Delay Analysis in Construction Contracts

P. John Keane, Anthony F. Caletka

• Publisher: Wiley-Blackwell
• Year: 2015
• ISBN:
  9781118631133
• Edition: 2
• Topic: Law
• Subtopic: Construction Law
• Index: Law

The most significant unanticipated costs on many construction projects are the financial impacts associated with delay and disruption to the works. Assessing these, and establishing a causal link from each delay event to its effect, contractual liability and the damages experienced as a direct result of each event, can be difficult and complex. This book is a practical guide to the process of delay analysis and includes an in-depth review of the primary methods of delay analysis, together with the assumptions that underlie the precise calculations required in any quantitative delay analysis. The techniques discussed can be used on projects of any size, under all forms of construction contract, both domestic and international. The authors discuss not only delay analysis techniques, but also their appropriateness under given circumstances, demonstrating how combined approaches may be applied where necessary. They also consider problematic issues including 'who owns the float', concurrent delay, early completion programmes, and disruption. The book has been brought fully up to date, including references to the latest publications from the CIOB, AACEI and SCL, as well as current case law. Broad in scope, the book discusses the different delay analysis approaches likely to be encountered on national and international projects, and features practical worked examples and case studies demonstrating the techniques commonly used by experienced practitioners. This is an invaluable resource to programmers and schedulers, delay analysts, contractors, architects, engineers and surveyors. It will also be of interest to clients' professional advisors managing extension of time or delay claims, as well as construction lawyers who require a better understanding of the underlying assumptions on which many quantitative delay analyses are based. Reviews of First Edition
"John Keane and Anthony Caletka are pukka analysts in that tricky area of delays, programming and extension of time. I highly recommend their book Delay Analysis in Construction Contracts. Buy the book." ( Building Magazine, February 2009) "The book?s stated purpose is to provide a practical guide for those interested in schedule delay analysis. It provides a good in–depth review of the most common delay analysis techniques.... An excellent book, full of practical tips for the reader and very timely in its publication. It is well worth the cost and a good read for anyone involved in schedule delay analysis." ( Cost Engineering, February 2009) It achieves in spades its stated aim of being a practical guide for contractors, contract administrators, programmers and delay analysts, as well as construction lawyers who require a better understanding of the underlying assumptions on which many quantitative delay analyses are based. ( Construction Law Journal, 2009)

Chapter 1
Introduction

1.1 General

Construction output¹ in the United Kingdom represents approximately 7% of the UK Gross Domestic Product (GDP²). In the United States, the proportion for construction output, including manufacturing and mining, constituted 17% of the GDP output³ for 2013 with construction output alone valued at around $900 billion.⁴ Construction is a unique industry due to it being a fast-moving, complex and dynamic process which depends on the successful coordination of multiple discrete business entities – including professionals, tradesmen, manufacturers, trade unions, investors, local authorities, specialist trade contractors and so on to ensure the delivery of a project on time, within budget and of the required quality. This coordination is dependent on the application of sound planning, programming and project controls, allied to the implementation of tried and tested management techniques. Much of this work is carried out using increasingly sophisticated computer applications that are continually advancing by offering more and more capabilities to the end user.

A survey⁵ carried out among UK contractors in the mid-1990s found that 49% of contractors did not use computers on construction site locations. Now, not only are computers commonplace in one form or another, but also the use of specialist planning software is common as is computer-aided delay analysis.

Risk is an inherent feature of construction, and it is well known that ‘no construction project is risk free. Risk can be managed, minimised, shared, transferred or accepted. It cannot be ignored⁶’. If it is accepted that risk is inherent in construction, then it must also be accepted that the likelihood of delays is also inherent in the process and should therefore be anticipated, managed and treated in a similar fashion as risk. When delays are experienced, this is not necessarily an indication that the process or management team is breaking down. Delays are often simply the result of an event which must be managed by a systematic process so as to anticipate the impact of that event on the programme and to minimise the risk of further delay. Systematic management of delay during the course of a project also ensures that the cause of that delay is identified, and documented, at the earliest opportunity. When there is a requirement to identify the cause and effect of delay to establish entitlement to additional time or money, the results of any relevant analysis should be capable of being presented in a clear and unambiguous way.

The most significant unanticipated cost in most construction projects is the financial impact associated with delay and disruption to the works. Assessing the impact of delay and disruption and establishing a direct causal link from a delay event (‘cause’) to its impact (‘effect’), the liability and resulting damages, can be difficult and complex. Contractors and subcontractors require these skills for successful evaluation and presentation of time delay claims. The employer's professional team also requires similar skills and techniques when analysing and evaluating extension of time entitlements under a construction contract. Where these delay issues are not resolved by the contract administrator and contractor in the normal commercial way, then such issues are often left to be decided by third parties in arbitration or adjudication, before dispute review boards or, ultimately, in litigation. All these steps within the dispute resolution hierarchy have different timetables and expectations regarding the evidence required to demonstrate cause and effect. In selecting the most appropriate technique to suit the project and to ensure proportionality is maintained, the following factors must be considered: the relevant facts, the timetable, the nature and number of delay events and the size of the potential dispute.

