Dealing with Suspension Claims

By Dr. Chandana Jayalath

Suspension usually occurs on a construction project when an employer requires a contractor to temporarily stop work on all or a portion of the project. Contractually, the contractor shall suspend the progress on the engineer’s written notice if it is only provided for in the contract, due to contractor’s default, due to climatic conditions, on safety reasons, necessary for proper execution of work or in excepted risks. A mandatory requirement is cast on the contractor to give a written notice of his intension to claim for any additional cost or time within a specified period from the date of receiving the engineer’s order to suspend the work. This clause specifically permits the engineer to authorize extension of time or payment of extra cost, whose decision is final and binding.

The typical clause ‘suspension lasting more than 90 days’ is to deal with suspension in one-go or part by part in consecutive periods, giving the contractor the right to determine the contract in two ways. If the suspension under Sub-Clause 8.8 [Suspension of Work] has continued for more than 84 days (in FIDIC), the Contractor may request the Engineer’s permission to proceed. If the Engineer does not give permission within 28 days after being requested to do so, the Contractor may, by giving notice to the Engineer, treat the suspension as an omission under Clause 13 [Variations and Adjustments] of the affected part of the Works. If the suspension  affects  the  whole  of  the  Works,  the  Contractor  may  give  notice  of termination under Sub-Clause 16.2 [Termination by Contractor]. It will be sometimes treated as an abandonment of the contract by the employer.

After  the  permission  or  instruction  to  proceed  is  given,  the  Contractor  and  the Engineer shall jointly examine the Works and the Plant and Materials affected by the suspension. The Contractor shall make good any deterioration or defect in or loss of the Works or Plant or Materials, which has occurred during the suspension.

Suspension claims often require a schedule delay analysis to evaluate the impact to the project’s critical path. A suspension claim will consist of cost calculations with regard to protection and securing works, idling labor, plant etc, loss of managerial inputs and any other incidental costs such as costs on demobilization/remobilization costs and other actual costs incurred due to the suspension. In addition, if the employer’s actions do not allow the work to proceed but the suspension clause has not been invoked, the contractor may claim for constructive suspension.

A party, who wishes to exercise the right to suspend performance, runs the risk that their suspension will be regarded a failure to carry out the works regularly and diligently and may be treated as a repudiation of the contract, if in the particular circumstances no such right actually exists. The right to suspend performance for non-payment is statutory but the parties are free to agree how long the period is between the date on which a sum becomes due and the final date for payment of that sum, then the period will vary between contracts.