Quantum - Loss and Expense

Birmingham

Home / Case Study 002 – Birmingham

The Assignment

To assess the amount of loss and expense due to a main contractor resulting from critical delays impacting the sectional completion dates for matters that were not its responsibility under the contract.

  • The 53 Quantum team comprised of one person.
  • Contract duration approx. four months.
  • Approx. dispute value £8m.
  • Dispute procedure. None.

Project & Background

The project comprised construction of a multi-story residential block complete with commercial buildings and shops using an amended JCT design and build contract 2016.

A dispute arose between the employer and main contractor regarding the amount of loss and expense due to the contractor.

The main contractor presented its loss and expense claim which it said resulted from the critical delays to the works using[1] contract rates.

The employer acknowledged that it had caused significant delays to the contractors' ability to complete the project by the sectional completion dates. However, it did not accept as correct the main contractor's calculation of its loss as a result.

Note

As an aside, if you are tempted to use contract rates in your claim[2] as opposed to the actual cost it will on the plus side - significantly:

  • reduce the time to produce your claim
  • reduce the cost of production.
  1. [1] For the most part.
  2. [2] Regarding loss and expense.

However, there is a substantially more significant negative consequence and risk associated with this approach, which would be remiss if we did not point this out.

If you refer a dispute to an alternative dispute resolution process (ADR), such as adjudication or arbitration, or initiate formal dispute resolution procedures through litigation, the likelihood of success using contract rates is virtually nil.

Despite the main contractor's lack of actual cost information to substantiate its claim for loss and expense, the Employer nonetheless requested that we conduct an analysis of the monetary claim based on the available data at the time.

Method Adopted

  • Task 1 Firstly, we gathered data on the main contractor's preliminaries for each section of the project for periods of excusable critical delay. Subsequently, we conducted the same exercise for its subcontractors.
  • Task 2 Secondly, we undertook a comparison of the number of resources included by the main contractor within its claim against our analysis for each item.
  • Task 3 Thirdly, we conducted a comparison of the actual resource type and cost against those items utilised within the contractor's claim.
  • Task 4 Fourthly, we assessed the contractor's other or secondary heads of claim i.e. its claim for head office overheads.
  • Task 5 Finally, we provided our analysis comparing the contractor's claim based on the information available to the Employer. Our analysis included caveats regarding contract rates and off-site overhead formulae used in head office calculations, to name just a few.

Resolution

The dispute was amicably resolved through negotiation, avoiding the need for adjudication, arbitration, or litigation. We continue to be recommended to new companies by our appointing contact on the aforementioned matter, albeit through different companies.