Unveiling the Power of Contract Resets in Construction
Contract resets, also referred to as project resets, have grown in prevalence in recent times.
A contract reset serves as a beacon of hope for employers and contractors motivated to find an amicable solution amid significant delays and cost overruns within construction projects.
It entails either settling outstanding claims commercially or reformulating the commercial framework to ensure successful project delivery, whilst avoiding protracted formal dispute resolution proceedings and safe-guarding contractor’s cash flow.
“An important part of the settlement of outstanding claims is to negotiate a result acceptable to all parties, often relying on evidence-based forensic delay analysis coupled with robust quantum analysis. ”
Why Consider a Contract Reset?
There are a number of reasons a contract reset may be considered but primarily it allows project owners and contractors to work together to update their frameworks to ensure they better meet the challenges experienced and unearthed whilst undertaking the work on the project.
Embarking on a contract reset journey can be a positive step for a project and the relationship between project owners and the contractor, steering clear of formal dispute resolution processes and fostering a collaborative, non-confrontational approach to resolving disputes.
Benefitting the final project delivery, a contract reset capitalises on accrued learnings and experience, instilling a sense of confidence in the new plan while addressing underlying issues hindering progress and success.
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With the support of forensic quantum and delay experts tailored to the specific project, a well-executed contract reset not only offers a clear audit trail. It also provides the project owners evidence-based reasoning behind payments made to contractors, in addition to a path forward towards project completion.
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From the perspective of the contractor, a contract reset is a solution worth considering as it may provide much-needed support in terms of time and cost relief, while also enabling project owners to better understand project issues and the costs and time impacts.
Components of a Contract Reset
Contract resets are not often the result of a single large-scale global or total cost claim alone as these in isolation may not suffice to sway project owners towards negotiation.
Instead, a meticulously crafted quantum and delay claim is crucial, irrespective of entitlement. Clear communication on how costs and timelines are calculated, emphasizing the cause-and-effect dynamics, is pivotal at this juncture.
While a contract reset requires collaboration and often complex negotiation between multiple parties to find an amicable resolution, at its core it boils down to three fundamental elements.
Separation of Claims Heads
The first trigger leading up to the decision to embark on a project reset is often a variety of additional costs incurred by the contractor. These costs may be the result of various heads of claims including disruptions, variations and delays, and due to reasons such as latent conditions, additional project scope, and changes in design.
To establish a basis for the reset, the additional costs need to be assess and quantified using a forensic quantity surveyor and an evidence-based approach.
Delay Analysis
Project delays need to be forensically analysed to unravel the complexities of project timelines and address setbacks.
Whether delays to the project are a result of latent conditions, industrial action, adverse weather, or any other number of reasons, evidence is needed to understand the cause and culpability, and aid settlement.
Renegotiation
Analysing additional costs and delays requires the support of qualified and experienced quantum and delay experts who are able to dig deeper and employ an evidence-based approach. With costs and delays determined, the next step in a contract reset is the collaboration between project owners and the contractor to renegotiate the contract to more appropriately address the challenges of today and anticipated challenges in the near future. The formal execution of a deed to solidify revised contractual terms lays the foundation to settling matters and setting the project up for successful execution.
Embracing Renewal and Realignment
By embracing Contract resets judiciously, stakeholders in the construction industry can navigate challenges effectively, foster collaboration, and pave the way for successful project outcomes.
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