Driver Trett Digest Issue 21 03.2021 - Flipbook - Page 6
DIGEST | ISSUE 21
their valuation may include the same
costs. Claims for disruption can
particularly overlap with acceleration
claims. An often overlooked area of
overlap is payments for cost escalation.
these sources might establish this ‘but
for’ baseline. Actual staff costs will be
tested in terms of the reasonableness
of their numbers, job descriptions and
rates.
The usual heads of acceleration costs
include:
People, including both staff and
operatives;
Preliminaries and general items
(site overheads);
Materials; and
Plant and equipment.
Once the ‘but for’ and actual staff are
established, comparison should not be
of total numbers alone. Job descriptions
should be looked at line-by-line. Who
was added, when and why, should be
established from factual evidence.
In practise, such comparisons often
show some reductions and this will
lead to debate, including: why there
is a reduction; whether the ‘but for’
would ever have been required; and
why there was no actual resource; and
whether they should be off-set against
the additions.
Other potential heads are:
Off-site overheads;
Profit;
Risk/contingency; and
The costs of quantification.
The Quantification of
Acceleration Claims
John Mullen, Principal and Quantum Expert
This short article focusses
on the retrospective
quantification of
acceleration claims.
These can all lead to increased expense:
Increasing levels of resource. Either on the same or additional work fronts.
Changing resources. These might only be available at greater expense.
Changing methods. Particularly sequencing, overlapping, hours of work, and
procurement.
Changing work scope or specification.
Prospective valuation, where parties
reach a prior acceleration agreement,
is not covered, though these can cause
their own problems. Potential legal
and contractual bases for acceleration
claims are also not considered.
The use of words such as “increase” and “change” begs the question “compared
to what?”.
By way of introduction to quantification
(and also because the author was
expert for the defendant who was
awarded indemnity costs) it is worth
considering these words from HHJ
Hicks1:
“increasing speed… finishing earlier…
increased expense…”
In practice, such increasing speed and
finishing earlier might be achieved in
several ways.
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Contractors often base acceleration claims on tender allowances. However, these
may have been insufficient.
An alternative baseline is levels before the acceleration, but these too may be
misleading. The proper baseline will usually be the contractor’s objectively
reasonable ‘but for’ methods, resources and costs. These might be from a
resourced programme, method statements, internal planning and budgeting,
witness statements, expert evidence, or a mutually supportive combination of
these.
Acceleration does not always only give rise to additional expense. Where work is
carried out more quickly savings can arise particularly in relation to time-related
costs. Where acceleration is achieved by changes to the works, savings can result
from omission or reduced specification.
Another area that is often overlooked in contractors’ submissions is duplication with
other claims. Where the cause of the acceleration relates to instructed Variations,
People costs are usually the largest
head
of
acceleration
claims,
particularly staff. For both staff and
operatives, overtime payments often
feature. Bonus payments can be
additional bonuses paid in recognition
of the working circumstance or
unearned bonuses which still have
to be paid to retain people. Where
additional people are introduced, they
may be at a premium cost, particularly
where
payroll
employees
are
supplemented by those from agencies,
subcontractors or even imported into
a country. Recruitment fees might be
incurred, and bringing new people to
a project can add costs of transport,
visas, work permits, site inductions,
health checks, accommodation, and
other indirect costs.
“Staff thickening” claims often feature
not only as an acceleration issue but
also as a head of disruption or even
prolongation claims. Where staff
thickening claims compare actual
and planned resources, the usual
questions apply to the differences.
Alleged ‘but for’ resources might be
based on tender allowances or staff
organograms, but these might have
been wrong or set intentionally low or
high respectively, to win a bid. Planning
and budgeting by the project team often
proves a much better basis, ideally
through contemporaneous documents,
or otherwise through statements.
Objective evidence can be sought from
experts or similar projects. Ideally, a
mutually supportive combination of
Staff thickening particularly arises in
claims based on:
The extent of changes, queries,
revisions and documents;
Increases in work fronts; or
Increased labour levels.
A useful analysis plots the levels
of staff against time and numbers
of documents or work fronts or
operatives. Discussion may ensue as to
whether correlation proves causation
and whether the resulting claim is
‘Global’ in the pejorative sense.
Regarding operatives, a number of
indirect effects can cause additional
cost. Long hours, crowded workspaces
and overlapping trades can reduce
production. Less obvious are learning
curves and the effect of changes in
the ratio of operatives to such as
supervision,
management,
plant,
equipment, and materials. Quantifying
labour productivity losses involves
the usual difficulties with disruption
claims.
Methods include:
Comparing planned and actual;
Measured mile analysis;
Earned value analysis;
Records of lost time;
Comparisons with similar projects;
Expert evidence; and
Historical data.
Ideally a claim for lost productivity
applies more than one of these methods
to mutually support each other.
Materials costs can include: part load
premiums; increased waste; double
handling; costlier suppliers; and
expedited delivery charges. Changes in
specification for earlier availability or
faster construction can also increase
costs.
Plant and equipment costs can include
some similar features to the operatives
using them. In particular, owned plant
might be supplemented by hired plant
at a greater cost and lower outputs.
Additions to the above for risk/
contingency,
quantification
costs,
off-site overheads and profit tend
to be more relevant to prospective
acceleration agreements. Inclusion
will depend on such factors as: the
contractual or legal basis; whether
they were incurred or lost; and the
bargaining strengths of the parties.
Subcontractors can incur any of the
cost headings identified above, and
can add complexity. Related questions
will include: whether a subcontractor’s
costs actually arose from ‘domestic’
issues; whether they were reasonable;
how the subcontractor was procured
and managed; and whether the
contractor actually has an incurred
cost or liability.
Dispute as to whose culpable delays
led to the acceleration is likely to see
a counterclaim from the Employer. In
particular, for additional fees paid such
as to a FIDIC Engineer for providing
additional staff or overtime and night
shift attendance. The relationship
between such costs and contractual
Delay Damages may have to be
considered.
Evaluating Contract Claims2 offers
further discussion on this broad and
complicated topic.
1.
2.
Ascon Contracting Ltd v Alfred
McAlpine Construction Isle of Man
(1999) 66 ConLR 119
By JP Mullen and RP Davison,
published by Wiley Blackwell.
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