What is disruption in construction and how can it be analysed?
Disruption is an interference that disturbs or slows down a Contractor's usual working methods, leading to reduced efficiency. Disruption is not the same as delay, however a disruption can be the cause of a delay.
Disruptive events have a direct impact on work, leading to reduced productivity through factors such as insufficient or altered site access, work performed out of sequence, or design modifications. Additionally, they can cause indirect consequences like overcrowding of workers, inefficiencies from disorganised work groups, heightened overtime leading to fatigue, recurrent training requirements, which further diminish productivity.
Ultimately, lost productivity will have a financial impact which in turn gives rise to disruptions claims in pursuit of compensation.
What to do when disruption has occurred
When disruption has occurred, it is critical to understand the extent of disruption, the cause, and the impact. To understand the full picture, a disruption analysis must be conducted.
When analysing disruption in construction projects, it is essential to apply analytical methods to determine the impact on productivity and resulting financial losses. Disruption goes beyond the variance between planned and actual outcomes.
The goal of a disruption analysis from the Contractor's perspective is to showcase lost productivity and additional expenses due to disruption events that the Employer is liable for, with the goal of securing appropriate compensation.
Compensation is only considered for the consequences of disruption events assigned to the Employer. Productivity losses linked to other factors should be excluded from any claims.
Causes like poor supervision, planning, re-work, subcontractor coordination issues, and tendering errors don't automatically justify compensation for disruption.
Disruption analysis methods
To initiate a disruption analysis, Contractors must assess productivity trends over time, identify affected work activities, and review financial implications.
Accurate project documentation is crucial and, if seeking compensation for disruption, Contractors must present their claim and supporting analysis with a reasonable level of certainty required by the Employer, adjudicator, or arbitrator according to the law.
Even on simpler projects, Contractors must conduct some level of analysis to estimate productivity losses caused by disruption events where the Employer is accountable.
There are three major groups of disruption analysis methods that can be classified as follows:
1. Project practice based
2. Industry based
3. Cost based methods
Preparing a claim
A disruption claim aims to show a decrease in productivity, resulting in additional costs that wouldn't have occurred without the disruptive events the Employer causes. There is no set way to prepare a disruption claim, instead a tailored approach is required, leaving the claimant to determine how best to provide a reasonable assessment of the disruption caused.
The claim should reflect the difference between achievable and actual productivity levels impacted by disruption events the Employer is at fault for. Original tender assumptions should not be automatically regarded as the baseline for productivity.
As a minimum you need to demonstrate in a disruption claim the following:
1. Events which entitle it to loss and expense.
2. Identifying the events which caused disruption; and
3. That the disruption caused loss and /or expense.
Compensation
Compensation can be sought for disruption within the limits set by the contract or if there is a legal basis for it.
Ideally, compensation for disruption due to variations should be agreed upon in advance or shortly after completion of the work. Disruption caused by other Employer-responsible events should be reimbursed based on actual reasonable costs incurred plus a feasible profit margin if allowed under the contract.
The financial impact of lost productivity is felt when executing the affected tasks. However, not all reduced productivity is eligible for compensation. The Contractor can only seek compensation for disruption within the boundaries of the contract terms or under applicable legal grounds.
Not all contract forms explicitly cover compensation for disruption, but they address events that could cause disruption like unforeseen ground conditions or delays in approvals.
Final thoughts
For Contractors to increase their chances of success when claiming disruption, it is crucial to identify the precise activities and events that have experienced disruption and demonstrate, on a cause-and-effect basis, how this disruption occurred. Additionally, Contractors need to quantify the losses incurred, backed by contemporaneous records.
Contractors frequently cite intertwined disruptive events to explain disruptions, justify productivity losses, and seek compensation for impacted tasks collectively. While isolating losses tied to individual disruptive events can be challenging, it is possible with a forensic approach. Before pursuing a global claim, it is essential to thoroughly assess the associated risks and dedicate time and effort to a forensic analysis.
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