Contractors Claims for Disruption
Disruption Claims have always been very difficult to establish with any precision and even more difficult to ascertain in financial entitlement, as a result the vast majority of Contractors’ claims are based on prolongation of the contract period which is easier for the parties understand and a more straightforward claim to establish and reach a settlement on, although not if all parties are acting strictly in accordance with the terms of the PAM or similar standard forms of contract.
In practice Contractor’s base their claim for disruption on comparing anticipated with actual labour costs. This method of establishing financial entitlement generally lacks in any kind of merit and it is rarely successful in Arbitration or in the Courts. This is due to the inescapable fact that there may be many reasons for the costs of labour being greater than the contractor anticipated at tender stage, other than the reasons for which the Contractor is holding the Employer or his Contract Administrator accountable as a result of disruption.
A more generally accepted method of evaluating a contractors entitlement as a result of disruption is to compare the productivity rate for a particular activity per man or similar for works executed during a period of no disruption with the productivity rate per man during the disrupted period and then to apply the ratio obtained to the total cost of labour for that activity. Obviously for this method is to succeed, it must be possible to isolate a period free from disruption for similar or identical works operations. The comparison must relate to similar works. Disruption often affects non-critical parts of a project, but not to the extent that those parts become critical in programming terms. The fact that the disruption did not delay the works does not mean the Contractor is not entitled to recover the costs incurred due to disruption. Disruption claims maybe for delay and associated costs or solely for costs.
Where similar works were not executed on the contract in both periods where disruption occurred and was not present it may be that the Contractor can establish productivity rates based on similar projects and works undertaken but it can be seen that this will often make the burden of establishing effects on the productivity rate harder to stick. In many instances this is why it is difficult for a Contractor to formulate a convincing claim.
It is usually necessary to deal with each work activity separately. The screeding of floors in a building may not be critical and there may be so much float that Contract Administrator determines does not cause delay. However the fact that the works took twice as long due let’s say to having to work around contractors directly employed by the Employer who were not specified in the Contract would entitle the Contractor to disruption costs as long as he can justify these. In such instances, the Contractor should provide his claim for each activity comparing the productivity rates achieved in the period without disruption and periods with disruption.