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Coping with disruption

AGENDA - Ask contractors to name the most common cause of disruption to jobs and client interference is likely to be top of the list. Domenic Donatantonio asks: Are we about to see a rash of disruption claims on Olympic 2012 projects?

THE SOCIETY of Construction Law's definition of disruption is the 'disturbance, hindrance or interruption to a contractor's normal working methods, resulting in lower efficiency'.

Generally, it can be seen as a loss of productivity, a proven reduction in the planned output of construction resources through client interference or mismanagement. Examples might be: a contractor not being allowed access to the site, logistical problems or a change in client supervision.

But blaming bad weather or staff coming into work with hangovers would get little sympathy for a disruption claim.

Disruption will inevitably play a key part in any legal battles stemming from construction for the London 2012 Olympics, as it did in the row that broke out over the Wembley stadium project.

Tim Tapper, director of consulting and legal support at international construction and property consultancy Cyril Sweett, deals with around 12 disruption cases a year. He said: 'Disruption is not the same thing as delay on a job. A contractor would have to show where it has achieved its best productivity against an area where it was disrupted.

'It may be that the initial forecast of the job was wrong. That doesn't matter. You're comparing what was achieved on parts of the job under the circumstances.

'I'm absolutely certain that it has played some part in the Wembley negotiations.'

Firms should also beware the ripple effect, whereby a hold-up on one job impacts on another. Cyril Sweett associate David Goodman gives the example of someone having their house decorated. He said: 'If you hire an electrician and he can't do his job, it might impact on the guy plastering your walls.'

Neal Morris, a partner at law firm Pinsent Masons - Wembley National Stadium Ltd's legal firm - believes disruption in some form or other has been a part of every case he has worked on.

He said: 'It has been there since Noah built the Ark but it has come more to prominence in recent years.

Disruption, like anything else in law, is about proving cause and effect.'

Mr Morris believes that the London Olympic Games could see a spate of disruption claims.

He said: 'I can definitely see it happening at the Olympics. In that instance, we will have what lawyers call a 'drop-dead end date', meaning you can't delay handover of the job for a couple of weeks.

'With the Olympics, we might see cases in which firms have had to accelerate production. This could mean they have had to work in a disrupted manner to get the job done in time.

'If this happens, a contractor might have what we call 'thickened preliminary costs'. This could be paying workers overtime, or having to use four workmen instead of two, or six managers instead of three. Naturally, when a job is accelerated , it is done much less eff iciently.'

So what can contractors do if they see a potential claim looming?

Mr Morris said: 'There's an old saying that there are three solutions for a disruption claim - records, records, records.

'It's not about output during the construction process. When a firm has an instruction to stop work, it needs a record of how long it has stopped work and a record of what it could have been getting on with.'

Clients and contractors squabbling over delay on a job has been well documented. But in the UK there has been relatively little case law specifically related to disruption.

A dispute in 1999 between How Engineering and Linder Ceilings, Floors and Partitions was one of the first test cases to show the affects of disruption, and the so-called 'measured mile' technique.

This method, recommended by the Society of Construction Law, compares the best productivity on site with a disputed area of work which has claimed to have suffered disruption.

It is based on fact and accepted by courts, but it is relatively expensive and time-consuming and requires a significant amount of information.

In this case, Linder was able to show that the productivity achieved installing ceilings within a disrupted element of a job was much lower than that achieved within the non-disrupted element of the works.

It was also able to prove that the productivity of the non-disrupted element of the installation works was as required for the tender allowance.

Presiding judge Mr Justice Dyson said: 'Any loss and expense claim is based on additional expenditure caused by the delay or the disruption complained of - additional, that is to say, to expenditure had the delay or disruption not occurred.

'Loss and expense calculations may be straightforward in simple situations where additional expenditure can be discretely recorded and attributed to a particular event and when safe assumptions can be made as to the situation had the event not occurred.'

The USA has led the field in case law and research on disruption. The Mechanical Contractors Association of America and the National Electrical Contractors Associations have produced guides used to compare the difference between baseline work rates and actual productivity achieved, the difference being the 'loss' through disruption.

But this method is not a definitive way to solve a disruption claim. If the UK industry were to adopt this process, construction firms could find themselves at a disadvantage if production rates were assessed conservatively.

Contractors can also use time and motion studies, the physical observation of methods and output on site to establish a baseline productivity figure. They can then make a simple loss calculation by subtracting the baseline productivity from actual productivity.

Yet this will involve a large amount of observation.

Mr Tapper said: 'Time and motion studies could mean literally having someone standing on site with a stopwatch. But that is not always practical.

'I would recommend the monitoring of projects on a weekly basis.'

Pinsent Masons' Mr Morris believes UK law still has a long way to go to improve building firms' chances on a disruption claim.

He said: 'It's a grey area that certainly needs to be tightened up. There is no clear case for valuing acceleration on a job and the resultant disruption claims.

'There is normally an agreement of the base costs of doing variations, and prolongation costs, but disruption is a difficult area to resolve.

'It's more a point for a quantity surveyor to prove, rather than having recourse to binding legal practices.'

And he warned that construction companies were not doing enough to help their cases.

He said: 'Most firms are not providing specific enough details. There needs to be a specific breakdown of plant and staff resources.'

So the message for contractors seems to be: it's time to monitor every inch of the operation.

Can you claim?

Common causes of disruption:

errors and omissions n partial possession (not being allowed on site) n logistics (out of sequence working) n lack of management supervision n 'ripple effect' n poor morale To prove disruption a contractor must show:

there are one or more events causing disruption n the client was responsible for disruption n the contractor can identify the actual loss resulting from the employer's breach Techniques available to prove disruption:

'measured mile' n expert opinion n time and motion studies Solutions:

need to identify the scale of the problem n involve interested parties n inform the paying party Who might get involved in a settlement:

project manager n contract administrator n employer n adjudicator n arbitrator/judge