Module 11:  Corruption dilemmas

Dilemma 1:  Submitting a contract claim for delay - Dilemma

You are Commercial Manager of a construction company, Buildwell, which is carrying out works under a road construction contract with the public sector National Roads Agency (NRA). 

Under the contract between Buildwell and the NRA:

  • if any delay to completion of the road is caused by the NRA, Buildwell is entitled to receive:
    • an extension of time for completion (and will not therefore have to pay the NRA any damages for late completion)
    • payment from the NRA for any additional cost incurred by Buildwell as a result of the delay
  • if any delay to completion of the road is caused by Buildwell or it sub-contractors or suppliers:
    • Buildwell is not entitled to receive an extension of time for completion, and therefore will have to pay the NRA damages for late completion at the rate of $10,000 per day
    • Buildwell is not entitled to receive payment from the NRA for any additional cost incurred by Buildwell as a result of the delay (and will therefore have to bear its own cost of the delay).

Buildwell is 100 days late in completing the road, and you are preparing a claim against the NRA for the delay.  There are two identifiable reasons for the delay. 

  • The first reason for delay is a variation to the specification by the NRA, for which the NRA is responsible under the contract. 
  • The second reason for delay is the late delivery of materials by one of Buildwell’s suppliers, for which Buildwell is responsible under the contract.

When you examine the cause and effect of the delays, you believe that:

  • 30 days delay is caused by the NRA’s variation
  • 30 days delay is caused by the supplier’s delay
  • it is difficult to ascertain whether the remaining 40 days delay was caused by one of these reasons, or by both of these reasons acting in parallel, or by other unidentified reasons.

When you explain the position to the commercial director of Buildwell (to whom you report), he tells you to claim the full 100 days extension of time from the NRA on the basis that the whole 100 days delay was due to the NRA’s variation.  He tells you not to mention in the claim the supplier’s delay, or any doubt about the 40 days.  He tells you that:

“It’s good commercial practice to claim the full delay.  It would be madness to admit the delay is our fault, as then we would have to pay damages.  Anyway, the NRA is going to knock two thirds of our claim off, so that will leave us with approximately 30 days, so that will get us to the correct result in the end.  And if the NRA does not spot it, and gives us more than 30 days, then we get a bit of extra time and money.” 

What do you do? 

Consider your position, and then go to the analysis on the next page.

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January 2025
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