PROFESSIONAL PRACTICE I
BSR609
Construction Claim
& Payment
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Claims
Introduction
• A contractor is entitled under the
contract to be paid for work done
including where appropriate the
ascertained value of any variation
ordered.
• The primary obligation upon the
employer is to give the contractor
the sum of the money which forms
the consideration for the contract. 2
Claims
Introduction
• Payment of the monetary
consideration for the contractor’s
performance is the employer’s
principle obligation.
• ‘There must be a cash-flow in the
building trade. It is the very
lifeblood of the enterprise’.
(Dawnays Ltd v FG Minter Ltd & Ors
1971). 3
Claims
Definition
• Claim – Amount to be paid for works
executed and total payment
must/should have resemblance to the
original price.
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Claims
Definition
• Contractual Claim – Specific
provisions in the contract that
compensates the contractor for
various losses suffered if the
project is prolonged or disrupted
by certain events.
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Claims
Type of Claim:
MAIN CATEGORIES
✔ CONTRACTUAL
✔ EXTRA-CONTRACTUAL OR EX-CONTRACTUAL
OTHER CATEGORIES:-
✔ QUASI - CONTRACTUAL
✔ EX - GRATIA
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1. Contractual Claim
Those claims which arise out of the express
provisions of the contract.
Can be related to:
⚫ Claims for extra works: variation order,
⚫ EOT, (extension of time)
⚫ price flactuation
(labour,material,plant,taxes)
⚫ Claims arising from the provisions of the
contract for the contractor to be
indemnified by the employer for the “direct
loss and / or expense” which he suffers as a
result of certain events. eg: delay by NS or
NSC
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2. Ex - Contractual Claim
⚫ Fall outside the term of the contract.
⚫ Claims for damages for breach of contract
i.e. common law claims.
⚫ Stem from allegations that the express or
implied terms of the contract were broken by
the employer or his agent i.e. contract
administrator [under his control].
⚫ Eg: employer cause delay, architect’s
negligent
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2. Ex - Contractual Claim
⚫ Pursued before the court and can result in
a “declaration” or “injunction” either
mandatory / prohibitive or;
⚫ Order for specific performance for
monetary claims.
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3. Quasi – Contractual
⚫ An act of event from which, though not a
consensual contract, an obligation arises as
if from a contract.
⚫ A quasi-contract, also an implied-in-law
contract.
⚫ It is a legal substitute for a contract.
⚫ A quasi-contract is a contract that should
have been formed, even though in actuality
it was not.
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Quasi – Contractual
⚫ It is used when a court wishes to create an
obligation upon a non-contracting party to
avoid injustice.
⚫ Quantum meruit.
-latin word means ”the amount he deserves”
-“what the job is worth”
- A claim for service rendered without
written contract. For small jobs or verbal
instructions. Can recover value for labour and
material to prevent “unjust enrichment”. The
amount is determined by state’s common law
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4. Ex - Gratia
⚫ Payment is one that is given as a favour
or gift not because it is legally
necessary.
⚫ Ex gratia is a latin word('by favour') and
is most often used in a legal context.
⚫ When something has been done ex gratia, it
has been done voluntarily, out of kindness
or grace.
⚫ Payment made without the recognizing any
liability or legal obligation.
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Ex - Gratia
⚫ For instance payment made to an
individual in respect of loss or damage
to personal property in a situation
where the government accepts no
liability for the loss or damage but is
willing to make some reimbursement
without accepting liability.
⚫ Example 2: V.O. additional work on
underpriced items.
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Claim Process
1. The claim inception stage
2. The notification stage
3. The claim preparation stage
4. The claim submission
5. The claim assessment
6. The claim resolution
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Claim Process
1. The claim inception stage
⚫ Study the characteristic of
the claim.
⚫ Information about claim
procedures set-out by
client
⚫ Type of contract
⚫ Claim Format
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Claim Process
2. The notification stage
⚫ Notify the client that you want to
submit your claim
⚫ Contractor may sent letter for joint
site evaluation.
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Claim Process
3. The claim preparation stage
Review & confirmation of Establishment of
documents prepared Claim team
Drafting the Claim The Claim Gathering of Facts
Submission Preparation and Documents
Establishment of Analysis of Material
claim basis Gathered
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Claim Process
4. The submission stage
a) Introduction
b) Description of contract
c) Factual Analysis
d) Contract provision
e) Legal basis of claim
f) Computation
g) Summary
h) Appendices
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Claim Process
5. The claim assessment stage
a) Joint site evaluation with claim
team.
b) Review of analysis of claim
c) Initiation & counter claim
d) Recommendation on claim status
e) Certification.
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Claim Process
6. The claim resolution stage
a) Outright of rejection of claim
b) Preparation of counter claim
c) Settlement of claim
d) Resort to Arbitration / Litigation
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Claim structure
Structure of Claim
Progress claim/payment
⚫ Preliminaries
⚫ Building Works
⚫ Mechanical & Electrical Works
⚫ External Works
⚫ Infrastructure Works (if any)
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Claim
1. Preliminaries
Lump sum (fix price)
⚫ Provisional sum
⚫ Prime cost sum
Certification for preliminaries
items subject to client formula.
