Article in Construction News, 10 January 2002

A BETTER WAY TO SORT OUT DELAYS
by Rudi Klein

Delays and disruption to construction contracts will never go away. Enlightened procurement strategies and teamworking can minimise them or create a better climate in which they can be managed but they will still persist. But, after years and years of experience of delays and claims, bad practice and even downright abuse still persists.

In fact, as one proceeds along the supply chain, the problems become horrendous. Often this is the result of a main contractor being clobbered for delays under the main contract and then swinging out wildly amongst sub-contractors in order to pass on his liabilities. Programmes for sub-contract works are often flexible to suit the convenience of main contractors; start dates and completion dates are never clearly stated when sub-contracts are executed. Presentation of claims are severely hampered by poor record-keeping.

When considering entitlements to compensation for delay/disruption and how that compensation is to be worked out, confusion still abounds. There is still the widespread belief that an entitlement to an extension of time automatically allows one to make a claim for compensation.

Then there is the habit of leaving all claims for extensions of time and compensation claims thereunder to be resolved in the negotiations over the final account. Without all this added complexity, a final account negotiation should last hours rather than weeks, months or even years.

The Society of Construction Law has decided that it is high time that something is done about this state of affairs. The Society is not noted for its campaigning or political zeal but has decided to "out" itself with the publication of a draft protocol for determining extensions of time and compensation for the delay/disruption. The aim of the protocol is to provide guidance to all parties in the construction process when dealing with time/delay matters; it is not intended to be a contract or, indeed, a contractual document. Rather, it is intended to help those negotiating and managing contracts to avoid delay/disruption disputes and to handle efficiently such disputes when they arise.

Those drafting the protocol (who were led by Jeremy Winter, my fellow legal columnist) were of the view that disputes could be "substantially reduced by the introduction of a transparent and unified approach to the understanding of programmed works (both permanent and temporary) their expression in records, and identifying the consequences of delay and disruption.

The draft protocol concentrates on the programme since it is this document which is always under the spotlight when there are disputes over delay/disruption. It is recommended that the parties reach agreement on the following matters:

How the programme is prepared (for most projects it is recommended that an industry standard critical path method project planning software is used).

The programme should contain all relevant activities including design, manufacturing, procurement and on-site construction and ensure that there is identified the information required by the constructors.

The programme should be accompanied by a method statement "describing in detail how the Contractor intends to construct the works, and the resources it intends to use to do so" (this may be difficult to achieve in practice since the contractor will need to get the relevant information from specialists who may not be "on board").

The programme should be submitted to the contract administrator and approved before the work is started.

The protocol advises that the programme is an organic document. It will need to be updated to accord with actual progress so that there can be proper monitoring. In fact, the drafters of the protocol believe that getting an approved programme and keeping it up to date is so important that any disputes in relation to either approval or updating should be referred to adjudication or whatever dispute resolution procedure is available in the contract. This is extremely sound advice.

This will take some time to find its way down the contractual chain but it will be nonsensical if the protocol was not to be applied throughout the contractual chain. It should be added that the updating of the programme to reflect actual progress does not mean that there is any admission of fault by either side for any delay. But ensuring such transparancy will require a significant alteration in mindsets.

Another significant change in existing practice is the suggestion that extension of time applications should be assessed within one month after receipt by the contract administrator. Some standard forms allow for 12 weeks and even longer for applications to be considered. As the protocol acknowledges, it is, of course, always possible to re-visit decisions on extensions of time. Furthermore, the parties should reach agreement at the outset on the cost consequences of delays. Decisions on granting extensions of time will, of course, have to refer to the approved or updated programme.

The protocol specifically recommends that a sub-network is added to the programme to cater for "Employer Risk Events" where the contract states that the delay (or the consequences of it) should be at the risk of the employer. Such sub-networks should, for example, set out the activities and the time involved in dealing with delays brought about by the employer. Once agreed between the contractor and contract administrator, this sub-network would be merged into the updated programme.

The protocol advises that:

"The assessment of the impact of delays (whether Contractor delays or Employer delays) should be at a level appropriate to the level of detail included in the Approved Programme and appropriate taking into account the size and complexity of the works and the delays being analysed"

This "time impact" analysis is also extended to the situation where parties have found themselves in a dispute about extensions of time and have not followed the advice on maintaining an agreed updated programme.

The protocol sensibly argues for agreement between the parties on the proper methods to be adopted in order to analyse the causes of delay. It has even suggested that a joint independent expert programming consultant is appointed to carry out the analysis.

There is a lot more advice in this protocol about various other matters such as disruption claims, head office overheads and interest. But, the most contentious part of the draft protocol is where it takes a view on matters which have been hotly disputed. An example is the ownership of the "float". This is the time that contractors add to the programme to allow for flexibility in the event that some unforeseen delay does occur. The point is that the contractor is in charge of his programme and, so long as he does not exceed the contract completion date, he can build in a float into the planning of the works. Contractors have argued that they are entitled to an extension of time where the delay has reduced their float (although there has not been a delay to the contract). On the other hand, the employer would argue that the contractor is not entitled to complete before the contractual completion date and, therefore, is only entitled to an extension where that date has been exceeded.

The view offered in the protocol is that "the project owns the float" and therefore, the contractor has no entitlement to an extension of time where the contract completion date has not been exceeded. Many contractors are likely to feel aggrieved by this approach, but hopefully, will accept that - overall - there is a great deal of benefit to be had by adhering to the protocol.

I would wholeheartedly commend this document to the industry. I'll only add that, when it is due to be published, it is presented in a way that is accessible. The subject matter is complex for many to digest and if some careful thought was put into presentation, it should reap dividends.


Reproduced with permission from Rudi Klein & Construction News (http://www.cnplus.co.uk)