Such are the problems caused by delay and disruption within the construction industry, the Society of Construction Law has published its own delay and disruption protocol; an eighty four page document now in its second edition.
Whilst most contractors will certainly not need to memorise the entire protocol, any business operating within the construction industry will benefit greatly from paying close attention to some of its key messages.
1. Programme and Records
The key to any successful delay claim (and most other claims for that matter) is comprehensive and accurate record keeping.
Construction programmes should be regularly updated and circulated to all relevant people (if responsibility for the production of the programme rests with their employer (as will often be the case), contractors (sub-contractors) should be pro-active in ensuring that accuracy is maintained by regular updates).
Where issues of delay arise, written notices should be provided to employers and any relevant sub-contractors (or to contractors if you are the sub-contractor).
Detailed records must be prepared concerning the impact(s) upon the construction programme (and, if relevant, completion date(s)) and the ongoing allocation of resources (including all plant and labour); particularly where additional financial claims are envisaged for idle machinery and / or manpower.
2. Extension of Time (EOT)
From the contractor / sub-contractor’s point of view, the primary goals of an EOT claim are to avoid liability for late completion (whether for liquidated or unliquidated damages) and, in some instances, to facilitate additional financial claims being made by them.
From the employer’s point of view, EOT’s allow for the proper management of the construction programme and the maintenance of accurate projections for the anticipated completion date (or dates where work is phased or carried out in sections). It also prevents the time for completion becoming ‘at large’.
3. Contractual Terms
Where standard form contracts (such as JCT) or bespoke agreements negotiated by the parties provide for specific procedures in relation to delay and disruption, it is essential to be familiar with those processes and to follow them.
Failure to adhere to specific contractual provisions concerning delay and disruption could invalidate any EOT claim; which may open the contractor / sub-contractor up to unliquidated or liquidated damages (LAD’s) and / or may prevent any additional financial claims being made.
4. Avoid the ‘wait and see’ approach
Whenever delay is experienced, records should be prepared and all relevant parties should be notified in writing (particularly the relevant employer).
Notices should be given even where it is believed that the delay can be caught up and the construction programme can be maintained without amendment (as such beliefs often prove to be unfounded).
Notices should also be given promptly where employer’s representatives suggest that they will ‘sort everything out at the end of the project’ (as such promises often melt into the ether).
5. Critical Path and Mitigation
It is not possible to properly prepare an EOT request without fully understanding the critical path of a project and the potential impacts of any delays upon other trades and completion dates.
Any party seeking to analyse the consequences of a particular delay and the correct EOT duration that should be requested must ensure that:
a) the critical path has been carefully considered and the likely knock on effects to following trades, phases, sections, etc. have been properly set out; and
b) any potential adjustments to the construction programme, which may mitigate the impact of delays have been applied to the construction programme and fully factored into the EOT request; and
c) the process is ongoing, such that the EOT request is kept under review to ensure the accuracy of any assumptions / projections and, where necessary, to allow appropriate adjustments to be made.
6. Concurrent Delay
If more than one delay event is operating simultaneously, and each event is likely to impact upon the critical path / completion dates, it will be necessary to consider their combined effects and whether they are truly operating concurrently or whether each is actually impacting upon a specific element of the project (albeit at the same point in time).
This type of analysis is particularly important where one or more delay event is the responsibility of the party requesting the EOT and one or more is not. In such cases, provided the party making the EOT request is experiencing delay for which it is not responsible, it will be still be entitled to an appropriate extension notwithstanding the fact that another delay for which it is responsible may be operating concurrently.
7. Financial Compensation
EOT requests do not automatically lead to claims for additional monies; however, in many cases they will.
In order to ensure that such claims have the best possible chance of acceptance, it is crucial to ensure that they are presented correctly; in accordance with the relevant provisions of the contract.
In some cases, the cause of delay will be instructions provided by the employer; which may amount to variations. Almost all construction contracts will set out a specific procedure for agreeing and valuing variations; therefore, where delay results from variations to the works, it may well be necessary to prepare an EOT request and to follow the variation process simultaneously.
Where the cause of delay does not amount to a variation, the contract may have alternative provisions to deal with additional financial claims for disruption (such as the JCT Loss and Expense clause) or it may be necessary to seek to adjust applications for payment by mutual agreement or to agree dayworks in respect of certain items / areas.
It is really important to consider each and every delay individually on its own merits to ensure that the correct procedures are applied; rather than simply adopting a ‘one size fits all’ approach (which often leads to the rejection of any additional financial claims).
If you’d like to discuss any issue of Construction Law, please contact Michael Smyth on 01785 223440 email firstname.lastname@example.org