7.11. Counterclaims on Contractor, recovery & back charging

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Process Owner | GM Office

Counterclaims, recovery & back charging are debit by the Client on the Contractor for various reasons, in line with the Contract document.

Some of the notable counterclaims are;

  1. Penalty for not keeping the site clean and safety violations
  2. The incurrence of any expenses on behalf of the GC
  3. Non-compliances of the Contract – As per provisions in the Contract
  4. Penalties for not achieving milestones – As aper provisions of the Contract
  5. Damages to the property at the site
  6. Third-party claims not settled by the Contractor
  7. Inadequate care of persons injured at the site and not adhering to HSE standards
  8. Reimbursement of insurance policy cost for the policy taken by the Client falling in Contractors scope
  9. Liquidated damages

Out of the above, Liquidated damages can be invoked only with the approval of the management. The back charges & claims can be made by the GM, in line with the contract terms. A discussion needs to be held with the Contractor explaining the amount to be claimed/ back charged, the background etc. so that it doesn't spring surprises to the Contractor when the actual debit is being made.

The Contract team shall make sure that items (i) to (h) above are over and above the LD in the standard template of GCC.

Rule 7.16

(Rule 7.16)Following process shall be followed for Counterclaims on Contractor and back charging

  1. As and when it comes to GM's notice about incurrence of cost towards the Contractor or entitlement of a claim, the GM office shall initiate a claim statement prepared using the QS under the concerned GM.
  2. This shall be sent to the commercial department to validate and approve. The information should include all the relevant details including brief on the issue, all written correspondence & evidences, financial impact, and any other useful information to establish the claim.
  3. Once the same is cleared, the GM shall initiate a meeting with the Contractor and share the calculations.
  4. Once the Contractor and GM agree on the values, QS shall be instructed to create a recovery on the Contractor in the following Running Bill.
  5. No entries shall be passed unless the claim/recovery is mutually agreed between the Contractor and the GM.
  6. Should there be stalemate or deadlock between the Contractor and the GM on the recovery, back charge or on the values, the matter should be escalated to the Commercial department for resolution at the highest level
  7. Before that formal communication should be sent to the Contractor from the GM office attaching the claim as per the Client
  8. The Commercial department should endeavour to close the issue in discussion with the senior management of the Contractor with 21 days of such escalation by the GM.
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Scope of ERP

The counterclaim, back charge and recovery should be made as part of Running Bill creation, validation and approval under ERP wherein the claim/back charge will appear as Contractors Recovery.

Rules:
Rule 7.16 Practice for contracting strategy for a project

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