Article in Building Magazine, 22 February 2002

Smooth Operator
by Tony Blacker

The SCL protocol on extensions of time, which is still in draft form, is provoking a great deal of discussion. Although the JCT contracts attach little importance to the document, the NEC describes at great length what the contract programme has to contain.

Both the NEC and the traditional ICE contracts set up machinery designed to produce both an agreed contract programme at the outset and a procedure for updating it regularly. But there can be no guarantee that agreement will be reached on an acceptable programme even at the beginning of the project, let alone updated programmes, as the work proceeds, unless, of course, it is identified in the contract itself before it is signed. But if the document has no contractual status, what is all the fuss about?

The answer, surely, is that a contract programme is a vital management tool for contractor and contract administrator (CA). A realistic programme submitted at the outset, agreed by the CA and updated at monthly intervals (and following any award of an extension of time) so it reflects actual progress and a realistic forecast of future events will make a major contribution to the smooth running of a project.

The protocol produces model clauses along these lines. Among other things, it recommends that when contractors make applications for extensions of time, they should submit a sub-network for insertion into the updated contract programme showing the expected effect of any delaying event that might entitle them to an extension. The intention is that, wherever possible, the parties should agree the impact of such events as the work proceeds.

But how should the contract provide for the everyday situation where such agreement cannot be reached? The protocol recommends that the view of the CA should prevail unless and until overturned under the relevant dispute resolution provisions of the contract. What this suggests is that if a contractor provides an updated programme that is considered unrealistic, the CA may amend the programme. The revised programme can then be used as the baseline for assessing extensions of time and for running the contract generally. And if the contractor is unhappy, he should invoke adjudication.

If a difference of view emerges about whether or not an updated programme is realistic, or about entitlement to an extension of time, should an aggrieved contractor be encouraged to start adjudication proceedings?

Adjudication is, by its nature, confrontational. Would it not be preferable for the parties to be encouraged to use some form of mediation? Contracted mediation, for example. Somebody well respected who knows the project might work wonders, whereas an adjudicator could wreak havoc.

What then about sanctions generally for breach of programming obligations? If a contractor on the NEC contract fails to produce a first programme (but not a subsequent one) he may be subject to a compulsory retention of up to one-quarter of the price due to him for work done. The protocol endorses this approach in its model clauses, offering as an alternative a clause providing for liquidated damages to be payable in the event of failure to produce an original or updated programme.

Liquidated damages would seem to be the better solution. They could be calculated on the basis of the expected cost to the employer of doing what the contractor failed to do. The third optional sanction offered by the protocol, namely, that such a breach should be deemed an "event of default" triggering termination rights, seems a little draconian.

And what about sanctions on the other side of the equation? If the CA or engineer fails to respond to a programme submitted by the contractor should he be "deemed" to have accepted it? That sanction is contained within the ICE conditions and will be thought appropriate by contractors infuriated with endless delays by the client's man. On the other hand, to deem an unrealistic programme to be the benchmark by which a project should be judged will produce its own problems.

The programme is not, at least in a traditional contract, a document laying down legal obligations. It should be regarded as a guide to a CA, but should not be regarded as cast in stone.

The protocol contains much for which we should be grateful, but its tackling of sanctions for programming defaults is perhaps not the last word on the subject.

Tony Blackler is a partner in solicitor Macfarlanes.

Reproduced with permission from Building Magazine (http://www.building.co.uk)