Delay and Disruption in Construction Contracts

Andrew Burr, Andrew Burr

• Publisher: Informa Law from Routledge
• Year: 2016
• ISBN:
  9781317377719
• Edition: 5
• Topic: Law
• Subtopic: Construction Law
• Index: Law

Delay and disruption in the course of construction impacts upon building projects of any scale. Now in its 5th edition Delay and Disruption in Construction Contracts continues to be the pre-eminent guide to these often complex and potentially costly issues and has been cited by the judiciary as a leading textbook in court decisions worldwide, see, for example, Mirant v Ove Arup [2007] EWHC 918 (TCC) at [122] to [135] per the late His Honour Judge Toulmin CMG QC.

Whilst covering the manner in which delay and disruption should be considered at each stage of a construction project, from inception to completion and beyond, this book includes:

• An international team of specialist advisory editors, namely Francis Barber (insurance), Steve Briggs (time), Wolfgang Breyer (civil law), Joe Castellano (North America), David-John Gibbs (BIM), Wendy MacLaughlin (Pacific Rim), Chris Miers (dispute boards), Rob Palles-Clark (money), and Keith Pickavance
• Comparative analysis of the law in this field in Australia, Canada, England and Wales, Hong Kong, Ireland, New Zealand, the United States and in civil law jurisdictions
• Commentary upon, and comparison of, standard forms from Australia, Ireland, New Zealand, the United Kingdom, USA and elsewhere, including two major new forms
• New chapters on adjudication, dispute boards and the civil law dynamic
• Extensive coverage of Building Information Modelling
• New appendices on the SCL Protocol (Julian Bailey) and the choice of delay analysis methodologies (Nuhu Braimah)
• Updated case law (to December 2014), linked directly to the principles explained in the text, with over 100 helpful "Illustrations"
• Bespoke diagrams, which are available for digital download and aid explanation of multi-faceted issues This book addresses delay and disruption in a manner which is practical, useful and academically rigorous. As such, it remains an essential reference for any lawyer, dispute resolver, project manager, architect, engineer, contractor, or academic involved in the construction industry.

Chapter 1
Introduction and terminology

Introduction

Terminology

The contractor

The developer

The contract administrator

The works

Programme and schedule

Critical path

Delay

Disruption

Introduction

“Construction changes, delays and claims are a major problem for public work agencies, developers and facility managers – and for contractors and designers building their projects. Delays and claims siphon off a significant portion of the available funds for construction, often cost contractors and designers a significant portion of their anticipated profit, and sometimes create a loss, or even destroy a contractor and the owner’s lifetime savings.” ¹

1–001 The construction industry has suffered more than most other sectors within the United Kingdom in recent years with the industry reportedly experiencing a 24% decrease in output from 2007 to 2010. Many of these projects suffer delay to completion, together with associated disruption.

1–002 Delayed completion is not unique, however, to the construction industry. It also happens in aerospace projects, shipbuilding², IT, oil and gas, rail transport, petro-chemical and process plants and civil engineering projects. Nor is delay unique to a particular culture, or jurisdiction: the same things happen in the United Kingdom as occur in Russia, the United States, Hong Kong, the Middle East, Pakistan, India, South Africa, Australia and the forests of Peru. In fact, it happens in all industries, jurisdictions and cultures in which a unique product, the character of which is expected to change, is created over a period of time by a combination of specialised resources.

1–003 When time has not been managed effectively, the consequences can be devastating for all participants. However, it is not just the employer, consultants, contractors and suppliers who suffer as a result of mismanagement of time: the £150m spent in prolongation costs on the Scottish Parliament building could have funded a fully equipped general hospital and, whilst for many private developers, profit and loss on the bottom line are the primary driving forces, for public authorities, getting value for money and not frittering it away on the costs of mismanagement are equally important. High profile projects in the United Kingdom (such as the Shard) do not escape such problems and there are currently four “disaster” projects in Germany alone.

1–004 At a meeting of the Society of Construction Law in 2000, a group of members got together to discuss the manner in which delay issues were handled by both the parties and the courts, with a view to making the resolution of delay-related disputes more predictable. In October 2002, the Delay and Disruption Protocol was published. The thesis propounded was that, if the impact of intervening events could be impacted upon a network schedule which was up to date at the time, their effect could be calculated and measured instead of guessed; further, this would be greatly to the advantage of everyone concerned with managing time proactively, or dealing with extensions of time and compensation for delay.

