# Claims Management Framework — Refinery/Petrochem EPC

## Claim Types (Frequency in Pakistan EPC Projects)
| Type | Frequency | Typical Quantum |
|---|---|---|
| **Variation (Scope Change)** | High | 10-30% of CP |
| **Force Majeure (FX, supply chain)** | Med | Time-only typically |
| **Unforeseeable Site Conditions** | Med | 2-10% of CP |
| **Employer-Caused Delay** | Med | 1-5% of CP + acceleration |
| **Disruption / Loss of Productivity** | Med | 3-15% of disrupted scope |
| **Acceleration** | Low-Med | Direct cost + 20-30% margin |
| **Termination & Compensation** | Low | NBV + reasonable profit |
| **Quantum Meruit (illegal contract)** | Rare | Reasonable value of work done |

## Time-Bar Discipline — The 28-Day Clock
**FIDIC 2017 Sub-Clause 20.2.1**: Contractor's claim is **time-barred** if notice not given within 28 days of event becoming known.

**Watershed: 2017 vs 1999 difference**
- 1999: Some jurisdictions held 28-day clause as "notice of intention only"; tribunals sometimes admitted late claims
- 2017: Clearer time-bar drafting; tribunals (especially Pakistan, SE Asia) increasingly enforcing strictly

**Practical protocol**:
1. Claims register on Day 1 of contract
2. Weekly "claims sweep" by Contract Manager — every event documented to prevent slipping past 28 days
3. Conservative bias: "When in doubt, notice it" — notice is cheap; claim preparation comes later
4. Use standard claim notice template embedded in PMC system

## Quantum Calculation Methodologies

### 1. Cost-Reimbursement Method (Direct Cost)
- Labor hours × labor rate (audited timesheets)
- Materials cost (invoices + freight + duty)
- Equipment costs (rental or owned-depreciation)
- Subcontractor costs (audited)
- + Allocated indirect costs (% of direct)
- + Profit margin per contract

### 2. Modified Total Cost Method
- Tendered cost - costs included in scope = baseline
- Actual cost - baseline = claim quantum
- Subject to challenge if Contractor's tender was below cost

### 3. Measured Mile Method (Productivity Loss)
- Compare productivity in "unimpacted period" vs "impacted period"
- Calculate cost differential per unit of work
- Most credible method; demands rigorous time records

### 4. Time-Impact Analysis (Delay Claims)
- Window analysis or As-Planned-vs-As-Built
- Critical Path Method (CPM) schedule
- Identify pacing delays vs concurrent delays
- Use accepted P6/MS Project schedules; recommend Hatcheted Sweep methodology

## Disruption vs Delay
- **Delay** — extends end date of activity / project
- **Disruption** — same end date but higher cost / lower productivity
- Often confused in pleadings; courts distinguish strictly
- Pakistan practice: Document disruption with daily production reports + lookup tables

## Defending Against Contractor Claims (Employer's Tactics)
1. **Pre-emptive variation discipline** — refuse to instruct unless variation order issued (preserves quantum at "instructed scope" level)
2. **Insist on time-bar compliance** — accept no claim past 28 days; record letter back
3. **Demand Modified Total Cost backup, not Total Cost** — Total Cost is suspect
4. **Counter-claim for delay damages (LDs)** — set off against Contractor claims
5. **DAAB engagement early** — Pakistan refineries have used Standing DAAB to discipline claim creep
6. **Cap exposure via Sub-Clause 17.6 (cap of liability typically 100% CP)** — make sure not waived

## Common Mistakes (Both Sides)
| Side | Mistake | Consequence |
|---|---|---|
| Contractor | Missing 28-day notice | Time-bar — claim lost |
| Contractor | Mixing change order with claim | Distinction critical; not interchangeable |
| Contractor | Inadequate concurrent delay analysis | Tribunal apportions delay between parties |
| Employer | Constructive variations not documented | Contractor's claim accepted |
| Employer | Slow Engineer's determinations | Contractor accelerates DAAB referral |
| Employer | Set-off of liquidated damages without basis | Tribunal restores set-off and adds interest |

## Pakistan Specific
- **Limitation Act 1908** — 3-year limitation period for contract claims
- **Pakistani arbitration**: Arbitration Act 2017 (recent reform); enforces UNCITRAL awards; LCIA seat preferred for international
- **Karachi seat arbitration**: Increasingly common; commercial courts established at Karachi/Lahore
- **Sovereign protection**: When State or Government instrumentalities party, immunity issues; foreign-seat arbitration preferred