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Delays, Extensions of Time and Liquidated Damages

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Introduction

Whoever was it who said: time is money and money is time had never done a delay analysis. Time and money are completely different both in principle and in the way one deals with them practically. They are different in principle because once a given construction period starts, time will expire at a constant rate up until the completion date, whether or not it is used. Whether it used effectively, efficiently, or not used at all, time will always expire at the same rate. Money, on the other hand is quite different. A fixed amount of money will only expire if it is spent, and the more

intensively it is spent, the quicker it will expire.

When it comes to delay analysis, what one finds is that the standard form of contract often require a different kind of proof for the expenditure or recovery of money from that required for the recovery of lost time. Thus the way one must go about proving entitlement to more money is often very different from the way one must go about proving entitlement to more time.

DELAYS, EXTENSION OF TIME AND LIQUIDATED DAMAGES CONTENTS

Page 1 INTRODUCTION TO TIME IN RELATION TO CONSTRUCTION CONTRACTS Contracts where no time for completion is specified ...................................................1 Contract where time for completion is specified ..........................................................2 Time of the essence ....................................................................................................2 Due diligence...............................................................................................................3

1. 2. 3. 4.

2 5. 6. 7. 8. 9.

EXTENSIONS OF TIME Need for extension of time provisions .........................................................................7 Notices of delay .........................................................................................................10 Grounds for extension ...............................................................................................14 Duties of the Architect/Engineer in granting extensions of time ................................19 Balfour Beatty Building Ltd v Chestermount Properties Ltd (1993) ...........................23

SHORTENED PROGRAMMES, FLOAT AND CONCURRENT DELAYS

10. Shortened programmes.............................................................................................26 11. Programme float ........................................................................................................28 12. Concurrent delays .....................................................................................................35

MODERN DELAY ANALYSIS TECHNIQUES

13. Introduction................................................................................................................46 14. What if or as planned expanded ..............................................................................48 15. But for or as built collapsed......................................................................................53 16. Time slice or window analysis ...................................................................................56

OBLIGATIONS TO USE BEST ENDEAVOURS, THE DUTY TO MITIGATE, CONSTRUCTIVE ACCELERATION AND TIME AT LARGE

17. Obligations to use best or reasonable endeavours ...................................................75 18. The duty to mitigate ...................................................................................................78

Page

19. Constructive acceleration ..........................................................................................81 20. Time at large..............................................................................................................89

CHALLENGES TO LIQUIDATED DAMAGES

21. Challenges to liquidated damages ............................................................................94 22. Liquidated damages as a penalty..............................................................................95 23. No loss.......................................................................................................................96 24. Certificate not valid ....................................................................................................97 25. Condition precedents not observed...........................................................................99 26. Provisions void for uncertainty.................................................................................101

27. Effect of a successful challenge to liquidated damages .............................. 102


28. Position of subcontracts ..........................................................................................102

Delays, Extension of Time and Liquidated Damages

INTRODUCTION TO TIME IN RELATION TO CONSTRUCTION CONTRACTS

1. 1.1.

Contracts where no time for completion is specified This lecture considers the basic principles of time in relation to construction contracts, and in particular the obligations of the parties where a time for completion is specified and where there is no such specification. Consideration will be given to terms such as time of the essence, and the often expressed obligation to proceed with due diligence.

1.2.

When parties enter into a contract it is normal that they specify the time in which performance of that contract must be carried out. However, such is not necessary and a valid contract can be concluded even though no time for performance has been specified.

1.3.

For example one person may enter into an agreement with another that they shall purchase a car belonging to that second party. In such cases it would be unusual for a time within which the completion, i.e. the mutual exchange of the money and the car must be carried out, to be specified.

1.4.

In such circumstance the intention of the parties would be that the completion be within a reasonable time, and this intention indeed reflects the legal principle where no time is specified in a contract - the party who has contracted to carry out work must do so in a reasonable time.

1.5.

This situation may be relevant to a construction contract in two ways, either where the parties enter into a contract without a time for completion being specified (for example where the Contractor starts work by reference to a brief letter with the intention that the detailed terms will be agreed later, but they are subsequently not so agreed), or where the specified time has ceased to become applicable i.e. where time has become at large.

1.6.

