Most of us are familiar with the basic rules of
"Prolongation claims". If the
Subbie's original period is prolonged by certain qualifying events (eg
variations, late information, delayed access etc) then he is entitled to be
paid for the additional costs of his time-related staff, plant and
accommodation. Most Clients' QS' and
Builders will eventually come to an agreed value, after the inevitable
"paperchase" with timesheets, salary records, car hire invoices,
plant invoices, etc. So far, so
good. However, what about the often
thorny subject of "Head Office Overheads"? For some reason, this claim heading is habitually regarded with
ridicule by Clients and defeatism by Subbies. As a result, the Subbie gets less
than his proper entitlements. Why
should this be?
Firstly, do we ourselves believe in our
case? Well ,there is no doubt
whatsoever that any substantial over-run of a decent sized job will similarly
prolong the involvement of office based personnel (ie contracts managers, engineers, buyers, wages and accounts clerks
etc). Why should such involvement be
provided as a free service?
One approach is by way of a formula ("Hudson" or "Emden"). In certain circumstances, and subject to hard evidence, this can be quite legitimate. This approach certainly produces the biggest numbers. However, the combination of crude application, lack of proof and general misunderstanding of the underlying principles does make this a difficult method. More likely to secure agreement would be a claim for specific additional involvement of managers and office staff. There is good case law to support this approach. However, most Subbies lack the records to evaluate and substantiate their entitlements. What a pity, to forfeit your rights for the sake of a little extra care.
In fact, proving your rights need not be
hard. The biggest single step is to set
up a system whereby all staff, from directors downwards, allocate their time to
individual sub-contracts on a daily basis.
This time should then be costed to the appropriate job. By "job costing" in this way,
you will be able to readily prove the
additional expenditure of Head Office people.
This may be due to prolongation, or to additional degree of involvement
due to certain specific causes (ie additional workload, design changes
etc). It is also vital to have
available detailed build-ups to justify the hourly or daily rates used for
individual office staff costs.
Your reliance upon the use of blanket
percentages in both costing systems and claims will therefore be greatly
reduced. This residual percentage will
largely derive from fixed overheads such as lease of premises, rates, gas and
electricity charges etc. The argument
for recovery is perhaps rather more tenuous.
Nevertheless, I suggest that this nominal percentage be added to the
bottom of your other claims, in which format it stands a decent chance of
securing approval.
Keynote:
Directors and staff should allocate their time
to individual projects.
JOHN RUSSELL
Email: swsubbie@globalnet.co.uk
Web site: www.jrconsultant.co.uk
John Russell
Construction Contracts & Training Consultants (Established
1984)
Cheshire CW4 7DP
Tel : 07770 986444
Email : swsubbie@globalnet.co.uk Website: www.jrconsultant.co.uk