Case Studies > Residential Development/Shopping Centre

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A high-rise mixed development of residential apartments and a shopping centre, comprising building and civil works, mechanical and electrical installations, instrumentation and control systems. The contract for the mechanical and electrical works was awarded by a private developer (the Employer) to a Consortium (the Contractor) of which our Client was the Consortium member responsible for the supply and installation of the mechanical works. The Employer retained responsibility for both the basic and detailed design and engineering of the high-rise development as well as for overall coordination and project management.

KEY FEATURES
The contract for the mechanical works was awarded on a fixed-price, lump-sum basis under the Employer’s hybrid form of FIDIC „Yellow Book“ and was subject to numerous causes of disruption, delay and additional cost and expense during the various phases of procurement and construction. Primarily, this was resultant from a number of key Employer initiated design changes and the ripple effect through several interfaces with other executing contractors. Serious delays occurred to the Contract date for completion as a result thereof and which subsequently exposed our Client to the potential liability for damages for delay. The Employer had furthermore failed to recognise our Clients entitlement to the reimbursement of bona-fide contract variations to the works instigated by its agent responsible for the basic and detailed design, nor take into account the impact such contract variations might have upon the contract date for completion.

CONSULTANCY SERVICES - Claims Management (Prosecution / Defence)
Lancaster House International Consulting were requested to undertake a fully detailed review and analysis of the historical events and circumstances which had given rise to the contract prolongation and cost overruns. Our terms of reference included the establishment of the Employer’s liability (if and where possible), for the various causal events of disruption an delays, sufficient to demonstrate an entitlement to an extension of time to the contract date for completion for or beyond the overall period of delay, thus removing any liability for liquidated damages for delay, sufficient also to establish entitlement to financial compensation for all prolongation costs incurred as well as any other identifiable items of loss and expense incurred. Our Client also requested that we completely review and, as necessary, redraft the numerous contract variation orders notices submitted by them to the Employer

Due to the complexity of the contract, the substantial potential liability and timeous urgency in order to preserve our Client’s rights and avoid the impending deduction of damages, we immediately mobilized a team of bilingual (English / German) claims consultants experienced in this type of project. We commenced with a complete review of the project historical record, the entire set of contract documents, (not only those relating to our Client’s scope of works), as well as all correspondence between the Employer and other Consortium members. We conducted several interviews with key personnel in the Client organization and analyzed a breakdown of all variations to the project works, (both those recognized as such and those not), and thereafter prepared a prognosis of the net resultant effect upon our Client’s contract programme for completion of its scope of works.

We subsequently concluded that the Employer was solely and entirely responsible for the critical delays to the mechanical works contract and prepared a fully substantiated and detailed statement of claim for an extension to the date for completion of the mechanical works. Furthermore, we redrafted the contract variation order requests previously prepared by our Clients while at the same time prepared a considerable number of new variation order requests which had previously not been identified. Our Client discovered that much of the additional costs, loss and expense which it had suffered could be recovered not only through the demonstration of prolongation costs, but also through the proper application of the contract provisions relating to variations of the works and the correct means for their evaluation and measurement.

Our Client was subsequently awarded the requisite extension of time, avoided the application of damages for delay in entirety and received reimbursement in full for the additional cost and expense incurred as a result of the extended contract period. After conclusion of these claims negotiations, we were also successful in obtaining full reimbursement of the revised submission of the contract variations to the works. The awarded extension of time together with the level of financial recovery achieved meant we were able to radically turn around the while commercial basis of our Clients project.