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Claim
1. Preliminaries
⚫ Provisional sum,
⚫
⚫ A provisional sum is an allowance that is inserted in the tender
documents for a specific work that is not yet defined in enough
detail for tenderers to price.
⚫ Example : when work is required below an existing structure,
where the under ground conditions cannot be determined until
the existing structure is demolished.
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Claim
⚫ Provisional sums can be 'defined' or 'undefined':
⚫ Defined provisional sums are considered to have been accounted for within
the contractor 's price and programme . In effect the contractor is taking the risk
that their estimate will be sufficient.
⚫ Undefined provisional sums are not accounted for in the contractor 's price
and programme . This means that the client is taking the risk for the works and
the contractor may be entitled to an extension of time and additional payments.
⚫ Provisional sums place either the contractor or the client at risk of
unexpected costs or delays. Agreeing the cost of such work or extensions of
time that might be claimed can result in tension between the contractor
and client . For this reason, they should only be used as a last resort, they should
not be an easy fall-back position for consultants (who are not bearing any of
the risk) when designs are incomplete or information is difficult to obtain.
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Claim
1. Preliminaries
⚫ Prime cost sum (PC sum)
PC sums are allowances for the supply
of work or materials to be provided by
a NSC by the client.
PC sums might include items that have
already been purchased by the client,
such as equipment, or a specific
installation by a company with a
strong existing relationship with
a client organisation.
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Claim
1. Preliminaries
⚫ Insurances, Levy
⚫ Temporary facilities (site office,
toilet, canteen, etc)
⚫ Hoarding
⚫ Project signboard
⚫ Site vehicle
⚫ As-built drawing
⚫ Testing
⚫ Etc
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Claim
2. Building Works
a) Piling Works
b) Work Below Lowest Floor Level
⚫ Pile cap
⚫ Pad footing
⚫ Ground Beam
⚫ Ground Floor Slab
⚫ Apron
⚫ Perimeter Drain
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Claim
2. Building Works (Cont’d)
c) Superstructure
⚫ Frame
⚫ Column
⚫ Beam
⚫ Suspended Beam (roof / floor beam)
d) Roof
⚫ Roof trusses
⚫ Roof Covering
⚫ Gutter & RWDP
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Claim
2. Building Works (Cont’d)
e) Upper Floor
f) Staircase
g) External Wall
h) Door & Windows
i) Internal Wall & Partition
j) Finishes
⚫ Wall
⚫ Floor
⚫ Ceiling
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Claim
2. Building Works (Cont’d)
k) Sanitary Fittings
l) Cold water plumbing
m) Waste pipe
3. Mechanical & Electrical Works
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Claim
4. External Works
⚫ Earthworks
⚫ Roadwork
⚫ Water Reticulation
⚫ Sewerage
⚫ Drainage
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Claim
5. Material On Site
⚫ Contractor entitle to claim 90%
unfixed material on site.
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PWD / JKR 203A
ISSUANCE OF
INTERIM
VALUATION CERTIFICATE PAYMENT
14 DAYS 30 DAYS
MAXIMUM 44 DAYS
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PAM
ISSUANCE OF
INTERIM
VALUATION CERTIFICATE PAYMENT
? DAYS (Reasonable
14 DAYS
days?)
MAXIMUM ? DAYS
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Final Claim & Final Account
It is the process of calculating and
agreeing on any adjustments to
the contract sum.
Generally this payment will be made at
the end of the defects liability
period providing that all patent
defects have been rectified.
Set out in the final certificate (or
final statement.)
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Final Claim & Final Account
The contract sum may need to be adjusted
for a number of reasons, including:
a) Original Contract Sum
b) Variation Order
c) All claim entitle by contractor
d) Re-measurement all provisional
quantities at site
e) Rationalize Prime Cost Sum
f) Rationalize Provisional Sum
g) Rationalize Fluctuation Price
h) Others i.e: Retention sum if any
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Final Claim & Final Account
Deduction:
a) Previous amount paid
b) Amount already paid to NSC (nom. [Link]) & NS
([Link])
c) Any deduction under term & condition of contract :
• Remedies for non-completion
• Any payment by client
• Cost for rectification work (DLP)
• Insurance’s premium
• Payments to nominated sub-contractors or nominated
suppliers.
• Statutory fees.
• Payments relating to the opening-up and testing of the
works.
• Liquidated and ascertained damages.
• Contra claims imposed as a result of the contractor's
operations (such as a third-party claim resulting
from contractor negligence or contractual
• breach, for example, flooding a neighbour's property).
• The release of any remaining retention.
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Final Payment
Completion Final Payment
Defect Liability Period
Interim Payment 3 months
(12 mths )
Certificate of Certificate Final
Practical of Making Certificate
Completion Good
Defects
(CPC)
Final Claim & Final Account
Agreeing the final account can be a complicated,
time consuming and adversarial process, often
resulting in disputes:
▪ The process can be made easier if adjustments
to the contract sum are agreed as the project
progresses rather than saving them up for the
end.
▪ It is helpful if the client's QS and
the contractor's QS work together on drafts of
the final account before agreement is sought.
▪ Agreement of the final account will allow
the contract administrator to issue the final
certificate.
▪ Where proceedings have begun in relation to
a dispute, the conclusiveness of the final
certificate is subject to the findings of
those proceedings
▪ END
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THANK YOU
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