How to Handle Subcontractor Claims as a Commercial Manager

A subcontractor claim lands on your desk, usually thick, usually late, and usually demanding a number that bears little relation to the actual disruption suffered. Managing subcontractor claims UK-wide is one of the defining skills that separates a commercial manager who protects margin from one who signs off whatever arrives loudest.

This is not about being obstructive. A well-run claims process protects both sides: it gives a subcontractor with a genuine entitlement a fair route to recovery, and it gives the main contractor a defensible, auditable basis for every payment made. Get the process wrong, and you either overpay on weak claims or provoke adjudication on strong ones you should have settled early.

This guide sets out the claim types you will actually see on site, the evidence a commercial manager should insist on before assessing anything, and the negotiation judgement calls that come with deciding whether to reject, negotiate down, or settle in full.

It draws on RICS practice guidance, JCT and NEC contract mechanics, and the way experienced commercial teams actually run this process on live projects. Whether you are managing claims under a JCT Domestic Subcontract, an NEC4 Subcontract, or a bespoke supply chain agreement, the underlying discipline is the same.

The Claim Types You Will Actually See

Subcontractor claims fall into a handful of recurring categories, and recognising which one you are dealing with early shapes the whole assessment. Most subcontracts, whether JCT Domestic/Named Subcontract forms, NEC4 Subcontract, or bespoke supply chain paper, mirror the main contract's claims mechanism but with tighter margins and less resilience to absorb disruption, which is exactly why subcontractors push claims harder and earlier than main contractors often expect.

Loss and Expense (Disruption and Prolongation)

This is the most common and most contested claim type. The subcontractor argues that a relevant event (an instruction, late information, access restriction, or main contractor default) has disrupted their planned sequence or prolonged their time on site, causing direct loss such as extended preliminaries, idle labour and plant, or additional supervision. Under JCT-based subcontracts this is loss and/or expense; under NEC4 it is dealt with through compensation events, which combine time and money assessment into a single mechanism rather than treating them separately.

Extension of Time

A time-only claim seeking relief from liquidated damages exposure and a revised completion date, without necessarily claiming cost. Subcontractors often submit EOT claims defensively, simply to protect their position, even where they do not intend to pursue loss and expense. Crucially, there is no automatic link between an EOT being granted and a loss and expense entitlement following - each must be established on its own facts.

Valuation and Variation Disputes

Disagreements over the value of instructed variations, remeasurement of provisional sums, or the application of contract rates to changed scope. These are usually less contentious in principle than loss and expense but can become bitter where the subcontract rates were priced tightly, and the subcontractor tries to use variations to recover margin lost elsewhere.

Acceleration and Global Claims

Less frequent but higher value: claims for costs incurred instructing or constructively accelerating the works, or global claims that bundle multiple causes together without isolating individual cause and effect. Global claims deserve particular scrutiny - they are inherently harder to substantiate, and the burden remains on the subcontractor to demonstrate that no other factor caused the loss.

Step One: Check the Notice Before You Look at the Number

The single biggest mistake a commercial manager can make is jumping straight to the value of a claim before checking whether it was validly made in the first place. Most subcontracts contain conditions precedent - clauses that require notice of a delay or disruption event to be given within a specified period, in a specified form, to a specified person. If that notice was not served in time, the subcontractor's entitlement can be lost entirely, regardless of how genuine the underlying loss was.

• Was notice given within the contractual timescale (commonly within a set number of days of the subcontractor becoming aware of the cause)?
• Was it given in the correct form - written notice to the correct contract administrator or commercial contact, not a verbal mention at a site meeting?
• Did it identify the event and, where required, an initial estimate of the likely effect on time and cost?
• Were interim updates provided as the effects developed, where the subcontract requires ongoing notification?
• Is there a clear paper trail proving when notice was actually received, not just when it was allegedly sent?

This is not a technicality to hide behind for its own sake - used properly, it protects certainty for both parties and stops claims arriving eighteen months after the event, when records have gone cold and witnesses have moved on. Where notice provisions have not been complied with, flag this immediately in your written response rather than silently assessing the claim on its merits, which can be read as a waiver of the notice requirement.

The Assessment Process: From Submission to Ascertainment

Once a claim has cleared the notice hurdle, the assessment itself should follow a consistent, repeatable sequence rather than an ad hoc negotiation. RICS guidance on ascertaining loss and expense is explicit that the assessor must be satisfied loss has actually been incurred, not merely estimated, before a value is agreed.

