Article in Building Magazine, 1 November 2002

....but fundamentally flawed

by John Sims

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Admirable in some ways, the protocol has it got it badly wrong in the advice it gives on the subject of float as it relates to extensions of time

The Delay and Disruption Protocol is an admirable document in many ways. But in one important area it is in my view, fundamentally wrong in the advice it gives, and that is in the treatment of programme "float" in relation to extensions of time.

Paragraph 1.3.1 states that where there is remaining float in the programme, an extension of time should only be granted if the employer delay is predicted to reduce this float below zero, thereby actually extending the works beyond the formal contract completion date.

This is completely to misunderstand the primary purpose of an extension of time, which is to preserve the employer's right to liquidated damages by fixing a new, later date by which the contractor is obliged to complete the works if the progress of the work is delayed by the employer or its contract administrator. It has nothing to do with the contractor's intentions as to completion. Whatever float the contractor has built into its programme to allow for unforeseen events for which no extension will be granted, should still be available to it.

The fallacy of the protocol's approach is vividly illustrated by paragraph 1.3.4, which contains two propositions which I read with disbelief. The first is that if an employer delay occurs first and uses up all the float, then "the contractor can find itself in delay and paying liquidated damages" as a result of any subsequent contractor delay that would not have been critical had the employer delay not occurred first. All I can say is that, if an employer were foolish enough to deduct damages in such circumstances, it would rapidly find itself in court being ordered to pay them back. Any contract administrator who advised it that it should do so would be guilty of professional negligence.

The second proposition is this: "Under contracts where the employer delay only has to affect the contractor's planned completion date, the contractor is potentially entitled to an extension of time every time the employer … delays any of its activities, irrespective of their criticality to meeting the contract completion date."

In more than 50 years' in the building industry, I have never come across any contract that expressly links delay and extensions of time to "the contractor's planned completion date". To do so would effectively be to make that the contract completion date, which is an obvious nonsense.

Obviously, any contract administrator considering the grant of an extension of time must consider whether the delaying event affects any activity critical to completion of the work. If it does not, no extension should be granted. If it does, even though the contractor's programme suggests that it will still complete before the contract completion date, an appropriate extension should be granted to preserve the employer's right to damages if, in the event, the remaining float is used up due to other delays.

One of the problems is that clause 25.3.1.2 of JCT80 requires the contract administrator, on receiving notice of a delay, to grant an extension if "the completion of the works is likely to be delayed thereby beyond the completion date". Those last four words appear to suggest that the administrator should only grant an extension if the delaying event will, in fact, delay completion beyond the contract completion date. In my view, those words are redundant and misleading.

The only remedy is for the JCT to take immediate steps to delete the four offending words from future editions of all their contracts, and for the drafters of the protocol to change paragraph 1.3 in the interests of preserving employers' rights to levy damages without exposing themselves to legitimate challenge.

(John Sims is a consultant, arbitrator, adjudicator and mediator in construction disputes.)

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