But in such circumstances what is a reasonable time? In Hick v. Raymond and Reid [1893] A.C. 22 Lord Watson said that where a contract shall be performed within a reasonable time, it has: invariably been held to mean that the party upon whom it is incumbent duly fulfils his obligations, notwithstanding protracted delay, so long as such delay

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is attributable to causes outside his control and he has neither acted negligently nor unreasonably. 1.7. Where there is no time for completion specified in the contract a reasonable time will be assessed by examining the time the Contractor actually took and then subtracting any delays for causes that were outside his control (eg extra work, strikes, exceptionally adverse weather etc). 1.8. Where a specified time for completion becomes inapplicable however a special difficulty arises. In many cases the original time for completion will be accepted as being a reasonable time, so that by adding to that for delays outside the control of the Contractor the reasonable time for completion can be arrived at. (See comments of Lord Denning in Trollope & Colls Ltd v North West Metropolitan Regional Hospital Board (1973) at paragraph 5.5 below). However a problem can arise if the Contractor asserts that the original date for completion was in itself unreasonable. There is no authority on this point, but it would certainly appear arguable that once the contract period no longer applies it should have no further significance and a reasonable time be assessed from first principles. 2. 2.1. Contracts where time for completion is specified In the more normal situation where a time for completion is expressly stated in the contract, the Employer is entitled to damages if the Contractor does not complete on time. 2.2. The majority of construction and Engineering contracts contain provisions for extension of time and deduction of liquidated damages in the event of late completion by the Contractor. These matters are considered in detail in lectures 2 to 6. 3. 3.1. Time of the essence Time of the essence is one of the most misused contractual terms, particularly in construction contracts. Time is of the essence where failure to complete by the specified date is a breach of a condition entitling the innocent party to treat the contract as repudiated. 3.2. Time is seldom of the essence in a construction contract because the effect of such a provision is that the Employer is stating that if the building is not completed on a certain date then the Employer does not want the building at all and will treat the contract as repudiated. Whilst one can think of circumstances where this may be

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relevant for a building, for example the building of a grandstand to watch a particular sporting event which is passed, such would be very rare. 3.3. Generally, however time is not considered to be of the essence in construction contracts, because such contracts are different to most others in that the Contractor will have expended heavily in performing the contract prior to a delay in completion and in constructing the works the Employer will have become owner of the property and thus have received a major and irretrievable benefit. Further it is clearly

arguable that liquidated damages clauses and extension of time provisions are inconsistent with an interpretation that time is of the essence, both clauses indicating a preference on the owners part to allow the Contractor to complete and accept liquidated damages as compensation. 3.4. For these reasons the courts have been very reluctant to interpret time in construction contracts as being of the essence, even if it is stated as being so. In Lucas v. Godwin (1837) it was said:It never could have been the understanding of the parties that if the house were not done by the precise day the plaintiff would have no remuneration; at all events if so unreasonable an engagement had been entered into the parties should have expressed their meaning with a precision which could not be mistaken. 3.5. In Lamprell v Billericay Union (1849) it was stated that: We are of the opinion that time for completion was not an essential part of the contract; first because there is an expressed provision made for a weekly sum to be paid for every week during which the work should be delayed and secondly, because the deed clearly meant to exempt the plaintiff from the obligation should he be prevented by fire or other circumstances satisfactory to the Architect. 4. 4.1. Due diligence The majority of standard form construction contracts contain provisions which stipulate the manner in which the works are to be progressed. For example:4.1.1. JCT 98 states at clause 23.1.1:-

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On the Date of Possession possession of the site shall be given to the Contractor who shall thereupon begin the Works and regularly and diligently proceed with same 4.1.2. ICE 7th Edition states at clause 41(2):The Contractor shall start the Works on or as soon as is reasonably practicable after the Works Commencement Date. Thereafter the