1. Establish Cause and Effect

Test whether the event claimed actually caused the loss alleged. A late instruction on one work package does not automatically justify a claim for disruption across the whole subcontract - the subcontractor must show the specific mechanism by which that event affected specific activities, resources or productivity.

2. Test Against the Programme

Compare the as-planned programme against the as-built record. Was the claimed activity actually on the critical path at the time of the event? Delay to a non-critical activity with float remaining does not, on its own, support an extension of time claim, even if it genuinely inconvenienced the subcontractor's sequencing.

3. Ascertain, Don't Estimate, the Loss

Loss and expense must be ascertained from actual cost records - labour allocation sheets, plant hire invoices, timesheets, daywork sheets contemporaneously submitted and agreed - rather than derived from a formula or a percentage uplift applied to the contract sum. Where a subcontractor cannot produce contemporaneous records, that absence is itself relevant to how much weight the claim deserves.

• Cross-reference claimed labour hours against site diaries and any agreed daywork sheets
• Check plant and equipment claims against hire records and actual site presence, not the hire period alone
• Query head office overhead claims calculated using formulae (e.g. Hudson, Emden, Eichleay) - these are a last resort where direct loss cannot be evidenced, not a default method
• Confirm that costs claimed were not already recovered through an earlier variation valuation or agreed daywork

Where a subcontractor submits a claim as a daywork-style application and it is not challenged promptly by the assessor, the evidential burden can shift - silence is not a neutral position, so a timely, reasoned response matters as much as the eventual valuation.

The Assessment Workflow, Step by Step

A consistent internal process protects the commercial manager as much as it protects the business - it creates an auditable trail showing every claim was treated fairly and assessed on the same basis, which matters enormously if the dispute later reaches adjudication.

Negotiation Tactics That Actually Work

Assessment gives you a defensible number; negotiation is about closing the claim out efficiently without damaging a supply chain relationship you likely need again next month. A few principles consistently separate commercial managers who close claims cleanly from those who let them drag on.

• Respond within the contractual timescale even if the full assessment is not finished - a holding response that requests specific missing evidence stops the claim being deemed accepted by default in some subcontract forms
• Never negotiate against the subcontractor's own figure as the starting point - anchor the discussion on your independently ascertained value and explain the basis line by line
• Separate genuinely disputed heads of claim from those you accept, and settle the accepted elements early to reduce the live balance and build goodwill
• Use without-prejudice meetings to explore settlement figures, but keep the formal written assessment on the record regardless of how negotiations progress
• Where the subcontractor holds a strong position on one head of claim and a weak one on another, a global settlement figure across both is often faster and cheaper than fighting each individually
• Document every offer and counter-offer - if the dispute proceeds to adjudication, the negotiation history is evidence of reasonable conduct

It also pays to remember that most subcontractors are not trying to defraud you - they are trying to recover genuine cost from a party with more contractual leverage. Treating every claim as adversarial from the outset erodes trust and encourages subcontractors to over-claim defensively on every future project, which makes your job harder, not easier.

When to Reject, Negotiate Down, or Settle in Full

Every claim eventually needs a decision, and commercial managers should apply a consistent test rather than gut feel or how persistent the subcontractor has been.

Reject Outright

Where notice provisions were clearly breached with no valid excuse, where the claimed event demonstrably did not cause the loss alleged, or where the claim is a global claim with no attempt at cause-and-effect breakdown, a reasoned rejection in writing is the correct response. A weak rejection invites a repeat submission with padding; a well-reasoned one usually ends the matter or forces a properly particularised resubmission.

Negotiate a Reduced Settlement

The most common outcome. Where the entitlement in principle is accepted but the quantum is inflated, unevidenced in part, or includes elements already recovered elsewhere, negotiate to the evidenced figure and be prepared to explain the gap between the claimed sum and the settled sum in writing, both for your own commercial file and to keep the relationship workable.

Settle in Full

Where the claim is well-evidenced, notice was properly served, and your own assessment lands close to the claimed figure, settle promptly. Dragging out a legitimate claim to preserve cash flow damages trust, invites interest and financing charge claims, and increases the risk the subcontractor escalates to adjudication - which usually costs far more in fees and management time than the disputed sum itself.

