published productivity data will not be specific to the project and the productivity rates are often conservative, causing the contractor to under-recover his actual loss. The use of industry guidelines is suitable where there is no or an incomplete labour estimate for the planned resource.

Another option is the use of expert opinion, where damages caused are assessed by reference to their experience on similar projects. They may also rely on contemporaneous documents, witness statements and other documentation. The major drawback is the perceived subjectivity of an expert’s opinion. Also, non-project specific information may be used, which therefore might not be accurate. Where records have been religiously kept, this method can come into its own, however.

There are, then, techniques available for making a claim where detailed records have not been kept. However, a successful claim is far likelier where accurate records have been maintained. A simple disruption schedule is the most powerful way to keep records.

The most common method of resolving disruption is negotiation based on a global claim, but the success of this technique depends largely on the balance of power and goodwill between the parties. Yet the key point in all of this is to identify and address disruption early, decide which technique would be used, maintain suitable records and hopefully avoid reaching a dispute altogether.