January 30, 2023
Disruption claims can be difficult to prove and often rejected by the principal due to lack of particularisation. This article will explore the key considerations and steps for a contractor to prepare a robust disruption claim and ensure the best chance of success.
To successfully claim for disruption, a contractor must establish three elements:
- contractual entitlement (liability);
- that those events caused disruption (causation); and
- the disruption resulted in additional costs and/or damage (loss or expense).
Contractual Entitlement (Liability)
As there is no automatic entitlement to disruption costs the starting point is to review the contract and determine a contractual basis (if any) for the particular disruptive event (and to disruption costs), or prove that the disruption suffered is a breach of contract resulting in damages.
Different contract models may provide for the ability to claim disruption in different ways depending on its drafting (if entitlement is provided at all). Contracts might directly reference entitlement to disruption costs, or the drafting may be ambiguous and requires interpretation. Importantly, contractors should look for gateways that open the possibility to claim for disruption under the contract; these could be found within various clauses including variations, valuations, delay damages, differing site conditions or other sources of disruption.
Events caused disruption (causation)
Next, the contractor must establish/identify that an event(s) occurred, and those event(s) caused disruption to the project. In severely disrupted projects, proving that an event(s) occurred in retrospect (sometimes over a year after the events) can be difficult.
Establishing causation can be supported through contemporaneous records. Said records may be used to establish:
- productivity it could have achieved but for the disruption;
- productivity achieved due to disruption;
- resources affected;
- time and cost effect of disruption; and
- causal relationship between an event that is the principal’s risk as to the cost and loss of productivity suffered.
Whilst labour crews can give you an initial high-level view of the events that occurred, it is important for contractors to keep good quality records of how the work was actually performed. Ensuring someone is responsible for maintaining and submitting records should not be considered a time-wasting exercise, rather a contractor’s long-term insurance.
Key valuable records that can assist in substantiating your disruption claim include:
| Record | Benefit / Recommendation |
| RFI’s | Issue RFI’s including a detailed description of the event, which can be easily understood in 2-3 years’ time. |
| Daily site records | Recording an issue/event at days end when memories are fresh, or drafting an email noting the instructions on site, creates a quick and easy invaluable record. For e.g., could assist in tracking whether labour crews are constantly moving to different work areas. |
| Site Photographs | With the date and time recorded, this is an undisputable record of the as-built status, and could also show site congestion (e.g., if access is more difficult than planned or whether there are other subcontractors physically in the way). |
| Weekly/Monthly Reporting and Production Data | Submit weekly or monthly reports to the Principal.
Reporting could include output achieved over the period – regularly tracking production output of labour crews provides valuable data to validate planned productivity rates when quantifying disruption claims, and can alert of impacts to labour efficiency as they occur. |
Further, when a contractor is identifying issues/events, causes cannot be invented, however, contractors are encouraged to look at the issue from the ‘bigger picture’ perspective, for example:
- if the principal was required to provide scaffolding for the works; and
- after wet trades were complete, the principal relocated the scaffolding to a new location before the contractor finished their works; and
- therefore, the contractor provided scaffolding and invoiced the principal for that direct cost.
Note, the invoice for the direct cost does not account for the labour disrupted while the scaffolding was erected, or the idle labour waiting for the scaffolding to be moved to another location.
Loss and damage
Once it has been established that an event occurred causing disruption, the next step is to value the disruption.
The objective of a disruption analysis is to demonstrate loss of productivity and hence additional loss and expense over what would have been incurred but for the disruptive events for which the principal is responsible.
There are many methods that can be used to measure and quantify disruption. These methods can be used in isolation, or in combination depending on the project, the relevant events and the impacts. Some of the more common methods used in the industry (non-exhaustively) include:
- measured mile analysis;
- earned value analysis; and
- cost based methods.
Measured mile and earned value are productivity-based methods which seek to measure loss of productivity in the utilised resources and then price that loss, while cost-based methods focus on project cost records and provide a comparison between either incurred and estimated cost or actual labour for the impacted activities.
These will be discussed in more detail next week.
Legal Support
Lamont Project and Construction Lawyers have extensive experience in preparing and drafting disruption claims.
By providing clients a tailored approach to project support, we can ensure that our clients are best positioned regardless of the particular circumstances.
If you require assistance with your next project, please do not hesitate to contact our team
Contact: Peter Lamont or Stephanie Purser
Email: [email protected] or [email protected]
Phone: (07) 3248 8500
Address: Suite 1, Level 1 349 Coronation Drive, Milton Qld 4064
Postal Address: PO Box 1133, Milton Qld 4064