Construction Delays

Extensions of Time and Prolongation Claims

Roger Gibson

• Publisher: Routledge
• Year: 2008
• Print ISBN: 9780415345866
• eBook ISBN: 9781134281718
• Edition: 1
• Topic: Technology & Engineering
• Subtopic: Construction & Architectural Engineering
• Index: Technology & Engineering

This book provides guidance on delay analysis, particularly in relation to extension of time submissions. It gives readers the information and practical details to be considered in formulating and resolving extension of time submissions and time-related prolongation claims. Useful guidance and recommended good practice is given on all the common delay analysis techniques, and worked examples of extension of time submissions and time-related prolongation claims are included.

Written in a practical and user-friendly style, the book includes helpful charts and graphics. It will be useful for construction professionals dealing with extensions of time and delay claims, and for lawyers and others who are involved in the contentious side of the construction and engineering industries.

Roger Gibson has over 40 years of planning & programming experience in the construction and engineering industries. During the latter part of his career his has received many appointments as an Expert in time-related disputes.

Part I

Introduction

1 The aims of this book

There are a number of excellent books on construction claims; and many other construction books that devote sections and chapters to construction claims. However, the majority of these works give very little guidance on the preparation of time-related delay claims, and even less guidance on the preparation of extension of time submissions.

Throughout this book the term ‘delay analysis’ is used, being a generalisation to cover both extension of time submissions and the time-related aspects of delay claims. Although there are various sophisticated delay analysis techniques around today, in its essence delay analysis is a fact-based process.

The aim here is to provide this guidance, particularly in relation to extension of time submissions. The contents of this volume are intended to outline the information and practical details to be considered when formulating extension of time submissions and time-related delay claims.

One of the recurring themes is good record keeping on projects. While a lack of progress-related records may not be fatal to a claim, it does make reaching a reasonable settlement an uphill battle. Readers will observe my continuing advice on good record keeping.

The book has been arranged in six parts, or sections:

Part I, ‘Introduction’, details general principles relating to extensions of time, delay claims and the SCL protocol.

Part II, ‘Programmes and record keeping’, deals with the fundamental matter of the project programme, together with the associated matter of record keeping during the project.

Part III, ‘Contracts and case law’, looks at the relevant time-related clauses in the JCT and NEC contracts, plus case law concerning time-related issues.

Part IV, ‘The “thorny issues” ’, deals with the ‘thorny issues’ that appear in many extension of time submissions, namely, (i) float, (ii) concurrency, (iii) acceleration and (iv) time at large.

Part V, ‘Extensions of time’, gives details of the various extension of time/delay analysis techniques together with some worked examples.

Part VI, ‘Prolongation claims (and time-related costs)’, gives details of the claim heads for a prolongation claim together with some worked examples.

A brief synopsis of the contents of each section

Part I: ‘Introduction’

The chapters on ‘Extensions of time’ and ‘Prolongation claims’ give brief overviews of these important subjects, while the final chapter in the section, ‘The SCL protocol’, highlights the core principles of the protocol together with the author’s views and opinion on these and the other sections of the protocol.

Part II: ‘Programmes and record keeping’

Although this section primarily considers the project programme and record keeping, it begins with a chapter covering the background and history of planning. Following this are four chapters concerning programming and programmes. The final chapter gives advice on record keeping during the project.

Part III: ‘Contracts and case law’

The second chapter in this section reviews the time-related clauses of the two most popular forms of contract in the UK, namely the Joint Contracts Tribunal’s 2005 edition (JCT) and The New Engineering Contract 3rd edition (NEC).

The remaining chapters, under the headings of ‘case law’ refer to cases from 1952 to 2005 held initially in the Official Referees Court, and then the Technology and Construction Court. This review of some 15 cases highlights the time-related issues of each dispute followed by a commentary reviewing the important issues such as concurrency, float and delay analysis methodology.

Part IV: ‘The “thorny issues” ’

There are many ‘thorny issues’ in the construction dispute arena which could have been included in this section. However, the four issues selected are considered to be the thorniest, if that is the correct phrase, and a chapter is dedicated to each one.

