GYK Newsletter – Presentation of a Variation Claim

Welcome to the new issue of Grow Your Knowledge Newsletter where you get free, ready to use, actionable, clear information regarding FIDIC Contracts and Construction Claims.

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Today at a Glance;

➤   Term of the Week

➤   One Tweet

➤   Presentation of a Variation Claim

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TERM of the WEEK 

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ONE TWEET 

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Hello from eayglobal.com.

Let’s talk about the poor presentation of a variation claim and how it negatively impacts the success of your claim.

A poorly presented variation claim;

➤ Forces the Engineer to reject the claim, or,

➤ Prevents the Engineer from making decisions due to a lack of information

Various factors may be the reason for the poor presentation. But, the most common factor is the claimant’s lack of expertise, capacity and capability in terms of the fundamentals of claim presentation.

Some of the claimants cannot;

➤ Accurately determine the events that contributed to the claim

➤ Sufficiently support the claim with contemporaneous records

➤ Perfectly prove and quantify the claim

➤ Understand and implement the steps of presenting a variation claim

On the other hand, the Engineer who’ve experienced a poorly presented claim might experience difficulties in understanding the;

➤ Facts of the case

➤ Purpose of the presentation

➤ Separation of what is important and what is not

Here are the subtitles of a well-planned variation claim presentation;

1. Executive Summary

2. Table of Contents

3. Introduction

4. Contractual Framework

5. Actual Conditions and Impact

6. Contractual/Legal Entitlement

7. Quantification of Claim

8. Formal Statement of Claim

9. Appendix

SUBTITLE #1: Executive Summary

While preparing the executive summary, you should bear in mind the end user of the claim.

Who is the end user of the claim?

In accordance with that perspective, you should prepare a summary.

Without reading the body of the claim that summary should provide a basic understanding of points and questions such as;

➤ Description of the project

➤ What happened

➤ What you want

➤ Why you are entitled to it

SUBTITLE #2: Table of Contents

In this section, you should provide an index of general topics regarding the claim.

SUBTITLE #3: Introduction

In this section, you should provide information such as;

➤ What works to be constructed

➤ Parties of the contract

➤ The main reason for the claim preparation

SUBTITLE #4: Contractual Framework

In this section, you should describe the Contractual Basis of the Claim.

You should identify the clauses of the contract that entitle you to make a claim.

SUBTITLE #5: Actual Conditions and Impact

In this section, you should describe in detail;

➤ The changes in the original conditions

➤ The impacts of these changes in your contractual scope and on schedule

A clear understanding of the “Scope of Works” is crucial for understanding the “Scope of Variation”.

“Scope of Works” defines the context within which a variation event can be identified and analyzed.

SUBTITLE #6: Contractual/Legal Entitlement

In this section, you should establish that the additional work is out of the scope of the contract. 

Where the variation is initiated by the Employer’s formal instruction, it will be easier to establish.

Additionally, you should prove that your actions did not cause the need for the variation and the cause was not within your control.

SUBTITLE #7: Quantification of Claim

Quantifying the claims can be incredibly challenging and complex.

You should;

➤ Know what happened.

➤ Show what it cost

You should determine the acceptable methods for the pricing of variation by reviewing the contract.

Specific methods can be used to quantify these costs;

➤ Actual Costs

➤ Total Cost Method

➤ Modified Total Cost Method

➤ Jury Verdict Method

➤ Quantum Meruit

All the;

➤ Evaluations

➤ Analysis

➤ Methods

➤ Assumptions

should be transparent and clearly explained.

SUBTITLE #8: Formal Statement of Claim

In this section, you should present the formal request.

SUBTITLE #9: Appendix

➤ Contract provisions

➤ Tender Calculations

➤ Cost Records

➤ Accounting Information

➤ External Information

##  The Contract Provisions  ##

The starting point must be the terms and conditions of your contract in connection with;

➤ Express provisions of the agreement

➤ Any terms imposed by applicable law

##  Tender Calculations  ##

You should examine the tender calculations.

While doing that you should consider all the information regarding the calculations underlying the contract pricing.

##  Cost Records  ##

The main source of cost information on a construction project is the Contractor’s cost documents and accounting records for that project.

You should consider;

➤ Identification of Invoices

➤ Discounts

➤ Bulk Discounts

➤ Timing of Costs

➤ Final Accounts

##  Accounting Information  ##

Accounting records usually provide two types of information available: these are;

➤ Financial Accounts

➤ Management Accounts

##  External Information  ##

Some examples of external information are;

➤ Pricing books

➤ Records from the Contractor’s other projects

➤ Data from the wider market

Formulate the effective claim and present it in a professional way.

See you next week.

 

This information is provided for your convenience and does not constitute any “Legal Advice”. This document is prepared for the general information of the interested persons. This should not be acted upon in any specific situation without appropriate legal advice.

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