Response to Claim rejection for the incurred transportation cost increase due to the KSA customs regulations

 

Our Ref: xxx

Date:

  To

xxx Contracting LLC

P. O. Box xxx

Dubai, U.A.E.

 

Attention            : Mr. xxx, Group Procurement Manager

 

Project                 : Design and Build of Coastal Village Residential Building.

 

Subject                 : Response to Claim rejection for the incurred transportation cost increase due to the KSA customs regulations

     References:

a.       xxx April xxx

b.       xxx dated 26 April xx

c.       Claim #1 ref: xxx dated 13 May xxx

d.       Claim #2 ref: xxx dated 9 June xx

e.       Claim #3 ref: xxx dated 23 June xx

f.        Claim #4 ref: xx dated 9 July xx

g.       Revised claim xxx dated 28 July xx

h.       Compiled claim xx dated 18 August xx

 

Dear Sir,

We are writing to you in response to the Employer’s rejection ref: xxx dated 18^th November xxx to our claim for the incurred additional transportation cost. This rejection from the Employer was received by M/s xxx (Contractor Name) on 28^th November xxx via Email.

Please see below our point wise response: 

On the 7^th April xxx following the onset of the COVID-19 Pandemic, extraordinary KSA custom regulations were introduced (Appendix 1). These measures resulted in the closure of the borders to trailers and drivers from the UAE.

 In order comply with our contractual schedule (Appendix 2) and as instructed by M/s xxx (Emails dated 6^th May,31^st May & 10^th June xxx Appendix 3) M/s xxx (Contractor Name) was obligated to take extraordinary measure, including usage of KSA plate trailers at inflated rates to circumvent these closures and deliver pods to site.

Our claim of the incurred additional transportation cost is based on the actual cost incurred and it does not include any overhead & profit. We have provided as supporting documents attached to our letter ref (h) above, all the copies of the invoices from the transportation companies used to deliver the 240 pods.

  ·         Identification of budgeted cost:

Our budgeted transportation cost/trip considered of AED xxx and compared to the actual cost incurred was decided based on the quotations received from the transporters during tender stage.

We had received prices of AED xxx from ATS and AED xxx from Noble. (Appendix 4).

In our claim we have considered the higher price of AED xxx and the same quotation was previously attached to our letters ref (g) & (h). In addition to that, we are attaching herewith the invoice of the cost currently paid for the delivery of pods for Phase B to your project which is only AED xxx. (Appendix 5).

This demonstrates that our consideration of AED xxx for budgeted cost is absolutely fair.

·         Selection of transporter:

Our selection of transporters was based on the lowest price among the transporters capable to deliver the pods during the customs regulation.

a-       FTE logistics was the first company that confirmed their capability of delivering to KSA. This was informed in our letters ref (a) & (b) on 26^th April xxx.

We have used the 8 available trailers from FTE and delivered the first 24 pods to the project. FTE provided the last trailer on 21^st May xxx and failure to provide other trailers. They couldn’t meet our requirement of daily deliveries to meet the project schedule. Please see (Appendix 6) the Email received from them on 17^th June xxx confirming the same.

(Note this was also informed earlier via our letter ref (e))

The failure of FTE to maintain deliveries obliged us to explore other available solutions to secure deliveries and avoid any delay to the project.

Al Suwaidi, Prime & Adso were the best available options among the transporters capable to deliver to KSA during the KSA customs regulations.

b-      Al xxx transport was the only one offering 18m trailers with a trip rate of AED xxx.

An 18 meter trailer is expected to take 5 pods, and the cost of pod/trip is AED xxx while a 12 meter trailer is capable of loading 3 pods only so the cost of pod/trip offered by ADSO & prime was AED xxx.

Since AL xxx transport were the best option in terms of price compared to Prime & ADSO, we have requested them to start arranging trailers.

AL xxx arranged 6 trailers immediately but the trailers that arrived were surprisingly not flatbed. They had a 2 meter slope which reduced the size of the trailer to load pods to 16 meters only. With such trailers only 4 pods can be used and not 5, therefore their rate of pod/trip became equal to Adso & Prime.

However, since the trailers had arrived and since we had already arranged and paid for the shipping documents considering 5 pods/trip, we took the risk and loaded the 6 trailers on 7^th, 10^th & 11^th June xxx.

This was a high risk we took to avoid delay in the project delivery but which couldn’t be maintained further, specially that the first delivery dispatched on 7^th of June, reached to KSA on 12^th Of June and the pods received were in a serious unprecedented condition. An NCR was issued also to M/s xxx (Contractor Name) after that delivery (NCR#26).

c-       Following the above, with the failure of FTE to provide trailers and the high risk of using 18 meter trailers by sending 5 pods, and with the non-benefit of sending 4 pods on a large trailers in terms of price, we had to select the best available options which were ADSO & Prime.

As of 11^th June, and as per our previous agreed schedule a total of 156 pods were supposed to be dispatched from our factory but only 54 pods were dispatched up to then due to the unavailability of transporters capable to arrange enough trailers to meet the delivery plan during the customs regulations.

The pods were ready in our factory and needing only for transporters, for that both ADSO and Prime were used together to have enough trailers and mitigate this gap.

Please refer to the attached communications (Appendix 7) with other transporters that demonstrate clearly that both ADSO & Prime were the best and for a while the only options to use.     

With reference to the Employer’s statement that only 160 pods should have been delivered during this period, we would like to clarify that M/s xxx (Contractor Name) delivered the pods in compliance with our contractual programme and we have not received any instruction by M/s Amana to reduce the rate of deliveries.

M/s xxx (Contractor Name) have not been made aware at any point during the execution of our subcontract that the pods required during this period should be 160 pods and not 240. We stress again that M/s xxx (Contractor Name) has delivered the 240 pods in accordance with our agreed Contractual Programme (Appendix 2).

Finally, we expect the above has detailed and clarified all the pending points to enable you to approve our claim of additional cost incurred amounting to AED xxx.

This amount is more than 6% of our subcontract value and has a significant impact on our Subcontract and our cash flow. M/s xxx (Contractor Name) has gone above and beyond to support the project and complete deliveries to site on schedule at a time of complete border closure and in full transparency.

We kindly request that you address this issue with the urgency and the fairness it requires.

Looking forward to receiving the approval confirmation.

 

Yours faithfully,

On behalf of xxx LLC                                                                      

 

xxx

project Manager