Contractor shall proceed with the Works with due expedition and without delay 4.2. The definition of the terms diligence and expedition may be illustrated by reference to the Shorter Oxford Dictionary thus: Diligence - the attention and care due from a person in a given situation, Expedition - the act of expediting, to perform quickly, dispatch . 4.3. The expression due diligence and expedition was dealt with in GLC v Cleveland Bridge (1984) 34 BLR 50. Here the arbitrators view (which was upheld by the court) was: If the access date, key dates and completion date are varied or extended the respondent could not in my view be said to be lacking in diligence if it paced its work so as to ensure delivery consistent with the appropriate access and key dates even though this might have the effect of increasing the sums eventually recoverable under the VIC provision. 4.4. The judge further stated that the expression due diligence imposed: an obligation on the Contractor to execute the works with such diligence and expedition as were reasonably required in order to meet the key dates and completion date in the contract. 4.5. In the case of West Faulkner v London Borough of Newham 71 BLR 1 (1994), the Court of Appeal acknowledged the difficulty of defining diligently when the proper construction of the term regularly and diligently was considered. The courts in this case found that: " the word 'regularly' is not least a requirement to attend for work on a regular daily basis with sufficient in the way of men, materials and plant to

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have the physical capacity to progress the Works substantially in accordance with the contractual obligations. What in particular the word diligently contributes to the concept is the need to apply that physical capacity industriously and efficiently toward that same end. " 4.6. This approach was adopted in the Hong Kong High Court case of Trident Engineering Company Limited v Mansion Holdings Limited wherein Deputy Judge To elaborated by stating: "So far as supply of materials is concerned, the Contractor has to plan his requirements ahead and ensure that the materials of the right quality and in the right quantity are available at the right time. This is to enable the works to progress continuously, industriously and efficiently. The most ideal situation would be to arrange delivery to coincide with work progress so that the materials will arrive at the site precisely when they are wanted and be lifted to where they are required. If such precise delivery is not possible, at least the Contractor should ensure that a minimum stock is kept on site which is sufficient to provide for the time required for placing orders and delivery, plus a reasonable provision for contingency. Otherwise, labour will be wasted while waiting for materials and delay will result. The term regularly and diligently must incorporate a wide spectrum of diligence and regularity. At the one end of the spectrum are breaches which are just short of due diligence and regularity, such as falling slightly behind the schedule or causing some minor interruption. At the other end are severe breaches amounting to non-performance, such as doing no more than keeping a watchman on the site, or perhaps proceeding with a less than minimal workforce while directing the major labour workforce to other more profitable projects. Both are breaches of duty but with very different

consequences. The former is a minor breach sounding in damages, while the latter is a repudiatory breach as it evinces an intention on the part of the Contractor no longer to be bound by the contract. 4.7. Contractors who are required to carry out work regularly and diligently must go about their work in such a way as to achieve their contractual obligations. This requires them to plan their work, to lead and manage their workforce, to provide sufficient and

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proper materials and to employ competent tradesmen so that the works are fully carried out to an acceptable standard and that at all times sequence and other provisions are fulfilled.

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2 5. 5.1.

EXTENSIONS OF TIME Need for extension of time provisions The majority of construction contracts provide a time for completion, and a provision that failure to complete by that date will entitle the Employer to liquidated damages at a certain rate per day or week.

5.2.

In the absence of any express provisions the Contractor will be responsible to complete within that time, and he will have no excuse if events occur which cause delays over which he has no control, such as weather, strikes, materials shortages or unforeseen ground conditions.

5.3.

However the position is entirely different if the Contractor suffers a delay which is caused by the Employer. Such delays are common and may be failure to give possession of the site on the required day, the issue of variations requiring additional works, or any other disturbance caused by the Employer. It is clearly established that one party can not impose a contractual obligation on the other where he has impeded the other in the performance of that obligation. In Amalgamated Building Contractors Ltd v Waltham Holy Cross UDC (1952) Lord Denning said: ..the building owner cannot insist on a condition if it is his own fault that the condition has not been fulfilled.

5.4.

Further in Barque Quilpue v Bryant (1904) Lord Justice Vaughan Williams stated:There is an implied contract by each party that he will not do anything to prevent the other party from performing a contract or to delay him in performing it. I agree that generally such a term is by law imported into every contract.

5.5.

