Definition

In an APC context, a loss and expense claim is a contractor's claim for reimbursement of direct losses and expenses caused by matters for which the employer is responsible under the contract. Under the JCT Standard Building Contract, clause 4.23 provides the right to recover direct loss and expense caused by specified relevant matters (including employer instructions, late information and access restrictions). "Direct" excludes loss of profit on other contracts and costs caused by the contractor's own risk events.

Why this matters for Communication and Negotiation

  • Loss and expense claims are a core negotiation scenario for quantity surveyors at Levels 2 and 3.
  • Assessors use loss and expense scenarios to test both technical knowledge (entitlement, quantification) and communication skills (how the negotiation was conducted).
  • Rules 1 and 3 of the RICS Rules of Conduct require surveyors to deal in genuine figures and achieve a fair settlement efficiently.

Key principles

Establish entitlement before quantification

The first question is not "how much?" but "is this claim payable at all?" Establish whether the relevant matter is one of the specified grounds in the contract, whether a causal link exists between that matter and the loss claimed, and whether the contractor complied with the notification requirements. Many claims fail because a concurrent contractor delay breaks the causal chain.

Prepare a detailed counter-assessment

Analyse the submission item by item: the claimed delay period against the programme; labour and plant costs against actual records (daywork sheets, plant invoices); head office overheads against the Hudson or Emden formula applied to audited accounts; and finance costs against evidence of actual borrowing. Every disagreement must be supported by a counter-calculation, not a global percentage reduction.

Conduct the negotiation with discipline

Share the employer's assessment in writing before any meeting. Work through the claim chronologically, agreeing items where the contractor's evidence is credible and explaining clearly why others are rejected. Record progress in a running tabulation. If the gap remains significant after two or three structured meetings, consider a without-prejudice meeting focused on total value. Document all offers and counter-offers.

Agree and document the settlement

Once the parties agree a total figure, confirm it in a without-prejudice save as to costs letter stating that the payment is in full and final settlement of the claim arising from the identified relevant matters. Issue a formal instruction, update the final account, and document the client's written authority to settle.

Relevant RICS guidance and legislation

  • RICS Rules of Conduct (effective 2 February 2022) — Rule 1 (Honesty and Integrity) and Rule 3 (Service) apply throughout the claim assessment and negotiation.
  • JCT Standard Building Contract (current edition) — clause 4.23 sets out the relevant matters, the notification procedure and the employer's obligations in responding.
  • Housing Grants, Construction and Regeneration Act 1996 — the right to adjudicate at any time defines the BATNA if negotiation fails.

Ethics and Rules of Conduct angle

Rule 1 (Honesty and Integrity) applies to both parties' surveyors. A contractor's surveyor who inflates a claim or presents records that do not reflect actual costs breaches Rule 1. An employer's surveyor who rejects legitimate claims without analysis or delays negotiation to erode the contractor's cash-flow also breaches Rule 1. The obligation is to deal in genuine figures and reach a fair settlement efficiently.

APC-style Q&As

Q (Level 1)What is loss and expense under a JCT contract and what does "direct" mean?

Loss and expense is reimbursement of the contractor's direct losses caused by specified relevant matters for which the employer is responsible. "Direct" requires an unbroken causal chain between the relevant matter and the loss claimed. Consequential losses and costs caused by the contractor's own risk events are excluded.

Q (Level 1)Name three relevant matters under the JCT Standard Building Contract.

Variation instructions issued under clause 3.14; failure by the employer or architect to provide information in accordance with the information release schedule; and delay in giving the contractor access to the site. The contractor must have been materially affected in the regular progress of the works.

Q (Level 2)The contractor on a hospital project submits a loss and expense claim of £500,000 for delayed delivery of specialist medical equipment. How do you assess it?

(example) First, establish whether the delay is a relevant matter: if employer-supplied, it is; if contractor-procured, it is a contractor risk. Assuming entitlement, assess causation: did the delay affect the critical path, or was the contractor working elsewhere concurrently? Finally, verify quantification: are the claimed costs supported by records showing resources were genuinely idle during the delay? A £500,000 claim for three weeks implies roughly £167,000 per week, which I would test against the tender resource schedule and actual site records.

Q (Level 2)How do you approach a negotiation meeting where the contractor and employer are far apart on quantum?

I share the employer's assessment in writing before the meeting. At the meeting I work item by item: listen to the contractor's explanation, probe unsupported assumptions, and concede items where the contractor's records and reasoning are credible. Summarise progress at the end of each section. Flag irreconcilable items as potential adjudication points and move on rather than allowing them to stall the negotiation.

Q (Level 3)The contractor submits a global loss and expense claim of £1.8m without identifying the causal link between each relevant matter and each head of loss. How do you respond?

A global claim that fails to identify the causal link is generally not admissible under English law. I would respond in writing, noting that the claim does not demonstrate the required causal connection, and invite the contractor to provide a particularised analysis within a specified period. The response would be constructive, giving a clear indication of the information required. If a particularised analysis is provided, I would assess it on its merits with the same rigour as any other claim, consistent with Rule 1 of the RICS Rules of Conduct.