Loss / Expenses and LADs Flashcards
What is loss and expense?
A matter that is the responsibility of the Employer that materially effects the progress of the works.
Entitles the contractor to make a claim for additional costs.
When can the Contractor make an application for loss and expenses to the Employer?
When the loss and/or expense has resulted from:
- Deferment in giving possession of the site
- Works are affected by a Relevant Matter
What must the loss and expense be?
A direct loss to the Contractor. Consequential losses are excluded.
What is direct loss?
Direct loss is breach caused from a direct contract breach
What is a consequential loss?
Consequential loss is an indirect loss that has affected the project.
What are the Relevant Matters in the JCT SBC?
- Failure to give the contractor possession of the site.
- Failure to give the contractor access to and from the site.
- Delays in receiving instructions.
- Opening up of works that then prove to have been carried out in accordance with the contract.
- Discrepancies in the contract documents.
- Disruption caused by works being carried out by the employer.
- Failure by the employer to supply goods or materials.
- Instructions relating to variations and expenditure of provisional sums.
- Issues relating to CDM.
What is prolongation?
- Prolongation refers to the extended duration of the works during which time-related costs are incurred as a result of a delay. (Additional time required to complete a contract extending beyond the contractual completion date).
- Prolongation costs are additional costs that a contractor has incurred as a result of the completion of the works being delayed by an event that is the responsibility of the Employer.
When must loss and expense be raised by the contractor?
The Contractor must give written notice of a claim (Relevant Matter) as soon as it becomes reasonably apparent that the works is being affected
How long does the CA have to make a decision on a loss and expense claim?
28 days
How do you review loss and expenses claim under JCT?
- Contractor notifies the Employer as soon as the Relevant Matter on the progress of works or deferment of possession becomes reasonably apparent
- The Contractor as soon as reasonably practicable will provide an initial assessment of the loss and/or expenses incurred and likely expenses to be incurred together with supporting information for the Employer to ascertain the loss and expenses incurred.
- The Contractor will then update the assessment and information at monthly intervals until all information necessary for the Employer to ascertain the total amount is supplied
- Within 28 days of the initial assessment and information and 14 days of each subsequent update, the Employer shall notify the Contractor of the ascertained amount of the loss and/or expense incurred, referencing the information supplied by the Contractor and providing sufficient detail and the Contractor can identify the difference between the two assessments.
a. CA shall notify the contractor of either:
i. acceptance of ascertained amount of loss and/or expense incurred
ii. request to negotiate or
iii. refer the matter to the adjudicator - Once acceptance of loss and/or expense claim is agreed, the Contract Sum is updated.
What is contained within a loss and expenses claim notice?
• Identify the Relevant Matter it is and provide all the relevant detail to substantiate the costs • These can be costs for: o Site Supervision o Site offices and facilities o Site security o Overheads o Scaffolding o Plant hire o Insurances o Disruption of labour, o additional waste, o inflation
How would you assess a loss and expenses claim?
- Check the contract to see if it was a Relevant Matter (there may be additional ones that are amendments)
- Review the loss and expenses claim notice
a. Does it contain the relevant facts? Evidence of this: i. Emails, meeting minutes, progress records, photographs
b. Are the prolongation costs admissible?
i. Site set-up costs – i.e bringing additional plant onto the site. If plant is already on site, setting-up costs would rarely be admissible unless setting up has been delayed by a relevant matter and inflation has occurred which is not reimbursable under the fluctuations clauses
ii. Removal costs – Admissible in the same way as setting-up costs.
iii. Additional hire charges – reimbursable if the particular item is required to be kept on site longer than otherwise would have been the case due to the relevant matter
iv. Additional running charges – reimbursable if, due to a relevant matter, the particular item is required for a longer period than otherwise would have been the case. Again the comparison is between the period that the item would have been in use had the matter not occurred and the period that it was reasonable to have been in use given that the matter did occur. These can include staff, insurances, additional management, and security, for example.
c. Is there a disruption to labour?
i. Method for establish disruption is to apply a technique known as the ‘measured mile’.
ii. The measured mile approach simply compared the ‘value of work output’ produced in a non-impacted period to that of an impacted period. - Liaise with the Contractor
- Award Contract. Amend Contract sum
a. Under the JCT 2016, the Employer must now make an assessment of Loss and Expense claims within 28 days.
How does the NEC deal with loss and expenses claims?
Compensation Event process under Core Clause 60
What is a Global Claim?
Where the contractor claims for the cumulative effect of a number of breaches by the employer (RE and/or RM) which results in a single total cost without attributing actual costs to individual events
Why would you want to limit a Global Claim?
- Contractor does not show link between the sums claimed for the individual events that have caused the loss which he would have had to claim under L&E or EOT claim
- As such, global claims put the burden of proof on the Employer
- Global claims are difficult to prove or disprove – so the contractor would end up with something
