Leadership with a vengeance – What to avoid when claiming delay damages – Construction and planning

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In construction and engineering, it is not uncommon for project completion to be delayed. This can be the result of many things such as supply chain disruptions, material shortages or even political interference. Project delays can be extremely problematic for both parties, and when they happen, the question becomes – who is responsible?

Delay damages are damages to which the employer is entitled in the event of a delay in the completion date for which the contractor is responsible.

Let’s look at a case study, Project X, to understand what to avoid when claiming damages for delay.

Project X had an original completion date of 18 months, with delay damages limited to 10% of the project cost. Project X involves many key challenges; in particular, the geotechnical report provided by the employer during the tender process, which turned out to be inaccurate, leading to a 300% increase in the amount of rock excavated and encountering significantly harder rock material than expected. To avoid future delays, the contractor used explosives to mine the rock. Another delay was caused by the local authority, which consistently refused to grant the necessary permits and licenses to the contractor. as a result, the contractor was not able to plan and carry out his works according to his bid. The project lasted more than 3 years. The contractor requested an extension of the deadline, but this was rejected by the employer.

During the negotiation to resolve the dispute, the contractor objected that the contractual procedure for deducting and applying compensation for delay was not followed, as there was no consultation with the contractor. In addition, it was found that the engineer who has the power to grant extensions of time has delegated this role to another party. However, this authorization was not in accordance with the contract, as the consent of the contractor should have been required, which did not happen.

Accordingly, the Disputes Committee held that the Engineer’s award of damages for delay was invalid. However, the contested panel concluded that it was not empowered to rule on the respondent’s right to payment. Nevertheless, an important lesson emerged from this case.

Lessons for employers and suppliers:

– Legality – Both the employer and the contractor must adhere to and adhere to the terms and conditions of the contract.
– If the employer decides to change the Specific Conditions, he must understand the impact of these changes on other parties.
– The supplier should be aware of their responsibilities and obligations under the contract and should consider whether this could be limited to providing some protection.
– The supplier should be proactive and resolve issues in a timely manner, such as providing or handling notifications as soon as possible, instead of waiting for the outcome.

Guided by Revenge was discussed in “What to Avoid When Pursuing Delay and Mediation Damages vs. Expert decision – essential or desirable?” webinar with Dušan Cvetković and Thaic Fernandes Chebatt. To view the webinar and detailed notes click here.

The content of this article is intended to provide a general guide to the issue. Professional advice should be sought regarding your particular situation.

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