Construction projects are normally priced against a set of conditions that include certain risks and exclude others.
Some risks are typically passed to the contractor, for example, since the pandemic, Brexit and other events that have impacted inflation there have been some significant cost increases and contractors have had to absorb these.
However, where the risk sits with the employer, they undertake to compensate the contractor on the contractor suffering a risk item. An example may be where a contractor allows a cost per ton for steel and that cost increases for the contractor, therefore, the employer will be required to compensate the contractor for the increase in costs. A more complex situation can arise if ground investigations defined the ground conditions as clay when in fact, they were a running sand. In this instance, the contractor would have costed for excavating in clay and now must work in running sand. It would not make sense to request that the contractor prices for whatever conditions they might encounter as that would result in a very high tender price. Hence the need to compensate for the increased costs incurred. The obligation is to compensate the contractor for the additional element, no more and no less.
It is important to identify the risks and claim where there are additional costs incurred. This is typically done through loss and expense claims and other forms of claims.
Loss and expense claims arise in almost every construction project that is subject to delays and or disruption. Such claims are caused by delays and/or disruption, inflation, acceleration, and variations in the work or sequence of the work. All to often, employers assume that the tender figure is not subject to any adjustment without full consideration of the provisions of the contract.
Each claim is unique and while specific issues can be grouped together the actual entitlement can be very different under different forms of contracts. It is the contract that gives entitlement to the claim; hence it is important to find the relevant provision upon which to found the claim. Without this, the claim, however well presented, will fail.
Contracts set out what it is that can be claimed and what cannot be claimed. This is based on the apportionment of risk.