Further Lord Denning in Trollope & Colls Ltd v North West Metropolitan Regional Hospital Board (1973) stated:It is well settled that in building contracts and in other contracts too when there is a stipulation for work to be done in a limited time, if one party by his conduct it may be quite legitimate conduct, such as ordering extra work renders it impossible or impracticable for the other party to do his work within the stipulated time, then the one whose conduct caused the trouble can no

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longer insist upon strict adherence to the time stated. He cannot claim any penalties or liquidated damages for non-completion in that time. The time becomes at large. The work must be done within a reasonable time that is, as a rule, the stipulated time plus a reasonable extension for the delay caused by his conduct. 5.6. Therefore if the Employer causes a delay to the progress of the works, he loses his right to have the works completed within the specified time for completion, in which case time becomes at large and the Contractor becomes obliged to complete within a reasonable time (as if there were no time specified at all), and the Employer loses his rights to liquidated damages. This was expressly confirmed in the famous case of Peak Construction (Liverpool) Limited v. McKinney Foundations Limited (1970). ..The liquidated damages clause contemplates a failure to complete on time due to the fault of the Contractor. It is inserted by the Employer for his own protection; for it enables him to recover a fixed sum as compensation for delay instead of facing the difficulty and expenses of proving the actual damages which the delay may have caused him. If failure to complete on time is due to the fault of both the Employer and the Contractor, in my view the clause does not bite. I cannot see how, in the ordinary course the Employer can insist on compliance with a condition if it is partly his own fault that it cannot be fulfilled. 5.7. It is for this reason that it is essential that construction contracts contain an express term that the specified time for completion may be extended in the event that the Employer causes a delay to the progress of the works. The inclusion of such provisions thus protect the Employers rights to take liquidated damages in the event of late completion and save time becoming at large by extending the specified time for completion in the event of acts of prevention by the Employer. 5.8. Such extension of time clauses need to be carefully worded to ensure that the power is given to extend time for delays caused by the Employer, as general words such that may give power to extend time due to other causes beyond the Contractors control has been found by the courts not to cover Employer delays caused by late possession and/or late information. (Wells v. Army & Navy Co-operative Society (1902)).

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5.9.

Vincent Powell-Smith in a critique concerning JCT 63 has this to say on the matter:-

"Clause 23 is gravely defective in many important respects and is in need of urgent amendment. The grounds on which an extension may be granted are very limited and do not cover many common delaying events e.g. failure by the Employer to supply materials to the Contractor, failure to give agreed access and failure to give possession of the site on the due date. If such events occur and cause delay to completion the Architect has no power to grant an extension with the result that time will be `at large' and the Employer will lose his right to liquidated damages".

In Rapid Building Group -v- Ealing Family Housing (1984) the Employer granted possession late and was prevented from levying liquidated damages in respect of delays subsequently caused by the Contractor. The contract used was JCT 63. JCT 1998 clause 23.1.2 now overcomes one of the criticisms of Vincent Powell Smith by providing for a delay of up to six weeks for granting possession.

5.10.

To ensure that all delays by Employer, Architect or Engineer are properly catered for in the extensions of time clause fully comprehensive wording is required similar to GC Works/1 1998 Edition which states under condition 36(2): The PM shall award an extension of time under paragraph (1) only if he is satisfied that the delay, or likely delay, is or will be due to: (b) the act neglect or default of the Authority or the PM or any other person for whom the Employer is responsible.

5.11.

Employers who cause delay to completion will lose their rights to deduct liquidated damages in respect of the Contractors delays if the contract does not provide grounds for extending the completion date due to Employer s delays.

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6. 6.1.

Notices of delay The standard forms of main contract and subcontract require the Contractor and subcontractor to give notice when delays occur to the progress of the works. A question often asked is whether in the absence of a notice the Contractor or subcontractor loses his rights to have the completion date extended. In other words, is the service of notice a condition to the right to an extension of time?

6.2.

This matter was considered by the House of Lords in the case of Bremer Handelsgesellschaft mbh -v- Vanden Avenne-Izegem (1978) 2 LLR 109, which arose out of a dispute over the sale of soya bean meal. Lord Salmon referring to how the rights of the parties were affected by the lack of a proper notice had this to say:

"In the event of shipment proving impossible during the contract period, the second sentence of clause 21 requires the seller to advise the buyers without delay of the impossibility and the reasons for it. It has been argued by the buyers that this is a condition precedent to the sellers rights under that clause. I do not accept this argument. Had it been a condition precedent, I should have expected the clause to state the precise time within which the notice was to be served and to have made plain by express language that unless the notice was served within the time, the sellers would lose their rights under the clause."

6.3.

