The claims QSII

When this guy arrives on your project, it’s time to feel nervous. Something, somewhere, has gone wrong and he’s going to be sifting through your records and grilling your staff in an attempt to find out the facts.

Better get used to him, though, because you’ll be seeing more of him. Since the credit crunch began to bite, belts are tightening from the top to the bottom of the supply chain as firms look to get as much as they can from their current jobs, rather than writing off and moving on.

In the 1980s, he might have been proud to call himself a ‘claims QS’. In the noughties, it’s a very different matter: ‘No self-respecting contractor will own up to employing or hiring one,’ comments Annie Wright, our legal columnist and contracts adviser. ‘And no one will own up to being a claims QS... Firms of claims QSs pretend to be project managers, contract consultants, dispute resolution consultants, commercial managers or divisions of cost consultants.’

This change dates back to Sir Michael Latham’s 1994 industry report Constructing the Team, which itself led to the Housing Grants, Construction and Regeneration Act 1996. The Construction Act, as it is often called, brought in adjudication – a cheap and cheerful way of settling disputes that allows a decision to be reached in a maximum of 42 days. Prior to that, parties who felt they were being done out of cash would have to use the lengthy and costly procedures of arbitration or court. And for many subcontractors, that meant either liking it or lumping it.

Then came Sir John Egan and his 1998 Rethinking Construction report for the new Labour government. The problem was that the cut and thrust of the claims surveyor’s craft just didn’t sit well with all that talk of partnering and frameworks. So the claims QS reinvented himself as something more approachable and user friendly.

Whatever you want to call him, all the signs indicate that his services will be increasingly in demand. The recession of the late 1980s/early 1990s was the making of specialist cost consultants. Leaner times ahead for some means more work for others. Consultant EC Harris, for example, plans to double its claims business in the next three years, expecting growth overseas in Asia and the Middle East, as well as in Europe.

We may not be in recession now, but people are certainly feeling more cautious. Barrister Peter Collie has noticed a change in practices. ‘I have seen an increase in set offs and claims that lack serious merit,’ he reports. ‘It could be that they are aimed simply at delaying payment of monies downstream. I have also seen an increase in the paying party imposing rather than negotiating final accounts. Another tactic I see deployed is for employers to snag buildings to perfection so that the contractor cannot hand the building over, thus entitling the employer to claim liquidated damages.’

There are also the well-publicised ‘discussions’ between housebuilders and their supply chains, such as Taylor Wimpey’s letter in January to its subcontractors announcing that accounts would be cut by 5%. And research in February from the National Specialist Contractors’ Council showed that 33% of its members had to wait between 60 and 90 days for payment in the final quarter of 2007. This was compared to 21% in the third quarter and 5% in the second quarter.

Recruitment firm Hays Construction reports an increase in demand for claims administrators over the past year. Gareth Broadrick, senior manager at Hays, comments that they are in particular demand on larger, more complex projects. He says: ‘For example, work on London Underground is substantial and involves extensive use of contractors and sub contractors. Due to the number of packages that follow, the possibility of variations increases and a claims QS/contracts administrator really shows their value.’

Broadrick adds that candidates are hard to come by, since good QSs are in short supply, let alone those with a speciality. Liam Holder, who heads up EC Harris’s European contracts advisory service, confirms this shortage. Particularly scarce, he says, are those with the planning experience and the ability to analyse delays. To grow his department, Holder plans to draw on professionals from other parts of EC Harris and train them.

Most claims QSs start life as project QSs, often working for contractor and employer. They may then find that they have a natural aptitude for dealing with claims so they specialise in claims. This was the case for Roger Jewell. ‘I was working as a PQS for the employer and just found that I was dealing with any claims that came in, without ever being labelled a Claims Surveyor as such’. He is now a claims consultant for Hill International in the Midlands. Holder, meanwhile, became hooked during a big dispute on a Hong Kong power project.

Any wannabe claims expert must enjoy getting into the nitty gritty of a contract. The role of a claims surveyor in preparing or defending a claim is to make his case clearly, linking the argument to some contractual obligation.

‘The claims QS must have a firm grasp of the contract provisions and must understand how risk is being allocated between the parties,’ says Alan Chan, who has 17 years’ experience as a contracts administrator and is now a claims consultant in Hill International’s Hong Kong office. ‘When things are black or white, there is little room to argue. When the contract contains provisions that are not very clear, the claims QS needs to play the role of devil’s advocate to interpret the contract in the contractor’s favour,’ adds Chan.

Many claims consultants have additional legal qualifications and may act as expert witnesses or adjudicators.

Jewell’s method is to initially distill the claim to two sides of A4 and then go to the other side to find out whether they think they are arguing over the same thing as you. ‘Often this isn’t the case,’ says Jewell.

On a bigger claim, preparing a full-blown narrative can take two months, says Jewell, and a further two to prepare the quantum – the amount being claimed.

The bane of any claims QS’s life is finding the evidence: sifting through the computer files, paperwork and interviewing reluctant site staff who have a distinctly ‘them and us’ attitude to anyone pursuing a claim. ‘As a group, contractors’ site delivery personnel are more interested in building things than dealing with the minutiae of contracts,’ comments Wright. ‘It is much more satisfying to change the built environment for all to see than to spend time picking through the niceties of often poorly worded and obscure contracts.’

Holder bemoans the lack of record-keeping he encounters when often a note in a daily diary would work. He advises contractors to explain to supervisors why keeping records is important and what they will be used for.

After the preparation and brainwork comes the fight. Refreshingly, Chan talks of ‘aggression’ as a requisite personality trait for a claims QS, although this must be backed up by contractual arguments, he adds. In post-Egan UK, the claims experts speak of negotiation skills, love of a challenge and will to win.

Most disputes don’t end up in a flash of fireworks and a big cheque, however, it is more a case of some give and some take. And plenty of patience as big disputes can run for years.

Chan recalls a job during reclamation works for Hong Kong airport, when he was working for the contractor responsible for dismantling a surface water run-off pipe which ran out to sea, protected by huge lumps of rock. The contractor had priced the job according to government-supplied drawings that detailed the rock sizes – which turned out to be wrong. The rocks were far bigger than shown, the cranes were too small, delay and cost ensued.

Chan’s claim ran up against an interesting clause found in all Hong Kong government contracts which says that if the contractor relies on information provided by the government and it turns out to be wrong, tough. Chan, believing that this clause might not stand up in an international court of law, wouldn’t let the matter lie, and wrote letter after letter with the claim being rebuffed each time.

The happy ending was that at the end of the contract, the employer did not settle the claim, but the money the contractor believed it was owed was paid through various other claims and means. ‘I will remember that claim forever,’ says Chan fondly.

Will it ever be PC to hold your head up high and announce ‘I’m a claims QS’? Perhaps not. But now is a good time to make sure that you have a least one QS with the necessary attributes on each project. Both Jewell and Holder point out that the experienced claims QS can have the biggest impact before a claim even happens, making sure that contract documentation is not ambiguous, and keeping his eyes open as the contract progresses.

‘Be on the alert for potential claims as the job is going through,’ advises Jewell. ‘If a subcontractor applies for more money than you think he is due and you pay him less, there’s an opportunity for a claim. Scream loudly: “There’s a problem here, let us talk about it!” Most surveyors will say they are too busy, but those are the little danger signals. A few moments chat will avoid bigger claims.’

Love him or hate him, everyone needs a claims QS. He could be the difference between profit and loss. cm