They are float, concurrency, mitigation and acceleration, and time at large.

Part V: ‘Extensions of time’

This section reviews and discusses the various types of Delay Analysis methods and techniques. The final chapters give worked examples of prospective analysis and retrospective methods; the techniques chosen are ‘time impact’ and ‘windows’ methods of analyses.

Part VI: ‘Prolongation claims (and time-related costs)’

This final section looks first at the contractual requirements and conditions for monetary compensation for time-related delays. This is followed by a chapter detailing the various ‘heads’ of a prolongation claim, followed by worked examples.

The author hopes that this book will provide useful guidance for those responsible for preparing extension of time submissions and time-related delay claims as well as for those dealing with them, the aim being that they can be resolved amicably, professionally and without either party being seriously disadvantaged.

2 Extensions of time

Just when you thought you knew all there is to know about how to prepare or analyse extension of time (EOT) claims, identify critical paths in programmes, and support your conclusions with well-reasoned arguments supported by the facts, something new comes along. Over the past 20 years extension of time methodologies have grown more sophisticated.

Delay analysis has evolved from crude hand-drawn charts in the early years of CPM to sophisticated modelling of impacts and delays using computers and state-of-the-art software. However, more recently, that very software has received criticism for allowing shrewd manipulation of the programme and analysis to favour a particular party.

Awarding extensions of time under a construction contract ought to be easy.

If the form is JCT 2005, the contractor notifies of a delay and the reason for it. The contract administrator reviews the application and, if they believe it to be the result of a ‘relevant event’, they award a fair and reasonable extension of time and fix a later date for completion of the project. The NEC contract has a more structured compensation event procedure and is specific about the programme information that has to be provided, so should achieve an answer more easily.

Most of the time these processes are applied fairly well, although there are often difficulties when contract administrators do not comply with the time scales for making the awards set out in the standard contracts: 12 weeks for the JCT, usually two weeks with the NEC. Unfortunately, the majority of EOT disputes concern the contract administrator’s assessment technique or lack thereof. Most contractors have had experience of their EOT submissions being assessed through a ‘wet finger in the air’ and/or a quick guess at what ‘they can get away with’ technique, rather than the application of a logical and analytical method involving the programme and a critical path analysis-based technique.

EOT submissions are common sources of construction disputes. Submissions/claims for extensions of time on construction projects are made by a contractor to:

1. avoid/reduce liquidated damages that could otherwise arise; and/or
2. establish an entitlement to monetary compensation during the extended period.

Extension of time clauses should be drafted so as to include for all delays which may be the responsibility of the employer. Then, if the employer, either personally or through his architect or professional team, hinders the contractor in a way which will delay the date for completion, the architect will have the power to fix a new completion date and thus preserve the employer’s right to deduct liquidated damages.

If the employer intends that liquidated damages are to be payable if the contractor fails to complete the works, then a date for completion must be stipulated in the contract. That is because there must be a definite date from which to calculate liquidated damages. There is an implied term in every contract that the employer will do all that is reasonably necessary to co-operate with the contractor and that he will not prevent him from performing. In this respect, the employer also has a duty to ensure that the architect and other professional team members employed by him carry out their duties properly. Alongside the implied term of co-operation, there is an implied term that neither party, employer or contractor, will do anything to hinder or delay performance by the other.

The meaning and purpose of liquidated damages

Construction contracts usually have a time or date by which the contractor must complete the work. The importance of a prescribed time or date for completion is that it facilitates a claim by the employer for damages for delay by the contractor in finishing the work. If there is no prescribed time, the law implies a term that the contractor must complete within a reasonable time. Therefore, the existence of an agreed time is very important for the employer. On the other hand, contractors prefer a reasonable time.

Linked to the problem of proving when the contractor is in breach for delay in achieving the date for completion is the problem of proving what damage was caused to the employer by the contractor’s breach. To overcome this, most forms of contract have a provision for the parties to agree upon a daily, weekly or monthly amount as damages for delay by the contractor. This amount is called liquidated and ascertained damages (LADs).