From what Lord Salmon has said it seems clear that for a notice to be a condition precedent to a right for more time, the wording of the clause would need to be such that a failure to serve notice would result in loss of rights. The situation of lack of notice was examined in the decision in Stanley Hugh Leach -v- London Borough of Merton (1985) 32 BLR 51 in relation to JCT 63 where Vinelott J. summarised the position as follows:

"The case for Merton is that the Architect is under no duty to consider or form an opinion on the question whether completion of the works is likely to have been or has been delayed for any of the reasons set out in clause 23 unless and until the Contractor has given notice of the cause of a delay that has become "reasonably apparent" or, as it has been put in argument, that the giving of notice by the Contractor is a condition precedent which must be satisfied before there is any duty on the part of the Architect to consider and form an opinion on these matters. The arbitrator's answer to this question was that "a written notice

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from the Contractor is not a condition precedent to the granting of an extension of time under clause 23."

I think the answer to Merton's contention is to be found in a comparison of the circumstances in which a Contractor is required to give notice on the one hand and the circumstances in which the Architect is required to form an opinion on the other hand. The first part of clause 23 looks to a situation in which it is apparent to the Contractor that the progress of the works is delayed, that is, to an event known to the Contractor which has resulted or will inevitably result in delay. The second part looks to a situation in which the Architect has formed an opinion that completion is likely to be or has been delayed beyond the date for completion. It is possible that the Architect might know of events (in particular "delay on the part of artists, tradesmen or others engaged by the Employer in executing work not forming part of this contract") which is likely to cause delay in completion but which has not caused an actual or prospective delay in the progress of the work which is apparent to the Contractor. If the Architect is of the opinion that because of an event falling within sub-paragraphs (a) to (k) progress of the work is likely to be delayed beyond the original or any substituted completion date he must estimate the delay and make an appropriate extension to the date for completion. He owes that duty not only to the Contractor but also to the building owner. It is pointed out in a passage from 'Keating on Building Contracts' (4th Edition) at p 346, which is cited by the arbitrator, that if the Architect wrongly assumes that a notice by the Contractor is a condition precedent to the performance of the duty of the Architect to form an opinion and take appropriate steps:

... and in consequence refuses to perform such duties the Employer loses his right to liquidated damages. It may therefore be against the Employer's interests for an Architect not to consider a cause of delay of which late notice is given or of which he has knowledge despite lack of notice.'"

6.4.

In Maidenhead Electrical Services -v- Johnson Controls (1996) the terms of the contract laid down that any claim for an extension of time had to be made within 10 days of the event for which the claim arises. It was held that a failure to comply with the notice provisions did not render a claim invalid.

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6.5.

The GC/Works/1 contract is somewhat out of line with the other standard forms of main contract in that it refers in condition 28 to the Contractor's written notice being a condition precedent to a right to an extension of time unless otherwise directed by the Authority. GC/Works/1 (1998) Form however does not provide for the delay notice under condition 36 to be a condition precedent.

6.6.

JCT 1998 makes it clear under clause 25.3.3.1 that the Architect's duties with regard to extending the completion date are not dependent upon service of notice by the Contractor. Clause 44 of the ICE 5th Edition is similarly worded.

6.7.

The interpretation of the various subcontracts run in parallel with the main contracts. An exception is the FCEC blue subcontract form for use with the ICE main contract. Clause 6(2) stipulates that it is a condition precedent to the subcontractors rights to an extension of time for a notice to be served within 14 days of a delay first occurring for which the subcontractor considers himself entitled to extra time.

6.8.

A recent Australia case Turner Corporation Ltd (Receiver and Manager Appointed) -v- Austotal Pty Ltd (1998) dealt with the situation of a delay caused by the Employer where the conditions of contract required a written delay notice as a condition precedent. The lack of notice lost the contract the right to an extension of time.

If the Builder, having a right to claim an extension of time fails to do so, it cannot claim that the act of prevention which would have entitled it to an extension of time for Practical Completion resulted in its inability to complete by that time. A party to a contract cannot rely on preventing conduct of the other party where it failed to exercise a contractual right which would have negated the effect of that preventing conduct.

6.9.

The MF/1 and I Chem E conditions make no reference to a delay notice being a condition precedent to an extension of time.

6.10.

Where a Contractor or subcontractor fails to serve a proper delay notice this will not result in the loss of rights to an extension of time unless the contract expressly states that the service of a notice is a condition precedent to the right to an extension of time.

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6.11.

