“We’ve been working on the job for years”, “we know everything there is to know about this job”, “it’s just been a nightmare from the start, but we’ve explored every angle”.
Just a few of the phrases we hear thrown about when projects are not going entirely according to plan. These are the types of projects where knowing and understanding the intricate details of the project may over complicate the situation.
Part of the role of a consultant or expert is to familiarise themselves with a project very quickly. This will include talking to the people involved at both project and commercial levels, reviewing documents such as progress records and programmes. This review will inevitably result in several very high-level questions, the answers to which could potentially take days to explain in detail. But often, the detailed answers are not what we are looking for.
As a business, we are approached by contractors daily, asking our opinion on how to recover losses on a project when the project manager or contract administrator has rejected notices and claims. Often, the notices and claims are well drafted and supported by excellent records, but this will be of no use if the entitlement to recover does not exist.
A recent example of this relates to a contractor working on a large refurbishment project where the building had been occupied throughout the tender stage. The contract was for demolition of part of the building and refurbishment of the remainder, with a new extension.
As you would expect from an older building, which had been refurbished and repurposed on many occasions, there was a significant amount of change on the job, and the change was being instructed on a daily basis.
With this being an NEC 3 contract, a large amount of small value change required enormous contract administration on the part of the contractor. The contractor kept what can only be described as the most comprehensive records I have seen on a project of this type. They were all catalogued and filed on a document management system, which is only of any use if they are then used correctly, which unfortunately, they were not.
The project was losing money and there were approximately £100k of compensation events which had not been notified in time, or at all. On the basis that you snooze, you lose, the contractor was not going to get paid for these compensation events. The Employer was well-aware of the true situation but understood the compensation event mechanisms in the contract and was not going to pay.
The contractor’s team had been going around in circles with this issue and debating how to recover the £100k. New ‘constructed’ compensation event notices had been issued, which were re-hashed versions of the originals and therefore did not stand up. Negotiations with the Employer had tried and failed. Updated programmes were being issued but not accepted. All avenues had been exhausted.
Eventually, the contractor picked up the phone to ‘pick our brains’ over the issue. It became clear very quickly that the contractor was not going to recover time or money against a compensation event that had been notified out of time, however, there may be another way…
A quick look at the list of instructions threw up a lifeline. Instruction number 1 – Omit all provisional sums. NEC 3 contracts do not recognise provisional sums. There were approximately £200k of provisional sums.
This instruction was not valid. Under an NEC 3 contract, you cannot instruct a change to the prices, it has to be a change to the scope. The Employer argued this, claiming that provisional sums are standard practice. Everybody uses them on every project. But, having sought independent legal advice on the point, the Employer was advised that if this matter was adjudicated, he would lose. Therefore, through gritted teeth and some choice language, the contractor was paid for the provisional sums.
The contractor was never going to be able to recover against the compensation events that had not been notified and was faced with losing over £100k. However, sometimes, not knowing the detail of the project and the strained relationships involved allows you to see the bigger picture and spot opportunities that had not been considered.
Sometimes, a fresh pair of eyes allows you to see the wood for the trees.
Author: Nicola Huxtable, Operations Director, Driver Trett Bristol.
This article was originally written for issue 20 of the Driver Trett Digest.