Contractually (required; failure to provide can result in waiver).
		Factually (needed to obtain time extensions and prove lost productivity).

		Letters, e-mails, memos.
		Notices/forms (e.g., RFIs).
		Photographs/videos.
		Meeting minutes.
		Periodic schedule updates.
		Job cost records and reports.
		Logs/notes/daily reports.
		Anything else that makes sense.

		Good documentation improves credibility in negotiations and litigation.
		Good documentation is necessary to comply with contractual notice provisions.
		Good documentation provides proof of facts.
		Bad documentation or no documentation hurts the contractor's position.

		General rule: Document all deviations from the plan.
		Increased costs.
		Delays.
		Unforeseen conditions.
		Oral directions.
		Number and location of the work-force.

		Honeymoon period.
		Fear of upsetting the client.
		Project management too busy with other tasks.
		Desire to be perceived as getting the job done, not preparing claims.
		The cost and schedule impact of the problem cannot be determined.

		Credibility. You don't want to hear: "If it was so important, why didn't you write a letter?"
		Prevents Employer or Architect from arguing, "If we had only known that you would claim an impact, we would have done it a different way."
		Need to comply with contractual notice provisions.

		Need for as-built schedule information.
		As-planned vs. as-built with impacts.
		Lost productivity (measured mile; other).
		Impossible to accurately compile without accurate daily information:
			Manpower.
			Equipment (deliveries, mobilization and movement).
			Materials (deliveries).
			Activities (commencement and completion of own activities and activities of others).
			Delaying events.
			Resolution of delaying events.

		Provides notice of a certain problem and its impact on the contractor.
		Describes the problem (dates, location, status).
		States that as a result of the problem, the contractor is being impacted and how (cost, schedule or both).
		Complies with the contract to the maximum extent possible:
			Method of delivery (e.g., certified mail).
			Time deadline (e.g., within 10 days).
			Estimates cost and schedule impact.
		Quantifies the problem or states that the problem cannot be quantified at this time (e.g., because the work is ongoing).

		While the level of documentation should be consistent from project to project, because of commercial realities and human nature, it will differ.
		For the Japanese contractor building an international project, there are several different contracting scenarios, and the level of documentation likely will vary based on the different scenarios.

The documentation at the Employer/Contractor level almost certainly will not be strong.
		At the Employer/Contractor level, the project will be handled "Japanese style" and disputes will be negotiated and resolved.
		But strong documentation still is needed at the Contractor/Subcontractor level:
			To defend against subcontractor claims.
			To support backcharges and delay claims against the subs.

		Obviously strong documentation is needed at all levels.
		For the Japanese Contractor, this contracting model presents the highest risk.

		Again, strong documentation is needed at all levels.
		Frequently, we see that the Japanese members of a joint venture or consortium do not maintain good records regarding the conduct of the fellow Japanese joint venture or consortium member.
		Good records are important because they allow the Contractor to:
			Allocate liquidated damages assessed by the Employer, if any.
			Assign responsibility for subcontractor claims.
			Allocate delay damages suffered by members of the JV.