If however, a notice is expressly stated as being a condition precedent which is the case with GC/Works/ 1Edition 2 where it states that the Contractors right to any extension of time shall depend upon the Contractor giving written notice, the question is often asked as to whether minutes of site meetings constitute good notice.

6.12.

In the Scottish case of John L Haley Ltd -v- Dumfries and Galloway Regional Council (1988) the Court had to decide whether site meetings minutes constituted a good notice. The contract where this matter arose employed JCT 63 under which the claimant undertook certain buildings works to a school with the contract period set at 78 weeks. This was overrun by 31 weeks with a 6-week extension of time granted. When further extensions were refused the matter was referred to arbitration. The claimants argued that they were entitled to an extension as the cause of delay fell within clauses 23(e), (f) and (h). The responders maintained that the claimants were not entitled to an extension as they had not given written notice of the delay as required under clause 23. The arbiter, following proof before answer, had granted a four-week extension on the basis of site meeting minutes. At the respondents

instigation, the arbiter stated a case for the opinion of the Court of Session as to whether the minutes constituted a notice under clause 23. The Court held that the minutes did not constitute good notice. Unfortunately the claimants conceded that a notice was a condition precedent to an entitlement to an extension of time and lost their case. 6.13. Whether site meetings constitute a good delay notice will depend upon the precise wording of the contract. It would seem however following the Scottish decision of John L Haley Ltd v- Dumfries and Galloway Regional Council (1988) that in the case of the majority of the standard forms the site meeting minutes will not constitute good notice. 6.14. Notices need not be particularly complicated. JCT 98 requires that the notice should include the material circumstances including the cause or causes of delay and identify any event which in the Contractors opinion is a Relevant Event. It is recommended that as a minimum notices should also identify:> > > > > the event the date the event took place its cause its likely duration and its potential impact

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6.15.

Contractors and subcontractors alike need to be mindful of the requirements to submit details / particulars in support of extension of time claims. For example JCT 98 provides at clause 25.2.2 that the Contractor in respect of each notified Relevant Event is to:give particulars of the expected effects thereof; and estimate the extent, if any, of the expected delay in the Completion of the Works beyond the Completion Date.

6.16.

ICE 7th edition clause 44(1) requires the Contractor to: deliver to the Engineer full and detailed particulars in justification of the period of extension claimed in order that the claim may be investigated at the time.

6.17.

When submitting a quotation for a compensation event under the ECC contract the Contractor is required to submit a revised programme if the event is likely to cause delay to the execution of the remaining work (See clause 62 of the core conditions).

7. 7.1.

Grounds for extension of time Traditional extension of time clauses contain a list of delaying events for which the Engineer or Architect is empowered to grant extensions of time.

7.2.

The lists generally covers two types of delays: 7.2.1. delays which are the responsibility of the Employer (or his agent the Engineer or the Architect), such as variations, late receipt of necessary information from the Engineer/Architect, suspension of the Works or a part thereof, and delays by other persons employed directly by the Employer. As stated

previously it is essential for these grounds to be included if the Employers rights to have the works completed within the specified time for completion, and claim liquidated damages are to be maintained. 7.2.2. delays which are caused by neutral events which the parties have agreed should rank for extension, such as inclement weather, delay by statutory undertakings, force majeure, etc.

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7.3.

JCT 98 at clause 25.4 sets out the following grounds (Relevant Events) for extensions of time:JCT 98 Employer delays 25.4 .5 compliance with the Architects instructions .5 .1 under clauses 2.3,2.4.1, 13.2 (except for a confirmed acceptance of a 13A Quotation), 13.3 (except compliance with an Architects instruction for the expenditure of a provisional sum for defined work or of a provisional sum for Performance Specified Work), 13A.4.1, 23.2, 34, 35 or 36; or .5 .2 in regard to the opening up for inspection of any work covered up or the testing of any of the work, materials or goods in accordance with clause 8.3 (including making good in consequence of such opening up or testing) unless the inspection or test showed that the work, materials or goods were not in accordance with this Contract; 25.4 .6 .1 where an Information Release Schedule has been provided, failure of the Architect to comply with clause 5.4.1; .6 .2 failure of the Architect to comply with clause 5.4.2; 25.4 .8 .1 the execution of work not forming part of this Contract by the Employer himself or by persons employed or otherwise engaged by the Employer as referred to in clause 29 or the failure to execute such work; .8 .2 the supply by the Employer of materials and goods which the Employer has agreed to provide for the Works or the failure so to supply; 25.4 .12 failure of the Employer to give in due time ingress to or egress from the site of the Works or any part thereof through or over any land, buildings, way or passage adjoining or connected with the site and in the possession and control of the Employer, in accordance with the Contract Bills and/or the Contract Drawings, after receipt by the Architect of such notice, if any, as the Contractor is required to give, or failure of the Employer to give such ingress or egress as otherwise agreed between the Architect and the Contractor; 25.4 .13 where clause 23.1.2 is stated in the Appendix to apply, the deferment by the Employer of giving possession of the site under clause 23.1.2; 25.4 .14 by reason of the execution of work for which an Approximate Quantity is included in the Contract Bills which is not a reasonably accurate forecast of the quantity of work required; 25.4 .17 compliance or non-compliance by the Employer with clause 6A.1;