The main purpose of LADs is to stipulate the employer’s entitlement to damages for the contractor’s breach of the obligation to complete by the agreed date. Even if the employer’s actual damages exceed the LADs, the employer cannot recover more by way of damages. Similarly, if the employer’s actual damages amount to less than the LADs, the employer can still recover LADs.

3 Prolongation claims

It is generally accepted that failure to give notice of delay for extensions of time purposes is not usually fatal to an extension of time claim. However, failure to give notice in accordance with the contract in respect of additional payment, e.g. prolongation, or loss and expense, claims, may bar or severely prejudice a claim.

Damages act as a means of compensating an innocent party for loss or harm suffered as a result of another party’s breach of contract. The generally accepted rule is that contractual damages should be sufficient to compensate for such losses as may fairly and reasonably be considered as arising from the breach of contract.

In order to justify entitlement to damages for breach of contract, the injured party will have to prove that:

• the breach actually causes loss;
• the particular loss is recognised as giving an entitlement to compensation;
• the loss is not too remote;
• the quantification of compensatory damages is fair and reasonable under the circumstances.

The burden of proving that the breach has actually caused loss rests with the claimant, and he will need to produce contemporary records in support of the claim. The quantification of damages must be based upon factual records and not upon theoretical calculations.

There is a mistaken belief in the construction industry that after an extension of time has been granted there is an automatic entitlement to the recovery of loss and expense.

Under the JCT 2005 form of contract extensions of time and recovery of loss and expense are dealt with under separate clauses. For example, in the JCT 2005 Standard Building Contract with Quantities, section 2, clauses 2.26 to 2.29 inclusive, deal with extensions of time; while loss and expense is dealt with under section 4, clauses 4.23 to 4.26.

Under the NEC form of contract the situation is somewhat different. This contract includes core clause 6 entitled ‘Compensation events’, and under this clause a contractor is entitled to the resultant time and money.

It is common practice for decisions and awards on extensions of time to be made and issued before considering prolongation claims. Once an extension of time has been awarded, the intention of most construction contracts is for the contractor to be reimbursed for the additional costs which have resulted from the employer-responsible delays. Basically, this involves a comparison between the contractor’s actual costs incurred and what the contractor’s costs would have been had no delay occurred.

When should the delay costs be evaluated?

If, for example, a critical delay occurs to the external envelope works, awaiting details for the external windows, and the contractor is awarded a six-week extension of time, for what period should the delay or prolongation costs be evaluated? Should it be the contractor’s costs associated with the six weeks on site following the original contract completion date, or would a more accurate evaluation be achieved by assessing the costs incurred during the six-week period when the information was late in arriving?

The Society of Construction Law’s ‘Delay and Disruption Protocol’ offers good advice on this matter in paragraphs 1.11.2 and 1.11.3,

Arguments commonly arise as to the time when recoverable prolongation compensation is to be assessed: is it to be assessed by reference to the period when the Employer Delay occurred (when the daily or weekly amount of expenditure and therefore compensation may be high) or by reference to the extended period at the end of the contract (when the amount of compensation may be much lower)?

The answer to this question is that the period to be evaluated is that in which the effect of the Employer Risk Event was felt.

This is a sensible solution, and it is recommended that it is followed.

Finance charges

A contractor’s prolongation, or loss and expense, claim will invariably include a sum in respect of finance charges, the argument being that they have been ‘underpaid’ for considerable periods of time, which has necessitated borrowing to make up the shortfall or, if money has been taken off the deposit, there has been a subsequent loss of interest.

It is clear from established case law that contractors are entitled to finance charges as part of their prolongation, or loss and expense, claims. However, the contractor will still need to show that the loss was actually suffered.

The ‘heads’ of a prolongation, or loss and expense, claim

Time-related claims are, as the phrase implies, derived from the time analysis, which has identified: (i) prolongation to the contract period, and (ii) other non-critical delays to work activities.

Both of these elements should be included in a prolongation...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Preface
• Acknowledgements
• PART I: Introduction
• PART II: Programmes and record keeping
• PART III: Contracts and case law
• PART IV: The ‘thorny issues’
• PART V: Extensions of time
• PART VI: Prolongation claims (and time-related costs)
• APPENDICES