Is it true that a contractor cannot make a loss and/or expense claim under MW?
Strictly speaking, that is correct. The only clause in MW that mentions loss and/or expense is clause 3.6.3. It provides that if the architect issues an instruction requiring an addition to or omission from or any other change in the Works or the order or the period in which they are to be carried out and there is a failure to agree a price before the contractor carries out the instruction, it must be valued by the architect.
The architect is required to value it on a fair and reasonable basis using any prices in the priced document. Significantly, the valuation must include any direct loss and/or expense that the contractor has incurred as a result of regular progress of the Works being affected in either of two ways. The first is compliance by the contractor with the instruction. The second is the employer complying or failing to comply with clause 3.9.
Clause 3.9 requires both parties to comply with the CDM Regulations. In particular, under clause 3.9.1, the employer must ensure that the duties of the CDM co-ordinator are properly carried out and, if the contractor is not acting as the principal contractor, that the duties of the principal contractor are also properly carried out. The grounds on which the architect can include loss and/or expense are obviously quite restricted.
It is clear from the wording of clause 3.6 that the architect’s inclusion of loss and/or expense in the valuation does not depend on any application by the contractor. Indeed, the only time the contractor is expressly required to provide information to the architect is under clause 4.8.1, where the contractor must provide all documentation reasonably required for computation of the final certificate.
In calculating the valuation, the architect will no doubt ask the contractor for information. Indeed, in practice most contractors will provide information in the form of an application for payment on a monthly basis. Although the contract does not preclude such applications, it does not confer any status upon them. The architect may take notice of or ignore the information as the architect deems appropriate, because the only factor the architect needs to take into account is the priced document, whether that is a priced specification, work schedules or a schedule of rates. It is entirely a matter for the architect how the loss and/or expense is calculated. Many architects link the amount to the length of any extension of time that has been given on account of architect’s instructions. Although one can see some logic in this approach, there is no justification for arriving at the loss and/or expense by multiplying the number of weeks by the amount the contractor has inserted in the priced document as its weekly preliminaries cost. Loss and/or expense is the equivalent of damages at common law. As such, the damages must be proved; the architect must secure the necessary evidence to show how much loss the contractor has actually incurred. At best, the preliminaries figure in the priced document is the contractor’s best estimate at tender stage. It may be an under- or an overestimate. It certainly will not represent actual costs.
The contractor cannot make a claim for loss and/or expense under the terms of MW, because they contain no mechanism to enable it to do so. MW does not have the equivalent of clauses 4.23 and 4.17 of SBC or IC respectively. Therefore, the contractor cannot make a claim under the contract for loss and/or expense for information received late. All is not lost, however. There is absolutely nothing to stop the contractor making a claim at common law in such cases, basing the claim on a breach of contract by the employer and claiming damages. Such action has received judicial blessing. The architect cannot deal with such claims, because they are outside the contract machinery. They must be handled by the employer. If the architect receives such a claim, it must be forwarded to the employer immediately. The architect should refrain from expressing any view about the claim unless consulted by the employer. Theoretically, the employer should deal with the matter by separate legal advice and, if appropriate, pay the money directly to the contractor without an architect’s certificate.