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The importance of records and making a claim

10th September 2020


The word ‘claim’ is despised by many when working on a live project as it is synonymous with blame these days, especially with the increasing prevalence of litigation

Unfortunately claims in the context of manufacturing and supply contracts have suffered a proportionate level of disdain, despite the claimant merely insisting on exercising their contractual rights. If claims were so bad, why do so many contracts make provisions for them? On a project, the word claim can send team members cowering under their desks, in fear that the dreaded finger of blame will be pointed in their direction for a decision made eons ago. In its simplest form, the word ‘claim’ means (amongst other things) to formally request something that is considered due. In light of that, we are going to examine the practical steps you can take to present a clear, concise, compelling, and cogent claim, which will increase the chances of success and often result in a better settlement.

It is implied that one party will not hinder the other in carrying out its contractual obligations. However, when one party does restrict the other, the affected party should be entitled to relief by way of cost, time, or both to complete the contract. Rather than rely solely on common law for such relief, many contracts contain provisions to govern the claims process.

What comes first?

Most standard forms of contract contain detailed provisions under which a manufacture or supplier can claim against the customer for any losses suffered if the work is disrupted due to certain specified clauses. The first point is: review the contract and identify the clause on which you will rely to claim an extension of time or additional costs.

Claim provisions mean that, in many cases, an event that enables a claim to be made will also entitle the manufacture or supplier to recover damages for breach of contract. It may amount to a breach of the customer’s implied obligations of cooperation. If this is so, it is for the manufacturer or supplier to decide whether to sue for breach of contract or to claim under the appropriate clause in the contract. Once you are clear on this, be sure to submit an appropriate notice.

What’s next?

Once a notice is issued to the other party, the next thing to consider is good record keeping. This ensures that any impact that your project suffers is properly recorded. These records will serve as evidence, so that your counterparty can assess the delay period to which you may refer when seeking a claim for an extension of time and costs in the future.

The most common reason why a manufacturer or supplier is unable to obtain an extension of time or recover additional costs is that it has insufficient evidence, in the form of records, to support its claim. The manufacture or supplier may often argue that as part of the project it is constantly dealing with challenges that arise from budget, schedule, and resourcing limitations; records are its last priority in delivering the project. But alas, without records, there may be little means of proving your position. Thus, even the best managed and planned project can encounter disputes, without a proper record of activities and events. It is important, therefore, that once you become aware of an issue that you begin to record any impacts that this event is having on your planned work activities. Record the decisions that are made or proposed by both parties and ensure that these are formally communicated.

A record of the decisions taken from both parties will act like a retrospective road map; it is these decisions, or lack thereof, which may have impacted the project and changed its direction. As well as being used to make a claim, records of decisions taken can act as a defence of your conduct should the other party believe you are at fault. 

A simple but effective way to manage your cost records for a delay event is to set up new billing codes in your financial systems against which your teams, sub-contractors and suppliers can record their time relating to the issue. This allows you to easily identify the period from which the issue first impacted the project to the end date at which the delay ceased.

Early management and collation of records will save a huge amount of time and this will support any adjustment required to the project programme in the form of an extension of time. It is also likely that there will be a provision(s) within the contract that requires for regular updates to be submitted and for continual assessments to made and submitted throughout the duration of the delay event. The above actions will help manage those requirements and ensure that measures can be put in place to mitigate the overall impact of the issue.

When claiming money, it is a process of accounting which needs to be adopted rather than estimation or valuation; parties do not make money from claims, but merely recover losses (cost).

What records should I keep?

The records that should be kept for any project will vary according to the type, complexity, and size of the project. Generally you should record: (1) resource name, job roles, work progress and interruptions; (2) the identification of specific work activities being undertaken; (3) productivity and output, recorded against working area; (4) the use of any operating plant and equipment: the number of hours worked, idle or down time for repair; hire charges, setting up costs and running costs; (5) information and approvals required and received; (6) instructions and orders given (written and oral); (7) test and inspections: when they took place and the results; (8) the identification of any other delays encountered; and (9) if working outside, the weather conditions.

What do I do once the event is over and I have all this information?

The next step is to produce the claim. This could be for additional time, money, or both, dependant on the clause(s) in the contract on which you are relying.

The burden of proof is on the claimant, who must prove that, on the balance of probabilities, the event is true, and that it has adversely impacted the project in some way. This means that the opposing party must be satisfied, based on the evidence presented, that the occurrence of an event was more likely than not.

There are four elements to be considered as part of a good claim: (1) cause (explain what happened); (2) effect (explain what effect the cause had on the project in terms or time, money or both); (3) entitlement (demonstrate entitlement under the contract or at law); and (4) substantiation (provide claim narrative, delay analysis and additional costs all need to be substantiated with evidence).

There are also four points to remember when compiling a claim: (1) ensure that the reader’s/decision maker’s job is made as easy as possible when assessing the claim; (2) the claim submission should be a stand-alone document; (3) assume that the person who will assess the claim has no prior knowledge of the project or circumstances; and (4) remove any irrelevant information from the document.

What should I do once I have completed my claim submission?

Once the claim has been prepared, this can now be submitted to the other party for review.

It is important that any submission complies with the specific provisions of the contract. Failure to do so may limit entitlement.

What happens next?

Typically, a responding party will take anywhere between two to four weeks to respond to an initial claim submission (some contracts specify a period of reply). It is good commercial practice to request a meeting with the other party, as soon as practicably possible, after the submission of a claim.

Regardless of how difficult it may be to discuss the issue, it is good to maintain a continuous dialogue between both sides. This allows each party to better understand the issue at hand and how best to navigate any areas which could potentially prevent an amicable settlement from being reached.

The checklist

  • Identify the clause(s) which enable you to claim an extension of time and/or costs.
  • Comply with any notice provisions in the contract, taking special care to comply with any timescales and include the relevant detail that you wish to rely on later when submitting a full claim document.
  • Keep and maintain contemporaneous records ensuring they have the necessary details to support the effects of any delay and additional costs.
  • When drafting the claim remember the four element and four points – this could be the difference between submitting a successful claim, or not.
  • During the whole process maintain a positive dialogue with the other party and be proactive when arranging meetings and reaching amicable settlement.

Carl Simms is a Director and claims management specialist at HKA with over 18 years’ experience in the rail, construction, and engineering industries. He has worked on a range of projects in the rail, rolling stock and signalling sector for a variety of clients providing support with contentious issues (dispute resolution and avoidance), drawing on skills in adjudication, arbitration and litigation, as well as, preparing and defending claims.

Chris Jackson is a Managing Consultant at HKA, who, having trained as a quantity surveyor, has built significant experience by working across a broad range of industries and sectors including rolling stock manufacture, infrastructure such as rail and road building. His experience also extends to oil and gas facilities, pipelines, specialist critical infrastructure, data centres and commercial and residential building. He has worked at various levels of the supply chain from specialist subcontractor to global EPCM corporation in the UK and internationally.

As published in Rail Professional Magazine, page 51, September 2020.

The burden of proof is on the claimant who must prove that, on the balance of probabilities, the event is true, and that is has adversely impacted the project in some way”
Chris Jackson, Managing Consultant, Carl Simms, Director, HKA

This publication presents the views, thoughts or opinions of the author and not necessarily those of HKA. Whilst we take every care to ensure the accuracy of this information at the time of publication, the content is not intended to deal with all aspects of the subject referred to, should not be relied upon and does not constitute advice of any kind. This publication is protected by copyright © 2020 HKA Global Ltd.


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