		The necessary level of documentation may vary based on the type of project.
		We are familiar with a large subcontract on a power plant project in Singapore in which the subcontractor undertook to construct the civil substructures.
		The piling subcontractor's work needed to be completed before the civil substructure work, and the mechanical erection subcontractor's work followed the civil substructure work.
		The civil substructures subcontract called for 22 different phases with 22 different commencement and completion dates and with 22 separate liquidated damages provisions.
		The subcontracts for the piling subcontractor and the erection subcontractor also had 22 phases and completion dates.
		Thus, it was clear from the outset that the civil substructures subcontract had substantial commercial risks.
		The need for good documentation was clear from the outset because it was likely that:
			The civil substructures subcontractor would assert delay/acceleration claims against the piling subcontractor (leading to the Main Contractor assessing liquidated damages against the piling subcontractor); and
			The erection subcontractor would assert delay/acceleration claims against the civil substructures subcontractor (leading to the Main Contractor assessing liquidated damages against the civil substructures subcontractor).
		In fact, that is exactly what happened. The Main Contractor asserted liquidated damages against all 3 subcontractors for many of the 22 different phases.
		The civil substructures subcontractor also asserted its own claim for delay and acceleration damages.
		One of the most important factors in the subsequent negotiations was the excellent documentation compiled by the civil substructures subcontractor.
		Delay notices were submitted by the civil substructures subcontractor before it even mobilized on the site to commence work.
		The civil subcontractor took advantage of the fact that the subcontract provided dates for the handover of the site for each of the 22 phases and the dates for issuance of the released-for-construction drawings for each phase.
		The subcontractor generated forms, which it issued in the first month of the project, and updated in every subsequent month. They included: Work phase number and description, scheduled access date, actual access date, days of delay and remarks on the delay.
		Not surprisingly, at the end of the project, the Main Contractor had a multi-million dollar liquidated damages claim, and the civil and erection subcontractors had multi-million-dollar delay damages claims.
		After extensive negotiations, the civil subcontractor and Main Contractor settled the delay claim and the liquidated damages claim. The parties agreed that the two claims essentially would offset and cancel each other out.
		This allowed the subcontractor to recover a reasonable amount of its change order claims.
		The subcontractor's well-documented delay claim allowed the subcontractor to:
			Prove delay damages.
			Defend what was, given the dynamics of the project, the inevitable liquidated damages claim from the Main Contractor.
		In order to do this, the subcontractor needed thorough documentation to show:
			The delays caused by the piling subcontractor.
			The delays caused by the Main Contractor.

		Typical coding of direct costs is by location and activity.
		Accurate coding to location and activity is extremely useful in supporting claims.
		If new cost codes are established, they must be used properly.
		It is better not to establish a new cost code than to establish one and use it improperly.

		A typical change order will recite that the compensation includes all impacts for the subject change, including cost and schedule impacts.
		The problem is that the contractor may not be in a position to know the full impact, or the contractor may underestimate the full impact.

THIS REVISION INCLUDES THE ENTIRE COMPENSATION FOR THE CHANGE SET FORTH ABOVE. It includes, but is not limited to, compensation for engineering, material, equipment, sub-subcontracts, labor, overhead, profit, loss, costs, changes in scope and/or sequencing and/or scheduling, additions, deletions, effects on productivity, delays, disruptions, ripple effects, impacts, extra work, quantum merit, and/or equitable adjustment(s), as well as for further claims for compensation for any of them, resulting directly or indirectly from the Change. ALL PRESENT AND FUTURE CLAIMS AGAINST COMPANY THAT ARE INCIDENTAL TO OR AS A CONSEQUENCE OF THE AFORESAID CHANGE(S) ARE SATISFIED BY THIS REVISION.

		Sign.
			But, the contractor should sign only if it is very comfortable with the pricing and the waiver.
			In our experience, contractors frequently underestimate the impact of changes.
		Add cost and schedule impacts to the change and sign.
			But the employer or architect may not permit such impacts to be included.
		Cross out waiver language and sign.
		Sign but send a "reservation of rights" letter. This is risky.
			"We have signed this change order under duress. We have not been permitted to price the full cost impact of this change, and we reserve our rights to seek additional compensation as a result of this change for costs we have not included in our pricing."
			But, this reservation may not be sufficient.
		Don't sign, leaving the issue open and pending (what claims lawyers prefer).
			The benefit of "putting issues behind you" can be overstated.
			Balance the need for cash flow against the negative aspects of a waiver.
			In some cases, the benefit of the additional cash flow is not worth the price (a waiver of the right).

		Contemporaneous.
		Factual.
		Prepared by a person with knowledge.
		Consistent.
		Stored securely.

		The term "delay" often is used when the impact is to both cost and schedule.
		Better to specify "delay" and "increased cost."
		Record fact, avoid opinion.
		Avoid disparaging comments about your subcontractor. They will haunt you in your claim against the Employer or Main Contractor.
		Respond to everything.

		It is best to print out e-mails if you want to refer to them later.
		Those with access to e-mail need to know whether they are being saved.
		If e-mails are being deleted automatically, printing is all the more important.
		E-mails should be written like letters and memoranda.

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For more information about the issues covered in this report, please contact Paul Berning in our San Francisco office at 415-369-7229 or at pwberning@thelen.com or contact your Thelen attorney. For more information about Thelen's Construction and Government Contracts Department, click here.





©2005 Thelen Reid Brown Raysman & Steiner LLP