Construction and engineering contracts usually define a date for completion; this being the date by which the works are to be ready for use by the Employer as intended. Any overrun of this date will have cost consequences for all parties (Employer, Professional team, Contractor, Supply chain).
In the event of delay, the Contractor may find itself at the receiving end of both downstream monetary claims from its supply chain, and the potential for upstream monetary deductions (Liquidated and Ascertained Damages, or ‘LADs’) or claims from the Employer. The Contractor will also be incurring additional time-related costs itself.
If the cause of the delay is an event for which the contract assigns responsibility to the Employer, the Contractor can apply for an extension to the date for completion. If successful this will protect the Contractor from LADs; and possibly assist the Contractor with its own, or its supply chain’s, financial claims.
The mechanism for extending the date for completion is ordinarily stated within the contract. The first step usually involves some form of notification of a delay event and that the Contractor attempts to mitigate the delay. Next there is usually a requirement for the Contractor to provide further and better particulars of the causes of the delay event, as well as demonstration as to the effect the delay event has on the date for completion.
Generally speaking, the cause (or not) of the delay event is a matter of fact. For example, something did or did not happen; an instruction either was or was not given; a design either was or was not provided etc. The effect of the delay event is often more difficult to demonstrate. Whilst it is usually fairly straightforward to demonstrate that ‘Event A’ affected the progress of its immediate surrounding area; demonstrating that ‘Event A’ delayed the whole project is a different matter, especially if there are other competing causes of delay.
If an Employer event delayed completion; then an extension of time (EOT) is due. If an Employer event only disrupted progress and had no effect on the date for completion; then no EOT is due. Subject always to contractual notification and/or condition precedent considerations, EOT claims can be made at any point prior to full and final settlement of the contract final account. This may be during the works, or after they have completed. A claim made during the works can only ever anticipate what measure of delay to the date for completion may take place on account of the Employer responsible event. Claims made after the works have completed are done with the knowledge of the actual measure of delay experienced to the date for completion, but that delay may only be in part caused by Employer responsible events.
It might therefore be tempting for the administrator of the contract to wait and see what the actual delay is before assessing any EOT claim. However, a ‘wait–and-see’ approach may be contrary to the assessment time-frames contained within the contract, and the certification obligations placed upon the administrator of the contract.
Generally speaking, the assessment time-frames within the standard forms of construction contract are:
- The JCT contract anticipates that an assessment be made "… as soon as reasonably practicable and in any event within 12 weeks of receipt of the required particulars."
- The NEC contract anticipates that the Project Manager will respond within 2 weeks.
- The FIDIC contract anticipates a response in 42 days (or 6 weeks).
- The ICC is silent on specific time-frames for review of a claim; but requires a final review within 28 days (4 weeks) of the achieved Completion Date.
Therefore if a Contractor provides a compliant claim during the currency of the project, it is generally entitled to a response within 'a number of weeks', which may mean before completion has actually occurred.
The assessment of EOT claims can be a time-consuming and complicated process, often requiring the administrator of the contract to review detailed submissions and project records. This may divert attention from his or her ‘day job’ of Project Manager, Engineer or Architect. Practical industry guidance exists to assist in the assessment of EOT claims. In particular:
The RIBA Guide to SBC 2016 – which is written to assist in the administration of the JCT forms of contract - states (para 4.28):
"… once sufficient information is available the Contract Administrator should proceed to making a decision, and not wait until the end of the 12-week period"
Seemingly making the point that, if possible, a decision sooner than 12 weeks is preferable. The RIBA guide continues (para 4.36):
"The effects of any delay on completion – taking into account the contractor’s ‘best endeavours’ – are not always easy to predict. The Contract Administrator is required to reach an opinion, and in doing this the Contract Administrator owes a duty to both parties to be fair and reasonable …"
The RICS first edition guidance note to Contract Administrator (page 16) states:
"It is recommended that the CA checks the building contract to identify time limits that apply to the process, and if necessary set up a system to ensure that the time limits imposed by the building contract are met …"
As to the assessment of delay, the RICS acknowledge the difficulties; stating (page 16):
"The calculation of an extension of time can be very complex but, in principle, the CA assesses whether or not the delay has had an effect on the contract completion date and what that effect is. Furthermore most building contracts require the assessment to be ‘reasonable’, recognising that the assessment is not an exact science."
The Society for Construction Law (SCL) Delay and Disruption protocol (2nd Edition), which is widely recognised and drafted to provide practical and principled guidance, lists 22 core principles.
No 4 is entitled ‘Do not wait and see regarding impact of delay events’. Stating (para 4.1) that "… EOT application should be assessed as soon as possible, and in any event not later than one month after the application has been received." The inclusion of the ‘one month’ time-frame appears to be representative of a ‘mid-point’ between the standard forms of contract assessment time-frames; and highlights the generic rather than contract specific nature of the document.
The protocol also makes the point (paras 3.1. to 3.3) that adherence by all project participants to the contractual requirements vis-à-vis notices, particularisation and assessment of delay claims gives the best opportunity for the project team as a whole to identify, and then attempt to mitigate, the effects of any delay event.
Despite standard forms of contract, practical industry guidance and the SCL protocol all agreeing that a ‘wait and see’ approach to EOT claims should be avoided; it is the author’s experience that some administrators of the contract still let the prescribed time-frames slip. This creates time and cost uncertainty for all concerned (Employer, Professional team, Contractor, Supply chain). Timeframe slippage may also provide the circumstances for a dispute to crystallize and be taken to Adjudication.
Furthermore, potential may also exist for a constructive acceleration claim by the Contractor. Such claims can arise when an EOT which the Contractor believes is properly owed is not forthcoming. The Contractor may feel it has no choice but to accelerate the works to avoid the threat of LADs being imposed. In the event that an EOT is subsequently awarded, perhaps through the Adjudication process, the costs of the accelerative measures may be claimed from the Employer.
Potential may also exist for the realisation of a ‘time-at-large’ scenario. The detail of such scenarios are subject to legal interpretation, and thus outside the remit of this article. However, the principle being if a third party referee decides the time mechanisms within the contract have become inoperable; this may relieve the Contractor of its obligation to complete by a specified date; replacing it with a lesser obligation to complete in a reasonable time-frame. The Employer may also lose the ability to levy LADs.
Whilst the success or not of a claim; or the realisation or not of a particular scenario will always be subject to contractual interpretation and the factual matrix; it is the author’s experience that failure to deal with EOT claims as they arise antagonises Contractors, and creates uncertainty for all involved in the project. This invariably results in a worsening of working relationships between the project participants. A project team working well together creates a far more enjoyable project experience for everyone, which in turn may lead to fewer disputes generally.
To conclude, it is always best for all parties to adhere to the contractual timeframes and processes. Doing so avoids uncertainty and helps maintain working relationships. To continue the widespread misquoting of Winston Churchill … jaw-jaw is better than war-war.
Sam Playford is a planner and delay analyst who advises both domestic and international clients and contractors on construction time-related matters.