TIME IS MONEY OR IS IT? (PART 2)

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1 TIME IS MONEY OR IS IT? (PART 2) In Part 1 of this article we reviewed the legal and contractual principles which apply to the time for completion of construction works and the remedies available to both employer and contractor parties to construction contracts. In it we saw that an employer can claim compensation from a contractor by way of either liquidated damages (LD s) or general damages where the contractor delays the date for completion. A contractor is usually entitled to an extension of time where the delays are caused by the employer. In this part we look closer at some of the complications which arise in determining entitlements to extensions of time (EOT). Distinction Between EOT and Prolongation It should be noted that the primary reason for the issue of extensions of time (EOT) is to protect the contractor from the levying of LD s, it is often the case though that an EOT is the basis of a prolongation claim by the contractor. The distinction can be illustrated by delays caused by exceptionally inclement weather, where in most standard form contracts it will entitle the contractor to an EOT and hence protection from LD s, but it will not entitle him to any additional monies. Critical Path Assessment of an EOT will in almost every case rely on a detailed analysis of the planned sequence of activities. Not every employer-culpable delay will result in the end date for the works being prolonged, some activities or series of activities within a programme will have an amount of float, that is they can be carried out at some later date without impact on the end date. It is therefore necessary to identify the critical path which runs through the programme, i.e. those key activities which, if delayed, will mean a delay to the completion date. That is not to say that those activities which have float will not result in additional cost to the contractor for which he may be able to claim compensation, it is simply that he does not need an EOT to protect him from the levying of LD s. Defining the critical path can be a complicated and painstaking task. That said, the assessment of EOT s in tunnelling projects can be somewhat simplified when compared to other civils works and building projects. By their nature shaft sinking and tunnel drives present very easily defined work faces, the problems encountered on any particular day, indeed particular shift, will be readily identifiable as being employer or contractor risks. Of course work can be ongoing on multiple shafts and/or headings but the effect on the critical path from the losses of production on tunnelling projects are comparatively straight forward to quantify. Concurrent Delays Our discussions so far have dealt with a scenario where delays are entirely due to one or other of the parties. Real life and construction projects in particular are rarely so straight

2 forward and it is likely that delays are caused by a combination of contractor and employer delays, some of these delays will be in series, some may also run in parallel. For example the employer may be late in issuing tunnel lining details but at the same time the contractor has difficulties commissioning his tunnelling equipment, such parallel delays are usually referred to as concurrent delays. It is unhelpful in the extreme that despite the prevalence of disputes concerning concurrent delays, in English law at least there is no settled authority for how these should be dealt with. It is partly because of this vacuum that the UK Society Of Construction Law (SCL) issued its Delay and Disruption Protocol 1. The Protocol does not have the force of law, nor is it, as yet, part of any standard form contract. Its own introduction makes clear that, It represents a scheme for dealing with delay and disruption that is balanced and viable. Nevertheless, given the lack of clear judicial guidance its solutions for dealing with certain issues are highlighted below where appropriate. The consideration of concurrent delays comes under the legal heading of causation. Causation has been judicially described as, a mental concept, generally based on inference or induction from uniformity of sequence as between two events that there is a causal connection between them. It is the establishment of this causal connection which is required for a contractor to demonstrate his entitlement to an EOT, the confusion of concurrent delays detracts from making that connection. Various Theories Relating To Concurrent Delay Various theories have been advanced as to how concurrent delays should be dealt with, some of which are set out as follows. If the two causes of loss result in roughly equal effect then the employer-culpable reason is sufficient grounds for the awarding of an extension of time. This is called the Devlin approach, following the case of Heskell -v- Continental Express 2 and the judgment therein given by Devlin J. If the competing causes are of unequal effect then it is the dominant cause which prevails, unsurprisingly this is called the dominant cause approach. Commentators have said that it is not sufficient to say that the first to begin in time prevails, but that a common-sense approach is needed. It is submitted that that is an unhelpful observation, common sense will of course be relative depending on which side of the contractual fence one is sitting. The Malmaison 3 approach says that where there are two competing causes, one of which is listed in the contract as entitling the contractor to an EOT and one of which is not then the contractor is entitled to his EOT. The example given in that case was that exceptionally inclement weather would have given the contractor and EOT, but it was argued that he had insufficient labour in any case. As inclement weather was specifically mentioned in the contract then an EOT was due notwithstanding the contractor s deficient labour.