1–005 Notwithstanding the obvious advantages, the industry did not take this message to heart; contract-drafting bodies ignored it and the SCL Protocol has been found to have been more often used as a stick with which to beat the opposition in disputes, rather than to avoid disputes in the first place. The SCL Protocol is in the process of being revised and updated and a critique thereof appears at Appendix 3 to this book.

1–006 Since the 1980s, the favoured theory has been that the failure to control time must be something to do with contractual relationships and that, if projects were less adversarial, better results would be achieved. In 2003, the OGC published their Constructing Excellence industry guidance, the essence of which was that, so long as the correct procurement route was selected, completion on time would follow³. To the myriad of standard forms and procurement methods already then available were added partnering and alliancing, and the New Engineering Contract. However, Constructing Excellence key performance indicators have shown that, since the adoption by government agencies of that procurement process, construction time standards have either remained stagnant, or declined⁴. If it was not apparent before, we now know that the type of contract, or procurement route, has no effect on the incidence of delayed projects and that is so whether the project is executed under a bespoke contract, PPP, partnering, NEC, design and build, EPC, traditional build only, or (that wonderfully reassuring misnomer) “guaranteed maximum price”. All that contracts can do is set a standard of performance and allocate liability for failure; they cannot produce success no matter how well they are written.

1–007 On the other hand, it is apparent that, over the years, little or no thought has been given in any of the standard forms discussed in this fifth edition (including the OGC-preferred NEC forms) as to what the employer might reasonably require as to the management of time, nor how it could be achieved with any certainty. It is generally the case that, whereas the provisions for cost control may run to several pages of conditions, the requirements for time control will not be mentioned at all or, if mentioned, then the requirements are hopelessly inadequate and unrelated to the provisions for extension of time, or time-related compensation. Such drafting renders it impossible for D to have any control at all over the effects of change, or the ultimate contract period. It is significant that, of all the standard forms considered here, only some 50% refer to a schedule at all, less than a third of those forms actually require the contractor to produce a construction schedule for the works and none provide any effective control of progress records, or the quality of the schedule, or say for what, or how the schedule and progress records are to be used⁵.

1–008 The only consistency over the last 100 years or so, between all the attempts to manage time, is that they have all been based upon getting the contractor to devise a static programme, usually on paper, at the beginning of the job (in the form of a target), against which a failure to achieve it can be measured and then reporting against any divergence, in the hope that, in response to threats and/or financial encouragement, some recovery, or acceleration could be made. This is at the root of the problems with time management. Historical reporting of failure to achieve a notional fixed target is not an effective way to manage time on complex projects. That is so, with, or without threats, or financial encouragement.

1–009 However, experience also tells us that there are two factors common to all projects which fail to be completed on time all over the world, in all industries and jurisdictions, under all forms of contract. These are:

poor project programming; and

poor record keeping;

competence in both of which is essential for effective project control.

1–010 For the last 30 years or so, construction management has been at the cornerstone of the CIOB’s policies for improvement of the construction industry. Conscious of several high profile disastrous failures in time management over the years since the SCL Protocol was published, and with a view to examining the state of the industry in this field, between December 2007 and January 2008, the CIOB conducted a survey of the industry’s knowledge and experience of different methods of project control and time management. The report, based upon data provided on nearly 2,000 projects over a three-year period⁶, concluded that, amongst other things, the growth in training, education and skill levels of the industry in the use of time-management techniques has not kept pace with the technology available. 95% of the respondents thought that the standard of education and training in the management of time was unsatisfactory. In summary, it was found that the state of proficiency in time management was roughly comparable to the state of proficiency in cost management over 100 years ago: no standards to work to, no training, or education in the process and no accreditation for those doing it. Indeed, it was felt that the absence of standards, training and education in this field might be the reason why the recommendations of the SCL Protocol have not been taken up more widely⁷.

1–011 It was against this background that, in September 2008, the CIOB set up a working group (under the previous author’s direction) of varied professional interests from as far apart as Australia, America and the United Kingdom to develop a practical standard to which the industry could work. The result, entitled A Guide to Good Practice in the Management of Time in Complex Projects, was published in 2010. This work was very much a team effort, which could not have been produced without the variety of experience provided by the “Working Group” which wrote it. It is widely referred to in this fifth edition.

1–012 In Mirant v Ove Arup⁸, the late HH John Toulmin CMG QC (a service of thanksgiving for whose life was held at The Temple church on 5 November 2012) paid glowing tribute to the third edition of this book. The structure of the fourth edition was a departure, in many ways, from the structure of its three predecessors; the fourth edit...