If the sub-contractor wishes to recover loss and expense, it is absolutely essential that the main contractor and/or employer is kept fully informed at all times as to the likelihood of delay and extra costs. Submit your application or lose your entitlement, Jack Russell warns, in this article originally published in Electrical Times magazine:
Are claims confrontational?
The mere mention of the word 'claims' is guaranteed to elicit a hysterical reaction. This ought not to be the case. What the JCT, and other standard forms, do is to legitimise a whole range of matters which otherwise would be employer's 'breaches of contract' (eg late information, delayed possession of site etc) by listing them as 'relevant matters', which then entitle the contractor and/or sub-contractor to financial compensation.
This policy has not been adopted out of any excessive concern for the contractor/sub-contractor, but merely recognises the increasing incidence, over recent years, of acts and omissions by the employer, which in earlier times would have entitled the contractor/sub-contractor to sue for breach. Indeed, the increasingly used NEC contract now places 'compensation events' at the heart of the contractual machinery.
Importance of prompt written applications:
The main clause dealing with 'claims' under DOM/1 is clause 13 ('matters affecting regular progress - direct loss and expense - contractor's and sub-contractor's rights').
Clause 13.1 sets out the sub-contractor's obligations as to giving of notice and making of application. Unlike extension of time, it is generally considered that the making of timely and adequate application by the sub-contractor is a pre-condition to recovery of loss and expense. Failure to make application, perhaps for fear of upsetting the main contractor, will therefore prove very costly in terms of lost entitlements. Indeed, many bespoke forms spell this out very clearly.
Clause 13.1 requires the subbie to 'make written application to the contractor' if the regular progress of his works is 'materially affected by any act, omission or default of the contractor......or by any one of the relevant matters...' This application must be made "as soon as it has become, or should reasonably have become, apparent to him that the regular progress of the sub-contract works, or any part thereof, has been or is likely to be affected."
The subcontractor must submit 'such information in support of his application as is reasonably necessary' to show that his regular progress is likely to be affected. He must then submit 'such details of such loss and expense as the contractor requests in order reasonably to enable that direct loss and expense as aforesaid to be agreed.'
Main contractor's reaction:
In reality, the typical main contractor will usually do all in his power to avoid agreeing any loss and expense whatever, unless he has a clear route through to the employer (eg major late variations by the architect etc). This may take the form of a tirade of counter accusations as to the sub-contractor's alleged shortcomings.
Alternatively, he may demand 'full details of cause and effect.' This is not usually because he is interested in evaluating the claimed loss and expense, but rather in the hope that the sub-contractor will give up in despair.
The prudent sub-contractor must submit timely and adequate applications, and keep first class site records, so that he is able to compile a formal claim submission and substantiate his entitlements, both in principle and as to 'quantum' (ie: value of the claim).
Get it in the budget:
What is it that inspires so many sub-contractors to embark upon a typical project in the apparent conviction that this time it will all go beautifully to plan, when the whole of their previous experience with main contractors surely demonstrates otherwise? We know perfectly well what to expect on a typical project. It will over-run and there will be disruption.
The sub-contractor will need an extension of time and compensation for his additional costs. He should set his stall out from day one in order to protect his entitlements. This means good site records such as a detailed site diary, technical query sheets, confirmations of instructions, daily labour allocation sheets etc.
Above all, if the sub-contractor wishes to recover loss and expense, it is absolutely essential that the main contractor and/or employer is kept fully informed at all times as to the likelihood of delay and/or extra costs. It is far more important for the sub-contractor to submit early application and estimate of likely loss and expense, and to get it in the budget, than it is to submit some glossy 'ripping yarn' at the end of the job.
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This article was originally published in Electrical Times magazine earlier this year by Highbury Business Communications - a Voltimum UK Media Partner.
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