Seeing the wood for the trees

DIGEST | ISSUE 20
Seeing
the wood for
the trees
Nicola Huxtable, Operations Director, Driver Trett, Bristol

“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.
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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.
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.
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.
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.
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…
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