Case Studies > Military Airport

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A military airport comprising various building and civil engineering earthworks relative to the runways, taxiways and aprons, mechanical and electrical engineering installations, runway lighting, perimeter fencing, power generation and power distribution, operations and control systems. The contract was awarded by a local government defence agency (the Employer), to a consortium (the Contractor) of which our Client was the consortium leader and responsible for the entire mechanical and electrical engineering installations with a local consortium partner responsible for the entire building and civil engineering works.

KEY FEATURES
The contract was awarded on a fixed-price, lump-sum, turnkey basis under the Employer’s hybrid form of design and build contract. Our Client had submitted a series of claims of considerable value to the Employer as a result of numerous causes of disruption, delay, additional costs, loss and expense throughout the execution of the contract period, all of which it alleged had been primarily caused by major design changes instructed and requested by the Client. These claims had been rejected in entirety by the Employer’s agent in view of our Client’s alleged failure to demonstrate any contractual entitlement and therefore any liability on the part of the Employer. In view of the rejection, our Client faced substantial losses (= $ 150million) on the project with serious internal repercussions.

CONSULTANCY SERVICES - Claims Management (Prosecution)
Our Client requested that we undertake an initial review of its claims to ascertain whether their submissions had any contractual validity, or whether the Employer’s Agent had been correct in its judgment by rejecting them. (The reasons given by the Agent were quite specific in a good many cases).

As there appeared to be several specific issues of a complex technical nature, we put together a team of claims specialists with airport construction experience who worked for several months in our Client’s head and field offices. Their first task was to review all tender and contract documents, reports, correspondence, instructions, requests, programme revisions, drawings and specifications, together with an analysis of the schedule of payments and prepare a resource based breakdown of the contract price relative to the agreed contract programme. The second task was to review the claims submitted to the Employer’s agent. Following these detailed investigations, Lancaster House International Consulting tabled its preliminary findings in an Executive Summary Report which was then discussed with the Client’s senior management. Our findings concluded that the although most of the heads of claim as submitted appeared to have a contractual basis from the facts as far as we had been able to substantiate them, the manner in which the claims had been researched, analyzed and prepared did not comply with the contract provisions, nor did they actually demonstrate entitlement, contractually, technically, or commercially. Our Report therefore included recommendations that the heads claims be re-drafted and re submitted to the agent appointed by the Employer to deal with such matters, for reconsideration, and eventual agreement. Our Report also recommended that further detailed analyses be undertaken to determine to what extent the entire financial loss as recorded at the expiry of the (delayed) contract completion period could be recovered, whether through additional heads of claim, reworking and identifying new contract variation and dayworks orders, together with other means of recovery, ex contractu, extra contractual, or ex gratia.

Our Client acted upon our recommendations and all the above exercises where then undertaken in a second commission to complete a process of financial recovery. During our analyses, we were able to demonstrate that most of the contract variations of omission affecting our Client’s scope of works were seriously overvalued in respect of the mechanical and electrical installations. Despite the fact that our Client had previously accepted the valuation of such V.O.’s of omission and that they had been included in amounts certified by the Agent and paid by the Employer, we were able to renegotiate their correct valuation in accordance with the contract through the application of proper measurement and valuation techniques where valid and obtain cancellation of a considerable number that should never have been V.O.’s of omissions in the first instance. We obtained the Agent’s and the Employer’s agreement on a proper interpretation of those contract provisions addressing variation, valuation and payments across a wide range of items under the draft final account and by doing so, achieved a turnaround of several tens of millions of dollars alone in respect of „other means of recovery“ . This, before we had even addressed the matter of proper contractual and other claims.

In concluding agreement of the final account, we prepared and negotiated an entirely revised raft of claims for time and money, the great majority of which the Agent accepted and certified for payment. Although the Employer was at first reluctant to accept the Agent’s recommendations, further meetings persuaded it to effect the agreements reached and reimbursement was made in full. The extent of financial recovery for our Client resulted a complete reversal of the situation and a respectable margin was made. The project was regarded within the Client’s organization as a commercial success while maintaining a cordial business relationship with the Employer for ongoing maintenance contracts and other defence works projects.