It is common for employers and contractors to fall into dispute over suspended projects and their
recommencement, particularly in regards to time and costs, changes in design and scope of works. With
many projects that were stalled during the Covid pandemic, and the period of lower oil prices, now being
restarted, Curtis provides an overview of the key issues to consider together with the main causes of
disputes and how to successfully navigate restarting suspended projects.
Pre-Suspension Losses
Contractors should consider what losses they may have incurred prior to a project being suspended. It
is very common that, prior to receiving an instruction to suspend works, the employer will have slowed
the contractor down in their works which will have caused a loss in productivity. A contractor should
consider whether a claim for prolongation or disruption exists prior to suspension.
To establish disruption, a contractor would be required to undertake a review of its productivity in
carrying out the works over the schedule in order to determine when lower productivity occurred and
what work activities were impacted. It is likely expert analysis will be required to determine the loss of
productivity arising out of the disruption events, and the resulting financial loss. As always, good
records are essential.
Suspension
- Costs incurred protecting the works against any deterioration, loss or damage.
- Downtime/standing time of plant/equipment and labour.
- Depreciation of equipment.
- Prolongation costs – staff, insurance, bonds, extended warranties, accommodation, storage
facilities.
- Making good unavoidable deterioration of the works.
- Loss of revenue.
- Interest.
- Other general damages suffered.
Extension of Time
A contractor should be careful to document the employer’s suspension of the works, and carefully
maintain project documentation/evidence in order to support any claim for extension of time. It is
almost certain that any claim for extension of time will need to be supported by a delay analysis, and
therefore a contractor should collect and preserve evidence of progress and instructions to suspend work.
This evidence will be critical to support a delay analysis. A contractor should ensure that the following
are carefully maintained during execution of the works, and carefully stored and controlled during
suspension:
- Minutes of meetings.
- Site inspection records.
- Daily, weekly and monthly reports.
- Schedules/programs.
- Design documents.
- Equipment logs.
- Photographs of progress and key milestones.
Such documentation will be essential to undertake a helpful analysis examining the status of the works
and the critical path prior to any slow down or disruption prior to suspension.
Project Restart – Practical Considerations and Costs
Key issues that a contractor should examine and consider prior to restarting suspended project works:
- Is there an agreed and documented procedure for restarting?
- Is the design still correct and/or viable?
- Is the existing project execution plan still workable?
- What project documentation/records are still in place?
- Is it possible to jointly agree a condition survey with the employer?
- Can variations be agreed prior to recommencement?
- How are the project restart works priced?
- Is timing, sequence and quantity agreed?
- What is the basis of pricing the restart works?
Some cost considerations to be considered before restarting the project:
- What is the impact of suspension/restart on the project’s material costs?
- Has there been any impact by inflation, escalation, commodity prices, availability of material?
- Have suppliers changed during the suspension period and, if so, does this impact time or cost?
- Is it necessary to revisit BOQs and rates/prices?
- Will there be a need to replace already installed material? There have been significant increases
in prices during 2020-2022 of concrete, steel, cabling, timber. This should be factored in and
agreed before restarting works.
Impact on Personnel and Rate of Progress
A review should be undertaken to consider what, if any, changes in personnel have occurred. Changes
in personnel can result in a decrease of rates of progress and efficiency, due to loss of project and site
knowledge. Any such losses should be taken into account and provided for. Some issues to consider:
- Have there been any regulatory or procedural changes during the period of suspension that have
increased costs during remobilization?
- Any changes in regulation also may impact pricing if specified materials have changed or are no
longer available due to supply chain restrictions, sanctions, or availability of materials produced
overseas.
- Are subcontractors still available?
- Has the introduction of VAT had any impact on costs?
Key Takeaways
Prior to restarting a suspended project, both parties should give serious thought to the issues above, and
be realistic and aligned: the original project schedule will unlikely still be suitable for the project. At a
minimum, the parties need to undertake a review of the schedule, consider prolongation costs, and
reconfirm the scope of works. The parties need to work together if restarting a suspended project is
going to move successfully towards completion without disputes arising.
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