WHAT ARE THEY?
Disruption on construction and infrastructure projects can lead to significant losses and in extreme cases be business threatening. Disruption is often included as part of a delay claim. However, disruption can (and often does) impact with no critical delay occurring (i.e. no delay to the scheduled date for completion). Therefore, a disruption clam can exist with no delay claim.
So, with the above in mind what is disruption? The Society of Construction Law (SCL) defines a disruption event as being a ‘disturbance, hindrance or interruption to a Contractor’s normal working methods, resulting in lower efficiency.
The SCL also suggest that a disruption claim should be distinct from a prolongation claim. This is because a project can often have little (or no) critical delay but a substantial amount of non-critical delay leading to significant loss due to reduced productivity. Therefore, it makes sense that a clear distinction should be made between prolongation claims (involving costs and losses incurred as a result of delays to the activity in question or the works as a whole which have led to critical delay to the scheduled date for completion) and disruption claims (which involve those additional costs and losses incurred during extended or disrupted periods of activities usually without any effect on the scheduled date for completion).
FEATURES OF DISRUPTION
A competent contractor will have programmes that are calculated on resources to work at industry or company standard rates of output, as applicable to each of the planned activities. If appropriate these standard rates of output are reduced, or increased, to accord with the expected efficiency level accounting for the site location, conditions, congestion, complexity, quality, size of project, continuity, weather, available work fronts, access and egress, storage, site facilities and attendances etc. that are specific to that particular project.
Given the above and by following the SCL definition that ‘disruption’ is a disturbance, interruption or hindrance to the regular progress of the works, resulting in a loss of, or reduction in, productivity it can be concluded that the feature of disruption is that the actual labour efficiency is lower to that which was expected or planned.
Disruption to the regular progress of the works results in the as-built labour man-hours expended, being in excess of what was planned and what was budgeted for and causes losses. When this occurs it is often the case that claims are advanced in order to seek recovery of these losses.
CAUSES OF DISRUPTION
Disruption can be caused by a variety of events and matters. Common examples include, but are in no way limited to; change orders, variations, instructions, late information, late approvals, inclement weather, out of sequence working, excessive overtime working, interface works with others, piecemeal access, stacking of trades, abortive works, acceleration, mitigation, new and additional imposed obligations, etc.
It is highly likely that these disruptive events and matters can occur at the same time, making it notoriously difficult to distinguish the effect of each of them to determine how much disruption was caused by each of these events and matters. This makes it difficult to establish causal linkages. Accordingly, this often leads to claims being more global in nature. Therefore, it is common that loss of productivity cannot be proven purely by reference to records, schedules and other documentation, which will likely increase the reliance witness statements, theoretical analysis and the opinion of expert witnesses.
ENTITLEMENT
Entitlement arising from disruption caused by the employing party are dependent on particular contract conditions. However typically entitlement for recovery of disruption can be found in:
- Express provisions for recovery of loss and expense which can provide compensation for disruption.
- Breach of Contract which would involve recovery via damages for the employing party’s breach of express terms (e.g. late provision of drawings, late access to site, and employing party’s breach of Implied terms e.g. not to prevent or hinder the contractor).
- Variation /change provisions found in some contracts may allow recovery (e.g. valuation of variations at fair allowance for changes in conditions, and adjustment for knock on effects of variations on other work). However, this is contingent on the events falling under the definition of Variation under the contract.
BURDEN OF PROOF
Under all bases of entitlement, the claiming party must prove that there has been an act of prevention or impedance (and the like) by the employing party that entitles the claimant to a contract sum adjustment. The claiming party needs to demonstrate causal linkage between such event(s) and the loss of productivity and additional expenditure. The claimant must prove (on the balance of probabilities) the cost of loss of productivity arising from disruption; or if allowable via a valuation in accordance with terms of contract.
CASUAL LINK
Casual linkages are often difficult to establish, but are critical to a successful disruption claim. The claiming party is only entitled to compensation to the extent that the employing party causes disruption. The claiming party’s own poor management and inefficiencies may contribute to loss of productivity, and this is a common line of defence against disruption claims. Additionally, the loss of productivity arising from disruption may be concurrent with other matters (e.g. acceleration by the contractor, which is subject to different principles of entitlement).
A recurring issue in disruption claims is a lack of sufficient records to demonstrate actual effect and costs caused by disruption events. Consequently, claiming party’s often attempt to claim the difference between ‘as planned’ and ‘actual’ man hour productivity. However, the claiming party must demonstrate disruption to actual progress and therefore more granular theoretical analysis linked to individual disruption events may be necessary that provide some more detailed understanding and demonstration (on the balance of probabilities) as to why the production losses are what they are (or enable a fair valuation to be applied where the contract conditions allow).
METHOD OF ASSESSMENT
There are many different methods employed in the analysis and presentation of disruption claims. The graphic below outlines each method with the ‘total cost’ method being the least effective and the ‘measured mile’ being the most effective.
CONCLUSION
In our experience, disruption claims can be significant and because of the numbers involved difficult to negotiate, especially where contemporaneous site records are poor.
If caused by the employing party, it may give rise to a right to compensation either under the contract or as a breach of contract.
The starting point for the preparation of any claim is the contract and the relevant clauses. The choice of quantification method will depend on the availability, accuracy, and quality of the contemporaneous site records. To increase the chances of success for a disruption claim, it must include clear identification of the causes of disruption, clearly particularised and evidenced, and the causal linkages demonstrated by record; or, where detailed records are not available, by a quantified and reasoned assessment. Whatever method is chosen, the claimant must be aware that assessments can be subjective.
Information Sheet Author – Liam Forry
Liam Forry is the owner and managing director of Forry Commercial (FCL). A member of the Chartered Institute of Arbitrators, a Quantity Survey, Construction Claims Specialist and Dispute Resolution Consultant with UK and international experience.
FCL can assist your business in dealing with the impact and preparation of disruption on projects you are delivering. We can employ methods aimed at avoiding disputes, reaching amicable settlements, and safeguarding your project delivery. For more information, please feel free to contact us at hello@forry.co.uk, and we will be happy to arrange a meeting to discuss your concerns and advise on actions to achieve the best outcome.