Construction Law/Claims on Abortive Works.
Here's the scenario:
1. An Instruction was issued to omit a part of work on a building. As of the date of the Instruction, shop drawings had been approved a while ago, and the Contractor had started procurement of the works, the fabricated parts were already en-route. What can the Contractor claim as abortive costs? Engineering Design, material, shipping?
2. After the parts arrived in-country, it was sent to storage. Time was taken to audit and inspect the aborted materials, and to decide if to dispose or to deliver without installation. Can the Contractor claim Storage Costs for this period?
3. How to make a fair assessment?
Thank you for this question.
I suggest that all of the elements you have identified within part 1 of your question are valid to claim in compensation and, indeed, you claim may not be limited to those costs. Certainly all drawing preparation time will be claimable also.
You have knot stated why the work was omitted from your contract and whether the Employer intends that the work is performed others now or at a later date. If this is the case you might also be able to claim a loss of profit element on the omitted scope.
As to storage, clearly it was necessary for you to do something with the goods upon their arrival in territory. Any transportation and storage costs, together with subsequent costs of disposal are claimable if they were reasonably and properly incurred. Bear in mind it is very likely that at all times both parties owed mutual obligations to mitigate the loss and expense incurred by the other.
Concerning the making of a fair assessment the test is whether the costs were reasonable an properly incurred and, also, whether consideration was given to mitigating the losses likely to be suffered on both sides. I suggest that actual costs are the basis of your calculation. A margin for your overhead costs can be added but whether or not you are entitled to a profit element will be dependent upon an interpretation of your contract.
I hope that this assists you.
Follow me on Twitter: @CernoOrg
For my regular industry newsletter e-mail to email@example.com, stating SUBSCRIBE in the subject line
Training and consulting services are available, bespoke to companies and individuals.
John Dowse can be contacted by e-mail to firstname.lastname@example.org (When e-mailing, please include “AllExperts” in the subject line.)