What is the Process for Contractor’s Delay Claims in accordance with the 2017 FIDIC Red Book?

 

 

“A claim process should be managed in a professional manner to reach the required results.”  

In construction, delays are mostly unavoidable.

Sometimes delays can be caused by the Employer.

Change to the scope of the work, delayed permits and approvals, payment issues, site access issues are some of the reasons for delay.

When the Contractor encounters Employer caused delay which is both excusable and compensable, the Contractor will be entitled to recover both the time resulting from the delay as well as delay damages. 

In this document, you will find the key issues and the process to successfully submit claims for Additional Payment and Extension of Time in accordance with 2017 FIDIC Red Book.

 

 

 

1   Identification of the Delay Event

The Contractor should recognize that there is an event that will cause the project to be delayed.

The activities on the Critical Path will delay the completion of the Work and the project schedule identifies which activities are on the Critical Path.

It is important for Contractors to actively update and use the schedule to determine when an event may cause Critical Path delay and to provide timely notice of delay.

The schedule is also important for identifying and demonstrating the impact of the delay through a comparison between original as-planned and as-built.

Inaccurate or out of date schedules can seriously hinder the ability of the Contractor to identify, establish and ultimately recover on delay claims.

2   Entitlement to Claim

Under the governing contractual provisions, the Contractor will be entitled to claim extension of time and delay related costs, if;

• The delay is excusable and
• The delay is compensable.

2.1 The Delay is Excusable

The Contractor should demonstrate that the entire delay is excusable under the governing provisions.

If the Contractor is delayed through no fault of its own, but also through no fault of the Employer, then the delay is excusable, but not compensable.

If the delay is excusable but not compensable, the Contractor generally is entitled only to a time extension.

Delays resulting from the following causes are generally excusable delays; An act of the Employer Changes Labor Disputes Fire Unusual Delays in Deliveries Any other causes beyond the Contractor’s Control

2.2 The Delay is Compensable

For a delay to be compensable, the Contractor must prove the Employer’s responsibility.

Certain types of excusable delays, such as those by some action or inaction of the Employer, may be considered as compensable delays that entitle the Contractor to compensation for the additional costs of the delay, as well as a time extension for the delay.

3   Notice of Claim

Sub-Clause 20.2.1 defines and describes the “Notice of Claim” procedure.

28 Days Time Limit for the Contractor

 

1.  The Notice of Claim is to be given within 28 days after the Contractor became aware or should have become aware of the claim related event.

2.  If the Notice of Claim is not given within 28 days, the Contractor is not to be entitled to any additional payment, the time for completion is not to be extended and the Employer is to be discharged from any responsibility regarding the claim related event.

 

 

4   Engineer’s Initial Response

 

Sub-Clause 20.2.2 defines and describes “The Initial Response” procedure.

If the Contractor fails to give the Notice of Claim within 28 days under Sub-Clause [Notice of Claim];

14 Days Time Limit for the Engineer

 

1.  After receiving the Notice of Claim, within 14 days, the Engineer is to give a Notice to the Contractor with the reasons included. If the Contractor disagrees with the Notice or believes the presence of the circumstances which justify late submission of the Notice of the Claim, the Contractor is to include these details in its “Fully Detailed Claim” under Sub-Clause 20.2.4 [Fully Detailed Claim].

2.  If the Engineer fails to give a Notice within 14 days, the Notice of Claim is to be deemed to be a valid Notice.

3.  If the Employer disagrees with deemed valid Notice of Claim, a Notice including the details of the disagreement is to be given to the Engineer by the Employer. Then, the Claim is to be reviewed by the Engineer.

 

5   Fully Detailed Claim 

Sub-Clause 20.2.4 defines and describes the procedure regarding the “Fully Detailed Claim”.

84 Days Time Limit for the Contractor

 

1.  Within 84 days or other period [1] after the Contractor became aware, or should have become aware of the Claim related event, the Contractor is to submit the “Fully Detailed Claim” to the Engineer.

2.  If within 84 days the Contractor fails to submit the statement under Sub-Paragraph (b) of Sub-Clause 20.2.4 [Fully Detailed Claim], the Notice of Claim is not considered as a valid Notice.

 

14 Days Time Limit for the Engineer

 

1.  After the above mentioned time limit has expired, within 14 days the Engineer is to give a Notice to the Contractor. If the Contractor disagrees with the Notice or believes the presence of the circumstances which justify late submission of the statement under Sub-Paragraph (b) of Sub-Clause 20.2.4 [Fully Detailed Claim], the Contractor is to include the details in its “Fully Detailed Claim”.

2.  If the Engineer does not give a Notice within 14 days, the Notice of Claim is to be deemed  to be a valid Notice.

3.  If the Employer disagrees with the deemed valid Notice of Claim, a Notice including the details of the disagreement is to be given to the Engineer by the Employer. Then, the Claim is to be reviewed by the Engineer.

 

 

Fully Detailed Claim Includes [2]

 

A detailed description of the event or circumstances giving rise to the Claim.

A statement of the contractual and/or other legal basis of the Claim.

All the contemporary records [3] on which the Claiming Party relies.

Detailed supporting particulars of the amount of additional payment claimed and Extension of Time claimed.

 

6   Interim or Final Fully Detailed Claim 

 

Sub-Clause 20.2.6 defines and describes the relevant procedure. If the Claim related event has a continuing effect;

 

1. The Fully Detailed Claim submitted is to be considered as interim.

2. The Engineer is to respond to the “First Interim Fully Detailed Claim” in accordance with the time limits.

3. Monthly, the Contractor is to give further “Interim Fully Detailed Claims” with the accumulated additional payment claimed and Extension of Time claimed.

4. After the end of the effects of the claim related event, the Contractor is to give a “Final Fully Detailed Claim” within 28 days.

 

7   Agreement or Determination of the Claim 

 

The Engineer is to proceed under Sub-Clause 3.7 [Agreement or Determination] to agree or determine the Additional Payment and Extension of Time for completion.

 

1.  The Engineer is to give a Notice to the Contractor regarding the requirement of additional details with the reasons for it.

2.  The Engineer is to respond regarding the contractual basis of the Claim in accordance with the Sub-Clause 3.7.3 [Time Limits].

3.  The date which the additional details are received from the Contractor is the “Commencement Date” of the time limit.

 

 

 

FOOTNOTES

1. Period which is proposed by the Contractor and agreed by the Engineer

2. The same Sub-Paragraph letters are used as in Sub-Clause 20.2.4 of the 2017 FIDIC Red Book.

3. Contemporary Records Means; Records that are prepared or generated at the same time or immediately after the event or circumstance giving rise to the Claim. (The same Sub-Paragraph letters are used as in Sub-Clause 20.2.3 of the 2017 FIDIC Red Book.)

 

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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