Documenting the Effects of Disruptions Should Not Be Overlooked in Construction Projects
Authors: Matti Tyynysniemi and Martin Rifall
Construction disputes often revolve around the question of which party is responsible for delays or increased costs during the project. To be in a position to effectively argue its case in litigation/arbitration (and, ideally, to avoid such proceedings), a contractor or other supplier needs to be able to establish:
that it has made timely notifications of any disruptions, hindrances, or variations;
the disruptions or similar events that it is not liable for; and
the effects that the disruptions have had on the works.
Project personnel should be aware of the importance of making timely notifications when potential problems arise. This is usually the case, but not always. Problems in construction tend to materialise gradually, and initially, project personnel often have the (usually correct) assumption that things will work out, and they are either focused on solving the actual technical problems for the client, or not eager to sour the mood with formal complaints. However, in the cases where the snowball keeps going, by the time an eventual dispute seems more realistic, a problematic gap in early documents may have developed.
Proving the existence of disruptions or hindrances is also easier when documentation is gathered with this in mind as events develop. However, this is usually not the main problem, as events affecting the progress of the works tend to be tangible enough that some proof can be found later if needed. The bigger issue, often overlooked, is how to prove the actual effect the disruptions have had. In this regard, timely efforts to document the effects can be significant later.
It is often the case that disruptions accumulate gradually. Notice might initially be served, but if the matter is left to be resolved later and the details are not worked out at the outset, it can prove difficult to assess and show later what effect, for instance, the client's delay in making a decision on how to proceed with a variation had on the progress of the works, given everything that has happened in between. Claims for lost productivity are also quite dependent on the availability of adequate records to facilitate expert reports.
It can sometimes happen that various hindrances do not seem significant enough to warrant detailed attention during the works, but later in the project the contractor runs into problems of its own, at which point any earlier events potentially explaining part of the delay could suddenly be of increased importance. However, there can be both practical difficulties and credibility issues in relying on earlier events if not much attention has been paid to them at the time and if available documentation is lacking.
What is the correct approach, then? Extensive record keeping in case of hypothetical future disputes may not be the most cost-efficient policy to adopt in every project. However, here are some good practices to follow:
Once disruptions and hindrances occur, their effects should be recorded on a daily basis. If this is done day to day, you will immediately become aware of what kind of information of the effects you might lack, and acquiring that information at the time of the occurrence will be significantly easier than perhaps a few years later during an arbitration.
It is advisable to keep a diary on disturbances, where negative implications on the project are recorded on a daily basis. The diary should ideally be kept in all projects and from the very outset, regardless of whether any disturbances are encountered. The cost and time spent on a diary on disturbances are generally minimal if done on a daily basis, but the evidentiary value of the diary in case of a dispute may prove significant.
Up-to-date records of progress and regularly updated programmes (schedules) are key documents if delay analyses and critical path assessments need to be done later. From a contractor's perspective, the client shall be informed on a regular basis of any changes made to the schedules of the project.
The cost structure of the project should be itemised in a way that makes it possible to separately analyse and track the productivity and extra costs related to particular parts of the works. Involving the company's financial department at an early stage has proven effective for keeping track of, and separating costs relating to, disturbances and disruptions.
In cases where the disturbances are caused by e.g. technical or geological issues, it is advisable to engage independent experts already during construction. Experts generally have better possibilities to investigate and identify issues when the works are still being performed instead of detecting the issues only after the works have been finalised. Engaging experts already during construction may also facilitate discussions with the client to find an amicable solution to the issues at hand.
Matti Tyynysniemi
matti.tyynysniemi@hannessnellman.com
Martin Rifall
martin.rifall@hannessnellman.com