Global and total cost claims: what are they and why are they treated with such caution?
Anyone who has anything to do with a construction project, either for the first time or the hundredth time, will know that you quickly become proficient in a whole new language of terminology. When faced with a construction claim, there’s even more to get to grips with. Naturally, one of the common areas of concern for clients is knowing how much compensation they are owed, and it isn’t always the figure that you might think. Increasingly, global or total cost claim is the method used by contractors where proving and calculating damages. This refers to a claim in which the damages calculation is derived from the total cost of the work incurred by a contractor, minus the bid amount. Here’s what you need to know…
What’s the definition of global and total cost claims?
What global and total cost claims is technically might be straight forward, but how that’s interpreted and worked out in reality isn’t always so clear cut. To get an idea of what one is up against, it’s a good idea to revert to the annals of law and professional expertise.
“Global claims may be defined as those where a global or composite sum, however computed, is put forward as the measure of damages or of contractual compensation where there are two or more separate matters of claim or complaint, and where it is said to be impractical or impossible to provide a breakdown or sub-division of the sum claimed between those matters.”– Hudson’s Building and Engineering Contracts
“If the Contractor has made and maintained accurate and complete records proportionate to the project, in most cases the Contractor should be able to establish the casual link between the Employer Risk Event and resultant costs and/or loss, without the need to make a global claim. The failure to maintain such records is unlikely to justify the Contractor in making a global claim.”– The Society of Construction Law’s (SCL) Delay and Disruption Protocol
Why use this method of assessing compensation for claims?
The often nebulous nature of costs caused by delays and disruption is the reason for the global and total cost claims approach. Broadly speaking, there is no need to go down the global or total cost route if the actual cost attributable to individual loss causing events can be readily determined. Although that is not generally quite as cut and dry as it initially sounds. The best way of proving your case, is to have accurate documentation of all communications throughout the project – something that proficient document management is vital for.
“In what should only be rare cases where the financial consequences of the various causes of compensation are impossible or impracticable to distinguish, so that an accurate or reasonable allocation of the compensation claimed cannot be made between the several causative events, then in this rare situation it is acceptable to proceed in two stages: (a) quantify individually those items of the claim for which the causal link can be established between the Employer Risk Event and the resultant costs and/or loss claimed; and (b) claim compensation for the remainder as a composite whole.”– The Society of Construction Law’s (SCL) Delay and Disruption Protocol
A claim doesn’t always mean you will get compensation
One of the most important things that clients should always be aware of with any claim, is that with the best will in the world, there are risks to raising a claim. When strained budgets and relationship breakdowns are already causing extra stress, this is worth being aware of. It’s also one of the reasons we created our claims funding initiative.
“The Contractor must be aware that there is a risk that a global claim will fail entirely if any material part of the global loss can be shown to have been caused by a factor or factors for which the Employer bears no responsibility and it is not possible for the CA, adjudicator, judge or arbitrator to assess the value of that non-recoverable portion on the available evidence.”– The Society of Construction Law’s (SCL) Delay and Disruption Protocol
The burden of proof is increasingly challenging and vigilant, making a professional approach more important than ever.
That said, even without a perfect case, the law is sufficiently understanding that it doesn’t necessarily mean the claimant contractor won’t recover anything. It depends entirely on what the impact of events or factors is.
With all this in mind, it’s easy to see why construction claims can be a daunting prospect, and if it’s not an area in which you are expert, then your options are often unclear. Speaking to a professional can help you understand what is recoverable when things have gone wrong, the time it will take and the impact it will have on your project and working relationships.
To speak to a construction claims consultant about your options, contact Tungsten Capital.