During 2005/6, Tony Farrow of Trett Consulting’s Houston office was involved on a major highways project in Israel. His appointment was ‘Claims Mentor’, assisting the Joint Venture constructing over 80 miles of highway. In this article, Tony describes his role and how the appointment provided an effective solution to a predicament often faced by contracting parties.
The project situation was typical of a major infrastructure scheme, or indeed of any mega project; the +$500 million contract had demanded the resources of several major national contractors coming together in a joint venture. The scope of work had been divided between them and each firm had different organisational, resource and construction challenges in undertaking their obligations. Given the unique local geological conditions and the prevailing political environment, the project had fallen into delay and each contractor to the venture had different ideas for dealing with the commercial consequences.
In order to create a unified position that was based upon the best solution for the Joint Venture (rather than for any one individual venture party), the group took the decision to seek outside advice and support. Consequently, over a period of 18 months, I had the great privilege of spending two weeks every month in Israel, offering guidance to the Joint Venture in its strategic management of its multi-million dollar extension of time claim.
The language of the contract and the communications were in Hebrew, and therefore, mercifully, there was not the usual extensive amount of reading-in for me to do! However, the contract terms and other documents dealing with important events and issues had been translated into English. The various contractors’ record-keeping systems were explained to me and reviewed, and of particular importance were the planning and progress data. With an understanding of the contract and the available records, it was then possible to consider how to approach the exercise of preparing a delay analysis. From this, a methodology and specification was prepared upon which the Joint Venture would organise its data and begin to analyse progress, events and delays.
In this case, it was possible to adopt an as-plan versus as-built approach, because the Joint Venture kept good records. The as-plan situation was adjusted as and when the Joint Venture updated its strategy for the remaining works. Event chronologies were developed, which described each claim history. The consequences of all the events were then analysed in real time by considering the as-built situation.
Organisationally, the Joint Venture established a Claims Group to undertake the work, with staff seconded from the various contractor groups or from outside agencies. Having created the specification for preparing the claim, my role was to work with the team as a mentor, offering guidance, providing experience and acting as an impartial sounding-board whenever there were alternative views concerning the way forward.
The issues of float and its ownership, of concurrency and constructive acceleration, disruption and preferential engineering all had to be dealt with. It was necessary to consider the comparative approaches taken in different legal jurisdictions and then develop the best approach for the local laws in this case. As with most jurisdictions, there was no clear precedence to follow on these issues and so the goal was to gather and analyse the project records and structure the claim so that it provided a detailed analysis of what had occurred i.e. as is always good advice, we focussed on the facts and their factual consequences; with this done, the legal interpretation was always going to be a matter of debate, whatever the jurisdiction.
Having worked with the Joint Venture to prepare and present its case to the Employer, the next stage was to seek to direct the negotiation process in an effective manner. As in many claim situations, the negotiation process can quickly polarise, as Parties immediately take opposing views, and we did not want this to happen. We, therefore, proposed a two-tier negotiation process.
The first tier was concerned with issues of principle and was to involve the senior management and their advisors. The second tier was to be concerned with the detailed facts and the more technical aspects of the project and the claims. The meaning of the contract terms, the different methods of analysis, the treatment of concurrent delays etc were issues of principle and each party proposed those topics of principle it wished to have debated. The senior members of each organisation and their advisors then met to exchange views and to understand and record the competing arguments on issues of principle. At the same time, more working-level meetings were held by respective project staff in order to review the facts and chronologies of the individual claims and establish those things that were agreed and those that were not.
Over time, the Parties gained a fuller understanding of the respective merits of their positions (and their weaknesses) and a settlement was achieved, perhaps not in a scientific manner, but in a way whereby the risks and consequences were better understood.
The role of Claims Mentor on large projects is an effective organisational option because it provides firms with the forensic, often retrospective-looking, skills that may not always be available within project teams who are more focussed on looking forward and building projects. It also provides the senior management with an independent, third-party view of the strengths and weaknesses of the case, and someone experienced in contributing to the strategy of effectively prosecuting a claim situation.
Tony Farrow is Operations Director of Trett Consulting’s Houston office.