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25.4 .18 delay arising from a suspension by the Contractor of the performance of his obligations under the Contract to the Employer pursuant to clause 30.1.4. JCT 98 neutral delays 25.4 .1 25.4 .2 25.4 .3 25.4 .4 force majeure exceptionally adverse weather conditions; loss or damage occasioned by any one or more of the specified Perils; civil commotion, local combination of workmen, strike or lock-out affecting any of the trades employed upon the Works or any of the trades engaged in the preparation, manufacture or transportation of any of the goods or materials required for the Works; delay on the part of Nominated Sub-Contractors or Nominated Suppliers which the Contractor has taken all practicable steps to avoid or reduce; the exercise after the Base Date by the United Kingdom Government of any statutory power which directly affects the execution of the Works by restricting the availability or use of labour which is essential to the proper carrying out of the Works or preventing the Contractor from, or delaying the Contractor in, securing such goods or material or such fuel or energy as are essential to the proper carrying out of the Works;

25.4 .7

25.4 .9

25.4 .10 .1 the Contractors inability for reasons beyond his control and which he could not reasonably have foreseen at the Base Date to secure such labour as is essential to the proper carrying out of the Works; or .10 .2 the Contractors inability for reasons beyond his control and which he could not reasonably have foreseen at the Base Date to secure such goods or materials as are essential to the proper carrying out of the Works; 25.4 .11 the carrying out by a local authority or statutory undertaker of work in pursuance of its statutory obligations in relation to the Works, or the failure to carry out such work; 25.4 .15 delay which the Contractor has taken all practicable steps to avoid or reduce consequent upon a change in the Statutory Requirements after the Base Date which necessitates some alteration or modification to any Performance Specified work; 25.4 .16 the use or threat of terrorism and/or the activity of the relevant authorities in dealing with such use or threat.

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7.4.

ICE 7th edition at clause 44(1) sets out the following grounds for extension of time:ICE 7th edition Employer delays (a) (b) (c) (e) any variation ordered under Clause 51(1) or increased quantities referred to in Clause 51(4) or any cause of delay referred to in these Conditions or any delay impediment prevention or default by the Employer.

ICE 7th neutral delays (d) exceptional adverse weather conditions or (f) 7.5. other special circumstances of any kind whatsoever which may occur.

ECC at clause 60.1 sets out the following grounds (Compensation Events) for extension:ECC Employer delays (1) The Project Manager gives an instruction changing the Works Information except a change made in order to accept a Defect or a change to the Works Information provided by the Contractor for his design which is made at his request or to comply with other Works Information provided by the Employer.

(2)

The Employer does not give possession of a part of the Site by the later of its possession date and the date required by the Accepted Programme. The Employer does not provide something which he is to provide by the date for providing it required by the Accepted Programme. The Project Manager gives an instruction to stop or not to start any work. The Employer or Others do not work within the times shown on the Accepted Programme or do not work within the conditions stated in the Works Information. The Project Manager or the Supervisor does not reply to a communication from the Contractor within the period required by this contract.

