Preparing Disruption Claims

“The early identification of disruption and a well-presented disruption claim improve the probability of recovery without a lengthy dispute resolution.” 

Disruption refers to a scenario in which the Contractor experiences “a loss of productivity”. That “loss of productivity” brings additional costs.

Disruption is difficult to establish. Proving the link between the disruptive event and the disruption suffered is mostly challenging.

Disruption Claim is the way of recovering additional costs incurred or the losses suffered as a result of disruptive events.

In this document you will find the process related to preparing a robust disruption claim.

1   Identifying the Disruptive Event

A Contractor may experience various types of disruptive events.

1.1  Non-Compensable Disruptions

If the disruptive event is foreseeable and the Contractor can anticipate, this is a non-compensable disruption.

1.  Disruptions caused by the Contractor’s own actions are non-compensable disruptions such as;

➤ Improper scheduling

➤ Inefficient material provision

➤ The failure of a subcontractor or supplier to perform

2.  The Contractor cannot complain when its disrupted performance is based on unreasonable assumptions.

3.  It should be considered that even though a disruption may not be compensable monetarily, it may entitle the Contractor to a time extension.

1.2  Compensable Disruptions

Two basic types of recovery regarding compensable disruptions are;

1. Recovery under a specific contract provision.

2. Recovery under general principles of contract law.

2   Contractual / Legal Entitlement

In this section, Disruption Claim should be linked to an entitlement under the contract.

The Contractor considering bringing a disruption claim should first determine whether there is any contractual/legal basis for a disruption claim to be made.

1.  The terms of the Contract should be reviewed and the rights of the Contractor under the Contract should be identified.

2. Loss and expense clauses which provide compensation for disruption should be identified.

3.  It should be kept in mind that more than one clause of the Contract may be at the root of entitlement (changes, differing site conditions or other sources of disruptions).

3   Notice of Disruption Claim 

The Contractor should understand and comply with the Notice requirements under the Contract, such as;

1.  Timing of the Notice.

2.  The information it should contain.

3.  To whom it should be sent.

4. The proper manner of providing Notice.

4 Factual Evidence

In this section, the evidence and analysis to prove the link between the disruptive event and the disruption suffered should be demonstrated.

1.  The case of Walter Lilly & Company Limited v (1) Giles Patrick Cyril Mackay (2) DMW Developments Limited puts forward three items regarding the issue of bringing a disruption claim.

The Contractor has to demonstrate on a balance of probabilities that [1];

➤ Events occurred which entitle it to loss and expense.

➤ Those events caused disruption.

➤ Such disruption caused it to incur loss and/or expense (or loss and damages the case may be).

2.  A claim’s credibility is negatively affected if there is a lack of contemporaneous evidence.

The recording of contemporaneous evidence regarding the disruptive events and its effects on productivity is critical.

5   Quantification of the Disruption Claim 

In this section, the cost that is experienced due to the disruption should be valued.

1. The Incremental Direct Costs

related to the additional scope or tasks required by the disrupted activities should be valued.

By focusing on additional quantities and performance, this type of costs can be valued.

2. Costs related with the Loss of Efficiency

in performing the original scope of work in a disrupted manner should be valued.

Unlike direct costs, both causation and entitlement regarding the recovery of lost productivity can be difficult to establish.

There are numerous ways to calculate the lost productivity.

3.  All the evaluations, analyses, methods and assumptions regarding the evaluation must be transparent and clearly explained.

Methods of Calculation

The Society of Construction Law/Delay and Disruption Protocol divides methods of calculation into two categories [2].

Productivity-Based Methods

rely on actual or theoretical measurements of comparative productivity.

Cost-Based Methods

rely on analysis of planned and actual expenditure of resources or costs.

Productivity-Based	Cost-Based
1. Project-Specific Studies:	1. Estimated v Incurred Labour
(a) Measured Mile Analysis	2. Estimated v Used Cost
(b) Earned Value Analysis
(c) Programme Analysis
(d) Work or Trade Sampling
(e) System Dynamics Modelling
2. Project-Comparison Studies
3. Industry Studies

FOOTNOTES

1. The same Paragraph letters are used as in Paragraph 486 of the case Walter Lilly & Company Limited v (1) Giles Patrick Cyril Mackay (2) DMW Developments Limited [2012] EWHC 1773 (TCC).

2. The same Sub-Paragraph letters are used as in Paragraphs 18.12/18.13 of the Society of Construction Law Delay and Disruption Protocol 2nd Edition.

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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