Causes of Claims

The five primary causes for claims on Public Services and Procurement Canada (PSPC) real property contracts are as follows:

Changes in subsurface conditions (GC6.2)

A contractor has the right to claim for compensation for extra expenses or any loss or damage for delays that are directly attributable to a substantial difference between the actual soil conditions encountered and those reasonably expected, based on the information provided in documents supplied by PSPC to contractors for preparation of their tender. The contract requires the contractor to provide PSPC written notice of their intent to claim "10 days of the date the changed subsurface conditions were encountered" as per G.C. 6.2.2. If the contractor fails to provide such notice, the contractor would normally forfeit the right to claim and PSPC would no longer have a legal obligation to make any payment in respect to the claim. PSPC must accept full responsibility for all information provided to the bidders relating to subsoil conditions and for its negligence, if available information is not provided. (Most claims received on civil works contracts, and a significant number on buildings contracts, are based on substantial differences in subsoil conditions).

Discrepancies and ambiguities in plans and specifications

When ambiguities occur in the plans and specifications, the courts will usually rule in favour of the contractor. Discrepancies in, and between, the plans and specifications can be dealt with on the basis of the 'usage in the trade', but more often PSPC must correct them through change orders or amendments for additional payments. The prompt provision of correct information by PSPC, will help prevent delay claims. In some cases, PSPC may seek to recover their additional costs due to errors and omissions committed by our consultants. Each case has to be assessed on its own merits.

Neglect or delay

A contractor has the right to claim for extra costs incurred due to neglect or delay by PSPC in providing any information on its failure to perform any PSPC contract requirements. The contract requires the contractor to provide PSPC written notice of their intent to claim within a specified time frame. If the contractor fails to comply with such notice, then the contractor would normally forfeit the right to claim and PSPC would no longer have a legal obligation to make any payment in respect of the claim. There are a number of reasons for neglect and delay claims such as:

Lack of, or incorrect information regarding underground services:
all underground information available on old drawings, even in the 'minds' of PSPC staff, should be shown on the contract drawings. Due diligence must be used to verify comments from the 'minds' of PSPC staff.
Delayed decisions and approvals:
project managers must provide contractors with prompt decisions and approvals to prevent a contractor from considering a delay claim. Decisions having a significant impact on the progress of the project should be recorded. The most frequent delay claims in this category are associated with late approvals of shop drawings and changes.
Lack of performance by consultants engaged by PSPC:
PSPC is responsible for the performance of its consultants. Consultants, when responsible for the administration of the contract as the Department's site representative, must respond to the obligations assumed by the department under the terms of the contract. Claims which arise due to the failure of the consultant to respond promptly to these obligations must not be negotiated by the consultants due to the possibility of a conflict of interest. The consultant must provide a statement of facts to the project manager who is ultimately responsible for resolution.
Problems related to municipal permits:
Problems related to local building code requirements should be dealt with at the planning and design stage and not allowed to become a problem at the construction stage. Permit application processes and time frames vary from one municipality to another. It is preferable for PSPC to complete the application for permits and advise bidders of their requirements to include for such permits in their tender. It is the project manager's responsibility to resolve permit issues during the design stages and to make PSPC's position clear to both the municipality and the bidder.
Site not available to contractor:
The contractor is entitled to possession of the site upon contract award, unless the contract documents indicate otherwise. The lack of availability of the site is a basis for a delay claim. Also, it may not be legally necessary for the contractor to provide PSPC notice-of-delay claim since it can be presumed the department must be aware of the delay it has caused.
Late delivery of materials or equipment pre-purchased by PSPC:
When PSPC undertakes to provide material or equipment, or to have related work completed by others, including the client, the contractor is entitled to claim for any extra costs incurred due to late delivery. It is usually advisable to make the contractor responsible for materials and equipment. Unless it is clearly a default on the supplier's part, PSPC cannot claim against them for late delivery. Claims against suppliers need to be assessed on an as-required basis.
Pre-tendering and post-tendering:
Pre-tendering should be avoided whenever possible as it can lead to problems arising between the general contractor and the subcontractor. Post-tendering should also be avoided since, very often, the amount of the post tender is far in excess of the allowance in the contract, resulting in delay while a decision is made on the course of action to be taken, or while waiting for tenders to be called for the work, which results in claims. Also, if the assigned subcontractors do not perform satisfactorily, the general contractor may utilize this as grounds for a claim. Both of these practices must be approved by Real Property Contracting (RPC) and the implications need to be taken into consideration.
Suspension of Work (7.2):
If the contractor is ordered to cease work on the project for the convenience of PSPC, the contractor would be entitled to any resultant additional costs incurred. Taking this action requires the contractor to mitigate their delay costs, etc.
Inspection of the work:
Inspections of the work by PSPC must be carried out in a timely manner which will avoid delay in the work. This means close cooperation between the contractor's construction supervisor and the resident or non resident inspector. Work not meeting the required standard must be brought to the attention of the contractor immediately with instructions to rectify the work.

Sending other contractors onto the site

PSPC has the right under the contract to send other contractors or workers onto the site. However, this should be avoided if possible, as it can create a condition resulting in claims due to possible interference of one contractor's activities by another. The specifications of the contract should make clear reference to the presence of other contractors and subcontractors on site where this is the case.

Delays and Changes in the work (G.C.6)

Changes are undesirable. They are usually the most expensive means to have additional work carried out. For deletions in the contract, it is very difficult to negotiate a reasonable credit. Changes affect the schedule, delay the work and lower the productivity of the contractor. They may cause additional cost to the contractor and ultimately PSPC.

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