Protecting the Relationship While Protecting the Numbers

A commercial manager who wins every claims argument but burns every subcontractor relationship in the process is not actually doing the job well. Subcontractor claims management sits inside a wider commercial relationship that spans multiple projects, and reputation in a regional supply chain travels fast.

• Keep claims discussions separate from day-to-day site relationships - a hard-nosed assessment does not require a hostile tone
• Communicate reasoning clearly, even on rejections, so the subcontractor understands the standard being applied rather than feeling arbitrarily refused
• Flag likely claims early through proactive site meetings rather than waiting for a formal submission - early identification often avoids the claim escalating in the first place
• Where a subcontractor is under genuine cash flow pressure, consider interim on-account payments against an accepted principle while quantum is finalised, rather than withholding everything until full agreement
• Build claims performance into how you assess a subcontractor for future work - persistent low-quality or opportunistic claims are a legitimate factor in re-engagement decisions

The best commercial managers treat the claims process as a discipline that runs throughout the contract, not an emergency response bolted on when a subcontractor finally submits something in writing. Good record-keeping from day one - instructions logged, site diaries maintained, programme updates issued - is what makes every claim assessment faster and every negotiation stronger.

Frequently Asked Questions

What is the difference between an extension of time and a loss and expense claim?

An extension of time addresses the completion date and relieves the subcontractor from liquidated damages exposure for the delay period. Loss and expense addresses financial recovery for the cost impact of disruption or prolongation. The two are assessed separately, and an approved extension of time does not automatically entitle the subcontractor to loss and expense - each must be proven on its own facts.

How long does a subcontractor have to submit a claim under most UK subcontracts?

This depends entirely on the subcontract wording, but many forms require notice within a set number of days (commonly between 7 and 21) of the subcontractor becoming aware of the delaying or disrupting event, with full particulars to follow within a further specified period. Missing these deadlines can invalidate the claim under a conditions precedent clause.

What evidence should a commercial manager request for a loss and expense claim?

Contemporaneous records are essential: labour allocation and timesheets, plant hire invoices and site presence records, daywork sheets, a programme comparison showing as-planned versus as-built, correspondence establishing cause and effect, and confirmation that no element has already been recovered through variations or daywork agreements.

Can a subcontractor claim head office overheads using a formula like Hudson or Emden?

Formula-based overhead claims are generally treated as a last resort, used only where the subcontractor genuinely cannot evidence actual loss through direct cost records. Where contemporaneous evidence is available, an assessor should expect the claim to be based on actual figures rather than a formula, which tends to produce inflated results.

What happens if a commercial manager ignores a subcontractor's claim instead of responding?

Ignoring a claim, particularly one submitted with supporting daywork-style documentation, can shift the evidential burden onto the party who failed to respond. It also removes the opportunity to challenge weak elements early and increases the risk of the subcontractor escalating straight to adjudication, which is more costly and time-consuming than a timely written response.

Should global claims ever be accepted without further evidence?

No. Global claims bundle multiple causes of loss together without isolating the effect of each event, which makes them inherently difficult to substantiate. A commercial manager should require the subcontractor to break the claim down by cause wherever possible, and treat an unbroken global claim with significant caution.

Is it better to settle a subcontractor claim early or wait until final account?

Where entitlement and quantum are reasonably clear, early settlement is usually preferable - it reduces the live commercial risk, avoids interest and financing charge arguments, and protects the working relationship. Weak or poorly evidenced claims can be left to final account, but genuine claims left unresolved too long tend to escalate rather than resolve themselves.

Final Thoughts

Managing subcontractor claims UK-wide is less about contract law trivia and more about disciplined process: check the notice, demand the evidence, test cause and effect against the programme and the accounts, and only then talk numbers. Commercial managers who follow that sequence consistently end up with fewer disputes escalating to adjudication and stronger, more durable relationships with their supply chain.

The subcontractors who respect a firm but fair claims process tend to submit better-evidenced claims next time, which makes the whole system faster for everyone. That discipline, applied consistently across every project, is what actually protects margin over a career, not any single hard-fought negotiation.

Want the full picture? Want to strengthen your claims and contract knowledge?

Read our guides to Extension of Time (EOT) in Construction, Compensation Events Under NEC4 Explained, and Delay Analysis Methods Explained for a fuller picture of how time and cost claims interact across JCT and NEC contracts.