1.1.1 Purpose of this book

The purpose of this book is to provide a practical guide to the process of delay analysis for programmers and delay analysts and to inform non-programmers of the nuances of delay analysis techniques available. The book also considers the assumptions which underlie the precise calculations of a quantitative delay analysis, in order to ‘level the playing field’ for non-programmers and experts alike. This entails an in-depth review of the primary methods of delay analysis in use today, along with some familiar secondary methods. The timing and purpose of delay analysis is also discussed, together with a review of the fundamentals of critical path method (CPM) programming. The ‘project control cycle’ is also described in detail. Contemporaneous programming evidence, whether flawed or not, will usually be preferred to retrospectively created programme data, so the emphasis should be on establishing and maintaining an accurate and effective CPM programme throughout the performance of the works.

This book is intended for project and construction management practitioners, contract and legal advisors and programming consultants alike, who not only seek an understanding of the principles, techniques and methodologies involved in the process of delay analysis but also want to understandw the techniques and underlying processes in some detail. Such individuals include those employed by project owners (employers), contractors/subcontractors, legal experts and consultants who often find the need to manage extension of time or delay claims.

The techniques discussed in the book can be used on projects under all forms of construction contract, both domestic and international. Disputes involving delay entitlement and quantification, and which have to be resolved by the intervention of a third party trier of fact, are a frequent occurrence in the construction industry. Over the years, judicial decisions on several key aspects of delay dispute have been handed down by the courts, which have assisted, to some extent, in shaping the way in which delay analysis is undertaken in certain aspects. However, while the implications of these decisions clearly have a great bearing on the work of a delay analyst, it must be remembered that most, if not all, decisions regarding delay analysis are made not necessarily on the method of analysis, but rather on the underlying facts presented and relied upon.

The courts are only presented with delay issues after the event, and therefore decisions handed down mainly provide guidance on retrospective delay analysis techniques which demand, and rely upon, a high level of accuracy and detail with regard to the as-built programme. Notwithstanding the influence of the courts on the process of developing claims for delay and disruption, in order to accord with the ethos of this book, and the actual circumstances and facts many construction professionals find themselves managing, the authors have restricted the use of case law references to a minimum; for instance, where a principle has clearly been established and is commonly referred to in delay claims. Where cases have been referred to, this has not only been restricted to English case law but also includes a small number of significant US cases which are relevant to topics addressed. The US courts have accepted the concept of CPM programming and computer-generated delay analysis submissions since the early 1970s. The English courts appear to lean in the direction of ‘common sense’, whereby the method of analysis is secondary, whether CPM programming techniques were relied upon or not.

It is important that a delay analyst should not become blinkered or be constrained by past judicial decisions in devising and applying delay analysis techniques prospectively in a live project environment. If a delay analyst adopts an unorthodox approach which is acceptable by both parties and resolves a time entitlement claim, then that is to be commended. In the same vein, it is important not to get too hung up on ‘named’ approaches; this is largely another spin-off from judicial involvement in the development of delay analysis. Such named approaches include ‘time impact analyses’, ‘as-planned versus as-built’ and ‘collapsed as-built’ (CAB). These names really only start to have any significance when used as expert evidence to provide a general indication of the approach being adopted by the delay analyst. Even so, there has been little guidance, until recently, as to how each method should be carried out. The primary named methods are often misused in court proceedings, arbitrations and adjudications.

Court decisions and arbitral awards sometimes indicate either a lack of willingness to come to grips with the issues and terminology or a difficulty in fully grasping the intricacies of sophisticated delay analyses. This is entirely understandable as judges are not usually presented with easy issues. The complexity of even the simplest of construction processes often proves to be extremely difficult to convey. Also courts, along with parties' legal advisers, are not always assisted by delay analysts who misdescribe or misapply these techniques and opposing experts who do not take one another's approach ‘head on’. When two opposing party appointed experts refuse to engage the other's method of analysis, this leaves a void where agreed programming evidence should be. These cases often conclude by the tribunal making an assessment based on the facts.

In summary, it is somewhat arbitrary to ‘badge’ and thereby restrict a piece of analysis, and while reference is made in this book to the primary delay analysis approaches, the authors urge caution in becoming too prescriptive because even these primary methods have secondary derivatives and many variations as to how they can be carried out. Also, for this reason, the authors have restricted the use of case law references to a minimum, to allow the site-based practitioner to make informed judgement calls when developing a delay claim rather than simply discounting one method of delay analysis over another, based on his or her understanding of the latest judicial decision mentioning a method of delay analysis being applied by either party.

This book discusses delay analysis techniques and approaches, with their appropriateness under given circumstances, and demonstrates how a combined, or hybrid, approach can be applied, complete with worked examples and case studies. Delay analysis is becoming an increasingly complex activity and there is continual debate and commentary on the primary approaches available. This book brings together the main techniques available in comprehensive primary and secondary categories. The particular techniques described in this book have been successfully tried and tested by the authors in both the commercial environment and in dispute resolution proceedings: adjudication, arbitration, dispute review boards and litigation. This book will serve as a resource guide for those practitioners, advisors, clients or contractors preparing or responding to construction delay...