The most common reason why a contractor is unable to obtain an extension of time or recover additional costs for delays and disruptions to a project is that there is insufficient evidence to support its claim. While it may be possible to support a claim with evidence created after the event, such as witness statements and retrospective analysis, these will be of little help if they are not based on contemporaneous records of what happened at a particular time.
It is therefore vitally important to establishing a proper system on site for keeping records of events and their effects as they occur. But what kind of records do you need to keep?
The type of records that need to be kept will be a combination of records that relate to specific problems as they occur, and those records that should be regularly kept on all projects.
Check the contract
Some contracts contain provisions for keeping specific records when particular problems arise. The FIDIC 1999 model forms provide that contemporary records should be kept for all claims for additional time and cost: Clause 20.1 requires the Contractor to give the Engineer1 notice of all claims and keep "such contemporary records as may be necessary to substantiate any claim". The Engineer may monitor the record keeping, may ask for specific records to be kept, and is entitled to inspect, or ask for copies, of the relevant documents. The Contractor has to issue a "fully detailed" claim which includes "full supporting particulars of the basis of the claim and of extensions of time and/or additional payment claimed". If the event or circumstances giving rise to the claim has a continuing effect then the Contractor has to issue interim claims on a monthly basis together with further particulars.
A well administered contract under FIDIC 1999 model form should therefore result in all contemporary records being available to support the contractor's claims.
In AG Falkland Islands v Gordon Forbes, the term 'contemporary records' was held to mean "original or primary documents, or copies thereof, produced or prepared at or about the time giving rise to a claim, whether by or for the contractor or employer"2 . The emphasis is therefore on the immediacy of the documents to the event or circumstances. The documents can be letters, notices, photographs, site diaries, invoices, labour records etc, but they must be created at or around the time the problem arose and its effects were felt.
Beware of contract clauses that provide that the contractor's entitlement to an extension of time or additional cost is conditional upon the contractor keeping contemporary records. In the same case of Forbes, the court held that in the context of Clause 53 of FIDIC Red Book 4th Edition, if there were no contemporary records to support the claim then the claim would fail; the contractor was not entitled to rely on witness statements produced after the event to fill the gaps where contemporary records had not been kept.
It is worth noting that Clause 20.1 of the FIDIC 1999 standard forms contains different notice requirements than the Red Book 4th Edition, and Forbes may have been decided differently if it had been considering the new Clause 20.1 wording.
Records that should always be kept
The records that should be kept for any construction and engineering project will vary according to the type, complexity and size of the project, but generally they should include the following:
- The number of men on site, work progress and interruptions;
- Activities on site, identifying the relevant contractors/subcontractors (including other contractors engaged by the employer);
- Productivity and output, recorded against location and the relevant contractor/subcontractor;
- Operating plant and equipment: when they were delivered to and removed from site; the number of hours worked, idle or down for repair; hire charges, setting up costs and running costs;
- Information and approvals required and received;
- Instructions and orders given (written and oral);
- Test and inspections: when they took place and the results;
- Delays encountered; and
- Weather conditions.
This information can be recorded in a number of ways including: regular progress reports, progress meeting minutes, correspondence and notices, regularly updated programs, progress photographs, site diaries, labour records and invoices.
Possibly the most important of these are the monthly progress reports and meeting minutes as they are often taken to be a reliable indication of what was happening at any time during the course of a project. However, the reality is that minutes of progress meetings are often drafted some months after the meeting and the attendees have little time to review them when they are circulated. It is vital that the person who attended the meeting keeps his own notes of the discussions; when the draft minutes are circulated he should check them against his notes and, if necessary, amend the minutes to ensure that they are an accurate description of what was discussed.
In the current economic climate, contractors are looking to reduce their exposure on all current projects. Employers will be doing the same and will be taking every opportunity to refuse claims for extensions of time and additional cost. If a contractor can substantiate its claims with proper records showing its entitlement, an employer will find it much harder to dismiss the claims out of hand.
In this article we have identified a number of types of records that should be maintained on all projects. That is not to say that a contractor will not be entitled to claim an extension of time and/or additional costs if it does not have all of these records; an entitlement to bring a claim depends on the wording of the contract and the governing law. However, claims have to be proved and contractors should make it standard practice to keep proper records rather than risk claims being lost for lack of evidence.