Before turning to the common pitfalls, it is worth stating that the realised value of your claim will always be zero if you fail to get three
things right at the outset: (1) the correct contractual basis for your claim, (2) the submission of timely notices and further particulars, and (3) a clear cause-and-effect link between the notified events and the losses being claimed. Assuming those points are addressed, here are the ten most frequent reasons why cost claims fall short at the quantum stage:
1. Failing to Understand Cost versus Value
Claims are about putting you back in the situation you would have been in but for the claim event occurring. In other words, they are about recovering your loss. The exercise is to assess the cost or loss suffered as a direct consequence of the event. You do not “value” it by adding overheads and profit unless the contract expressly provides for this.
2. Passing Through Unchecked Supplier and Subcontractor Costs
Simply appending subcontractor or supplier invoices without scrutiny is rarely accepted. Claims need to demonstrate that such costs were properly incurred, reasonable, and linked to the events relied upon. Contractors are expected to vet and evidence these costs before passing them forward.
3. Claiming Prolongation Costs Over the Wrong Period
Prolongation costs must be limited to the actual period of critical delay for which entitlement has been established. Too often, claims are advanced over wider periods where entitlement does not exist. This misalignment between time entitlement and cost assessment is a common reason for rejection.
4. Confusing Task-Related and Time-Related Costs
A clear distinction must be drawn between costs tied to specific tasks (for example, productivity or disruption claims) and time-related costs (site overheads, preliminaries, staff standing time). Mixing the two leads to double counting or confusion about what is truly being claimed.
5. Misuse of Formulae for Overheads
Formulae for calculating head office overheads have their place, but misuse is common. Applying a formula without considering whether it is appropriate to the project, the company’s accounts, or the nature of the delay undermines credibility. Wherever possible, actual records should be used.
6. Failure to Demonstrate Loss of Opportunity Claims
Loss of opportunity – the contention that the contractor could have earned margin on other projects had resources not been tied up – is frequently pleaded but rarely proven. Such claims require evidence of genuine capacity to take on other work and contemporaneous records of opportunities foregone.
7. Use of Global Methodologies
Global or total cost claims, where costs are presented in the aggregate without proper disaggregation, are inherently weak. Unless careful adjustments are made to strip out inefficiencies, unrelated issues, or contractor errors, these claims usually fail to convince.
8. Failure to Demonstrate Mitigation
Decision-makers expect contractors to show what steps were taken to minimise loss. Claims that ignore reasonable mitigation efforts – resequencing, resource reallocation, alternative procurement – are often discounted. Demonstrating active steps to mitigate can materially improve prospects of recovery.
9. Failure to Net Off Recoveries from Elsewhere
Claims frequently ignore sums already recovered through variations, insurance, or other mechanisms. Presenting a gross figure without netting off overlaps damages credibility and risks wholesale rejection. A clear reconciliation between claimed sums and recoveries is essential.
10. Records, Records, Records
The importance of contemporaneous records cannot be overstated. However, it is not always practical to present every last invoice or timesheet. A better approach is to select representative samples and present them thoroughly, showing in detail how costs were incurred and linked to events. Done properly, this gives confidence that the wider body of records will support the same conclusions.
Conclusion
Cost claims often fail not because the events are in dispute, but because the numbers are poorly evidenced or overreached. The recurring themes are lack of discipline, weak records, and failure to separate different cost categories. If practitioners focus on these ten areas – keeping claims tied to the compensable period, distinguishing cost categories, avoiding shortcuts, and above all maintaining proper records – they will greatly improve the credibility of their submissions.
davidbrodiestedman@dispute-iq.com
