Typical Issues
The terms of suspension under the Contract often result in the parties having different views of the purpose and ambit of the suspension. Suspension claims are likely to include the following issues:
- Where the project is about to be suspended, the Employer and the Contractor need to be clear on the scope of the suspension and what elements of the project require the Contractor to maintain resources and perform any ongoing duties.
- During the suspension, the parties would be well served to monitor the resources being deployed and to flag any issues arising in the suspension that may have implications regarding any restart of the works. This can be sought from project management dialogue and recordings of weekly meetings.
- Upon lifting the suspension, the parties will seek to agree the cost consequences and to review any interim payments that have been made during the suspension period. Any time implications arising from the suspension will be subject to the administration of any extension of time. This will turn on whether the suspension event provided opportunity to recover programme delays or is a critical delay event with time and cost consequences.
Insight
In our experience, the suspension event is usually foreshadowed by correspondence that communicates the suspension but is potentially unclear regarding the reduced level of resources to be maintained during the suspension period. The parties may even have completely different views as to whether the Main Contractor was to maintain a full resource on “hot standby,” ready to resume at any time, or whether the suspension was indefinite with lesser safeguarding duties.
This can result in conflicting valuation of the level of resources that can be valued as part of the suspension instruction. Where an element of the works is not subject to the suspension, it may also be questionable whether that element of the works is subject to a progress valuation under the original value of works or valued as part of the suspension costs. If the Employer asserts that the Contractor was in culpable delay at the time of suspension, any work fronts where the Contractor can recoup schedule losses may also be a topic for evaluation, concerning responsibility and time and cost consequences.
Depending upon the duration of the suspension there may be a trade-off decision between the costs of demobilising, cancelling rental agreements and remobilising equipment versus the cost of maintaining the status quo through the suspended period. The lifting of the suspension may give rise to issues regarding resource planning for materials in transit and the remobilisation of personnel and equipment.
Valuation will depend upon the ambit of the suspension instruction, its duration, and the resources that are subject to the suspension. In addition to these variables, the valuation principles under the Contract need to be examined to consider whether the valuation requires a cost-based or rate-based valuation. This can provide a significant range of valuations, particularly where large equipment or plant is retained on the project and where the Contractor could have deployed that equipment at market rates elsewhere.
We would advise that the allocation of resources and any continuing scope is agreed upfront and to keep weekly records of the resourcing during the suspension period. Ideally, costs should be kept by reference to cost records compiled weekly.