Good Procedure Process Compliance for Prevention Minimisation of Contractor Contractual Claims Unfounded Frivolous

1. Article ONE “BEYOND CONTRACT” SERIES OF MUSINGS -- LESSONS LEARNED FROM 27 YEARS OF
CONTRACT AND COMMERCIAL MANAGEMENT
Beyond Contract : Reliance on Instituted Procedure Maturity and
Compliance in the Prevention of Unfounded Contractual Claims Under
International EPC and Turnkey Contracts.
Andrew Ng, B Sc (Hons) Construction Management,
Change is an inevitable part of any project but some risks can be clearly identified and separated from
those which can’t or haven’t been considered as best managed by the Contractor. Against these risk
must be allocated appropriate rewards, incentives and reimbursements of resources which Contractor
have agreed to carry throughout the project duration. Unless there exceptional circumstances which
made those allocation grossly inadequate, like misrepresentation by the Employers etc., there can’t be
too many circumstances they need to be separately reimbursed, extra over the Contract sum.
However, what to do next is where the difference begins between the approach of practitioners of the
science of project control and the approach of those who are not.
As Contract and Project Contract consultant to many clients, I have never been ceased to be amazed by
the prevalence of a naive belief amongst many that reliance on some well-crafted Contract clauses
alone would somehow discourage the Contractors from engineering some dubious ground for recovery
of prelims and other costs. They have this puzzling abhorrence of what they consider redundant
procedures and processes beyond those what the professional would consider as whimsical and
impotent “motherhood statement like” write-ups. On my part I have always been requiring the
Contractors to comply procedures which require the Contractors’ provision of quantities of reasonably
verifiable records of man-hours of labour, management and plant/equipment used throughout the
project.
It may have something to do with the many failed projects(where the Clients paid millions of dollars)
and the lessons I learned there that the Contractor's honesty is not to be expected as a given or
foregone conclusion. It is rather the results of tough policing made possible through properly detailed
procedures which enable the Employers to speaking softly but always wielding a big stick to demand the
Contractor’s respect.
To enable the Employer’s Rep achieving a decent degree of policing, I have always advocated
supplementing the Contract Document and the Employer’s Requirements with the following:-
a) complete suite of procedures (or process, usually forming part of the Employer's
Requirement) stipulating the Contractor's obligation and commitment on strict compliance
with a set of prior-agreed project deliverables, their timely submission of records of
meetings, plant and labour records and returns at pre-set intervals. And if external parties
are relied upon for supervision, the contract would further prescribes obligation on the part
of the PMC;s team members and the Employers staff (where assigned) to attend to such
deliverables and records and certifying them as true reflection of their field observation of
the resources expended by the Contractor. For good measures too, the project managers
are often required to rotate these assigned resources every quarter to avoid familiarity with
any particular ground of contractors workforce or subcontractors;
b) clearly defined baselines of these performance and resources requirement, with quantities
and major categories of staff, labour, vehicles fuels and etc., which are tabulated in a
histogram spreading over the whole Contract Period including those time identified as free
floats in the Construction/Baseline programme.
2nd Aug 2011 Andrew Ng, Consultant at RDP Consultants Pty Ltd Australia

2. Article ONE “BEYOND CONTRACT” SERIES OF MUSINGS -- LESSONS LEARNED FROM 27 YEARS OF
CONTRACT AND COMMERCIAL MANAGEMENT
In nearly all tender clarification meetings before award, I would revisit each of the above and negotiate
and rationalise these deliverables, procedures, processes, quantities and rates of each and require the
Contractor to confirm their acceptance of these parameters as the baselines beyond which their claims
begin to have any chance to be considered.
In most remote mining sites or in those more compact urban site, I also advocated the use of access
control for those plant and human resources entering site, site offices as well as mess/camps as means
of registering the hours and days of work . For those sites other than above, monitoring may be done
through some RFID, which should be relatively cheap now. But I must confess that I have not as yet
worked on a project which requires the latter todate.
Even in FIDIC Silver Book type of EPC Contract I would not be fooled into a complacent belief or reliance
on high level Pricing Schedule (<200 cost breakdowns/quantities) as the means of benchmarking the
Contractor's claim entitlement. This is even if the Contractors can prove to me that it has done for
example, the same configuration of CCPP twenty or more times before.
To pinnacles of the Employer's sins would be to accept Pricing Schedule without any kind of Prelims
breakdown, especially the details of those recurring ones separated from those for mobilisation and
demobilisation.
Even in FIDIC Silver Book type of EPC Contract I would not be fooled into a complacent belief or reliance
on high level Pricing Schedule ( those with <200 cost breakdowns/quantities) as the means of
benchmarking the Contractor's claim entitlement. This is even if the Contractors can prove to me that it
has done for example, the same configuration of CCPP twenty or more times before.
But I can tell from most of the projects in the skill-constrained resource industries in Australia Asia and
Africa, the Contractors are struggling to even assemble a team with half the years of experience or half
of the complete skillsets normally required in executing such a project. One needs to either have some
superior connection with the all mighty above or an indomitable conviction of one’s infallibility, to rely
on such poorly equipped parties to execute its project.
But nothing could surpass the pinnacles of the Employer's sins than to accept Pricing Schedule without
any kind of Prelims breakdown, especially the details of those recurring ones separated from those for
mobilisation and demobilisation.
It is nothing short of inviting future claims and headaches if Employers’ beliefs and relances like those
cited above stand uncorrected. In fact most savvy contractors consider the mere absence of project
control procedures requirements and properly configured breakdown of prelims from the Contract
document as the strongest sign of inviting open season on such misguided if not foolish paymaster. For
them, these clients are not worthy of any sympathies especially if they are long on ignorance but short
on acumen.
2nd Aug 2011 Andrew Ng, Consultant at RDP Consultants Pty Ltd Australia