Addressing a robust claim of 2M€ to the contractor of a structural work

As a part of a major construction project for an energy plant, our client signed a contract over the manufacturing of a range of components. Our client’s client (the contractor) is responsible as “designer” to provide ready-for-execution drawings and the parts to be integrated during the manufacturing in adequate quantity.

In the course of the project, our client has noticed non-conformances in respect to the contract:

• Errors in the supplied drawings prevent manufacturing and/or assembly
• The quality and/or condition (e.g. packaging) of the supplied parts are not compliant
• The contractor requests modifications and/or additional parts during the manufacturing process

Non-compliance with contractual commitments by the contractor led to an additional cost of approximately 2M€ for our client, i.e. 50% of the sales price of the project and a delay of several months.

1. Identify the subjects that caused extra costs

Example: The installation of reinforcements to stabilize the structure required more manpower and material than initially planned.

Approach: Interviews with department heads, brainstorming sessions, documentary research.

1. Prove that the contractor’s non-compliance in regard to the contract has led to additional costs

Example: The drawings of reinforcements were modified by the contractor after our client notified that the structure would not be stable if manufactured as indicated in the “ready-for-execution” drawings

Approach: Analysis of exchanges (e-Mail, minutes of meetings, etc.), monitoring of the modifications of the drawings, study of contract’s deviations

1. Quantify the economic impact: overtime, purchasing and loss of efficiency

Example: Following the modifications made by the contractor, the assembly of the reinforcements required 100 additional hours of manufacturing + 20 hours of design office time + 40 k€ of purchased material + the blocking of the manufacturing team for 3 days to wait for the delivery of the parts

Approach: Analysis of accounting, analysis of the manufacturing processes, estimation of the additional workload and team inefficiencies

• 2 M€ claim from the contractor, spread over 16 subjects
• Drafting of a document shared with the project team, the legal department and the management (around 700 pages)
• Demonstration that the contractor’s economic losses would have been higher if our client had not carried out the additional work required
• Construction of a detailed argument document for our client to use during the negotiation process