3 The SCL Protocol takes what can be seen as a middle way. The Protocol is a committeedrafted document which took soundings and had representatives on the drafting committee from different sides of the industry so that in truth, its solutions dealing with concurrent delay are an expedient compromise. This is not a criticism as its conclusions are at least clear, clarity being something which is sadly lacking from any judicial consideration of the matters. The Protocol divides consideration of concurrency into two parts, firstly concurrency as it relates to extensions of time and secondly concurrency as it relates to prolongation costs, thus drawing on the distinction outlined above that the primary purpose of EOT s is protection from LD s and may or may not lead to entitlements for prolongation costs. As regards concurrency as it relates to EOT s the Protocol states: Where the Contractor Delay to Completion occurs concurrently with the Employer Delay to Completion, the Contractor s concurrent delay should not reduce any EOT due. As regards concurrency as it relates to compensation for prolongation the Protocol states: If the contractor incurs additional costs that are caused both by Employer Delay and Contractor Delay, then the Contractor should only recover compensation if it is able to separate the additional costs caused by the Employer Delay from those caused by the Contractor Delay. So it can be seen that the scheme of the Protocol is to readily give a contractor protection from LD s but that the threshold for recovery of additional monies is set at a high level, it being submitted that there will be significant difficulties in separating out losses arising out of Contractor and Employer delays. In conclusion of the considerations regarding concurrent delays the situation as far as clear judicial guidance is concerned is far from satisfactory, the SCL Protocol has the advantage of clarity but holds little comfort for a contractor facing losses arising out of a concurrent delay, though he will have ready protection from the levying of LD s. There are some further old chestnuts when considering time issues and the granting of extensions of time. Late Instructions When The Contractor Is Already In Delay What is the situation when the employer issues a variation in a period where the contractor is in culpable delay. Let us say that the contractor has delayed completion by a projected ten weeks. Four weeks after the date when the works should have originally been complete the employer finds it necessary and does issue a variation the effect of which is to delay the works by a further one week. The question arises, is the contractor

4 entitled to a one week or a five week extension of time? The argument for a five week extension being that the critically late timing of the issue of variation caused a four week delay plus one week for the effect of the variation. The argument for the one week extension being that if it were not for the contractor s own delay then the employer would have reached the point where he would have realised that a variation needed to be issued so much the sooner and that therefore an extension only for the effect of the variation is due. Following the case of McAlpine Humberoak v. McDermott International 4 English judicial opinion favours the latter approach. Who Owns The Float We talked earlier about float, i.e. programme activities which are off the critical path, indeed this can be extended to a common situation where a contractor programmes all his activities to complete some time earlier than the contractual completion date so as to give himself some breathing space at the latter end of the contract works. The question then arises of who owns the float?, that is, is the float available only for the contractor s mistakes or can the employer avail himself by causing delay which would otherwise be grounds for extensions of time, but which because of the float none is needed. Again the cases are unhelpful with no concluded judicial precedent on the matter. This therefore is another area where the SCL Protocol has taken up the slack and provides guidance. Again, the Protocol considers the question from the two perspectives outlined before, separately considering float as relates to granting of EOT s and entitlement to prolongation costs. It says that float as it relates to EOT can be used by the employer to the point where the float has been used up but that the contractor is allowed prolongation costs if the float is used for employer-culpable delays, this though is caveated by a provision that the existence of the float is disclosed by the contractor at the time of entering into the contract and that the shorter construction period was realistic and achievable. The float provisions therefore are submitting as being more in favour of the contractor, perhaps evening up some of the difficulty as described as above caused by the high threshold set for prolongation recovery where there are concurrent delays. Provision Of Information To Meet A Foreshortened Programme One further issue arises out of the above noted situation where the contractor has planned to complete his works earlier than the contractual completion date. What happens if the employer provides information, drawings and the like, in a sequence and at a time would be sufficient to meet the contractual completion date but in fact causes delays to the foreshortened period required by the contractor. The matter was considered in the case of Glenlion Construction v The Guinness Trust 5 and it was held that there was no obligation that that design information needed to be provided in order to meet the shorter period such that it did not entitle the contractor to an EOT. Conclusions

5 From the two parts to this article it can be seen that the broad legal principles dealing with time for performance of a construction contract are reasonably straight forward and present few conceptual difficulties. The problem, as with many things, is that the devil is in the detail. It is once one begins to try and quantify the effect of competing delays that confusion and dispute develops, the situation is exacerbated by a lack of judicial clarity. Guidance can be found in the SCL Protocol but this is only guidance. Consideration could be given to incorporation of its contents into one s contract by reference, true that the Protocol is something of a compromise but it is submitted that it does have overall balance and does have the distinct advantage of clarity. 1 Delay and Disruption Protocol, Society Of Construction Law, October Available from 2 [1950] 1 All ER After Henry Boot Construction (UK) Ltd -v- Malmaison Hotel (Manchester) Ltd [1999] 70 Construction Law Reports 32 4 (1992) 58 Building Law Reports 1 5 (1987) 39 Building Law Reports 89