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24/10/23

Introduction to disruption claims

Introduction to disruption claims

What is disruption on a construction project?

Disruption is defined by the second edition of the Society of Construction Law, Delay and Disruption Protocol (the “SCL Protocol”) as: “disturbance, hindrance or interruption to a Contractor’s normal working methods, resulting in lower productivity or efficiency."1 For quantum, the crucial point of a disruption claim are the additional costs incurred, over and above the planned resources, due to a loss of productivity caused by unanticipated interruptions to the planned work progress. The consequence is a reduced rate of work which leads to an increase in direct hours spent on the relevant disrupted work. Examples of disruption include site access problems, changes in the work sequence, design changes, crowding of trades, fragmented work gangs, overtime, rework, labour availability and poor morale.


Author: Natasha Fortune, Senior Consultant, Paris, Driver Trett France


Disruption vs delay

As Hudson’s Building and Engineering Construction Contracts states: “The distinction between delay and disruption is important, but rarely articulated, and is to an extent a matter of definition.  Delay is usually used to mean a delay to the completion date, which presupposes that the activity which was delayed was on the critical path. Disruption to progress may or may not cause a delay to overall completion, depending on whether the activity delayed is on the critical path as explained above, but will result in additional cost where labour or plant is underutilised as a consequence of the event.”2 Although the two common claims frequently overlap, only critical events are relevant for prolongation costs and may lead to compensation. Disruption claims are compensation for less than expected productivity of labour and/or equipment.  

Disruption can be for critical, or more often, noncritical events. Therefore, winning an extension of time claim may not result in the recovery of losses associated with the disruption on site. However, the disruption rather than critical delay has often caused much of the losses suffered.

Comply with contract notification

Complying with contract notification may be stating the obvious but giving ‘notice’ is the prerequisite to bringing any claim.3 Failure to comply with your contract notice provisions within stipulated timescales can be fatal and can result in the failure of the disruption claim in its entirety.4

Disruption claims - how to succeed

For a disruption claim to be successful, the three elements of the ‘common sense‘ approach need to be proven:5 

  1. Events occurred which entitle the claiming party to loss and expense;
  2. That those events caused disruption to activities;
  3. That the disrupted activities caused loss and/or expense to be incurred. 

Establishing the event and causation 

Disruption claims are arguably harder to detect, prove and measure than other financial claims. Loss of productivity is often not identified until after it has occurred, and determining which work element(s) and trade(s) are suffering losses due to disruption depends on the quality of records to explain why those losses have occurred. By interviewing relevant personnel on site, the contractor often identifies the type of events that have occurred and the prospect of a successful claim. However, to satisfy cause and effect, it is necessary to analyse factual, contemporaneous project records such as project correspondence, progress records, site diaries, allocation of timesheets and meeting minutes. The better the records, the greater chance of being successful. It is no secret that a lack of records and reporting is unhelpful.6 

The better the records, the greater the chance is of being successful, and contractors should always take account of the quote of Max Abrahamson in his book, 'Engineering Law and the ICE Contract':

“A party to a dispute, particularly if there is an arbitration, will learn three lessons (often too late): the importance of records, the importance of records and the importance of records.”

Measuring disruption

Once the events in question have been identified as causing disruption, and a loss of productivity, the next step is to value the disruption. The SCL protocol provides two categories: productivity-based methods, and cost-based methods.

Productivity-based methods 

Cost-based methods

1. Project specific studies
a. Measured mile analysis
b. Earned value analysis
c. Programme analysis
d. Work or trade sampling
e. System dynamics modelling 

1.  Estimated v incurred labour

2. Project comparison studies 

2. Estimated v used cost

3. Industry studies

 

 

This introductory article will only cover the preferred productivity-based method, the “measured mile analysis."7 This method works best on linear projects such as roads, rail and/or where there is repetitive work, such as cable laying.

A measured mile analysis looks at work productivity levels during the non-disrupted performance period, establishing the ‘baseline’ productivity ratio. Then, the baseline productivity ratio is compared against the claim-impacted performance period. The difference between the impacted and unimpacted ratio is the lost productivity. However, this assumes that the contractor can find an undisrupted period to use as a comparison or can prove it could achieve the productivity rates in the tender based on contemporary project records.  What not to do is advance a disruption claim on a ‘total cost basis’. Measuring loss by comparing resources planned with resources consumed, making no effort to prove causation, or to take into account other factors, is unlikely to succeed.

This is because many causes can result in lower productivity which are unrelated to the claimed basis for disruption, including inadequate tender/tender sufficiency, poor planning, and reworks due to defects, as well as internal issues such as learning curves and staff turnover.  

Practical tips

Although all the methods listed in the SCL Protocol are acceptable, as a rule, the easier the method for proving disruption, the least likely it will succeed.8 Therefore, the most reliable analysis is methods which rely on contemporaneous information drawn from the specific project in question.

The type of records needed are generally the same as the records required for delay analysis:

  • Tender documentation: the process and assumptions should be consistent with the tender information, for example, the location of material deliveries, size and capacity of the plant, any restrictions on sequencing etc.
  • Contract notices and other contractual correspondence.
  • Project programme: Include start and finish dates for each sub-contract activity and location to determine when and where activities were planned.
  • Dated, time-stamped and catalogued progress photographs, including locations: To illustrate what actually happened, where and when.
  • Substantiation of costs: Company database for costs incurred, paid and allocated to the project, invoices, and other payment records.
  • Comprehensive site diary and other progress reports documenting information such as factors affecting work progress, key dates such as commencement of activities and progress of each activity, weather, labour, resources and materials deliveries.
  • Minutes of meetings. The contractor should keep note of the following:
    - Intermittent working and reasons
    - Instructions, variation/compensation events, design or specification changes.
    - Access issues, obstructions, or orders to stop work in an area. Include a description of the progress at the time and when this obstruction or order to stop was removed.

This article introduced disruption to a construction project. As a recap, this article covered the difference between disruption and delay, the importance of complying with contract notification, and how to succeed in a disruption claim. Lastly, the article provided some practical tips.


This article was written for issue 26 of the Driver Trett Digest. To view the publication, please visit: www.driver-group.com/digest-issue-26


SCL Delay and Disruption Protocol 2nd Edition: February 2017.
See Hudson's Building and Engineering Contracts, 13th edition, Chapter 6 - Section 6.15.
Disrupted? Prove It! (Fenwick Elliott, Insight Issue, May 2017).
Van Oord and another v Allseas UK Ltd [2015] EWHC 2074 (TCC).
Walter Lilly & Company Limited v (1) Giles Patrick Cyril Mackay (2) DMW Developments Limited [2012] EWHC 1773 (TCC).
Van Oord and another v Allseas UK Ltd [2015] EWHC 2074 (TCC).
SCL Delay and Disruption Protocol 2nd Edition: February 2017.
Disrupted? Prove It! (Fenwick Elliott, Insight Issue, May 2017).

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