(3) (4) (5)

(6)

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(7) (8) (9)

The Project Manager gives an instruction for dealing with an object of value or of historical or other interest found within the Site. The Project Manager or the Supervisor changes a decision which he has previously communicated to the Contractor. The Project Manager withholds an acceptance (other than acceptance of a quotation for acceleration or for not correcting a Defect) for a reason not stated in this contract. The Supervisor instructs the Contractor to search and no Defect is found unless the search is needed only because the Contractor gave insufficient notice of doing work obstructing a required test or inspection. A test or inspection done by the Supervisor causes unnecessary delay. An Employers risk event occurs. The Project Manager certifies take over of a part of the works before both Completion and the Completion Date. The Employer does not provide materials, facilities and samples for tests as stated in the Works Information. The Project Manager notifies a correction to an assumption about the nature of a compensation event. A breach of contract by the Employer which is not one of the other compensation events in this contract.

(10)

(11) (14) (15) (16) (17) (18)

ECC neutral delays (12) The Contractor encounters physical conditions which are within the Site, are not weather conditions and which an experienced Contractor would have judged at the Contract Date to have such a small chance of occurring that it would have been unreasonable for him to have allowed for them.

(13)

A weather measurement is recorded within a calendar month, before the Completion Date for the whole of the works and at the place stated in the Contract Data the value of which, by comparison with the weather data, is shown to occur on average less frequently than once in ten years.

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8. 8.1.

Duties of the Architect / Engineer in granting extension of time There is a general duty on the Architect / Engineer to determine a fair and reasonable extension of time. This is expressly stated in the various clauses as follows:8.1.1. Clause 25.3.1 of JCT 98 requires the Architect to award such extension as he considers fair and reasonable. 8.1.2. Clause 44(3) of ICE 7th edition requires the Engineer to grant such extension of time as to which the Contractor is fairly entitled.

8.2.

Architects / Engineers cannot take a merely passive role in the extension of time process. The perils of so doing were highlighted in the case of Holland Hannan & Cubbitts (Northern) Ltd v Welsh Health Technical Services Organisation (1981) where the Architects failed to issue a variation order or extension of time to overcome design defects in windows supplied by a nominated sub-Contractor. judgement Judge Newey stated: However, I find it impossible to believe that Architects in charge of a great building project, which has been brought to a stop by an unexpected difficulty, are entitled to adopt a passive attitude, as PTP did in this case. PTPs In giving

failures were ones of omission rather than of commission, but I think that they nonetheless amounted to a breach of contract. The same conclusion as I have reached in regard to the issue of a variation instruction applies, I think, to the grant to Cubitts of an extension of time 8.3. As stated above Architects / Engineers must determine a fair and reasonable extension of time. Such determination is required to be based upon both a thorough analysis and a proper application of the provisions of the contract. In John Barker Construction v London Portman Hotel Ltd (1996) the Architects extension of time award was found to be fundamentally flawed in a number of respects namely:(1) [The Architect] did not carry out a logical analysis in a methodical way of the impact which the relevant matters had or were likely to have on the Plaintiffs planned programme.

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(2) He made an impressionistic, rather than a calculated, assessment of the time which he thought was reasonable for the various items individually and overall. (The Defendants themselves were aware of the nature of [the Architects] assessment, but decided against seeking to have any more detailed analysis of the Plaintiffs claim carried out unless and until there was litigation.) (3) [The Architect] misapplied the contractual provisions, as more particularly set out above. Because of his unfamiliarity with SMM7 he did not pay sufficient attention to the content of the bills, which was vital in the case of a JCT contract with quantities. (4) Where [the Architect] allowed time for relevant events, the allowance which he made in important instances (such as the items relating to the walls or the cutting of pockets in the bathroom screeds) bore no logical or reasonable relation to the delay caused. I recognise that the assessment of a fair and reasonable extension involves an exercise of judgment, but that judgment must be fairly and rationally based. All in all, I am satisfied that the Plaintiffs have established that, although there was no bad faith or excess of jurisdiction on the part of the Architect, his determination of the extension of time due to the Plaintiffs was not a fair determination, nor was it based on a proper application of the provisions of the contract, and it was accordingly invalid. 8.4. In considering an award of extension of time under JCT 80 an Architect is entitled to consider the effect of other events when determining whether a relevant event is likely to cause delay to the completion of the Works. (See Henry Boot

Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd (1999)). 8.5. The majority of the standard forms requires the Architect / Engineer to make the assessment of extension of time within a stipulated period and prior to the completion of the Works. For example:8.5.1. JCT 98 at clause 25.3.1 requires the fixing of a new Completion Date not later than 12 weeks from receipt of the notice and of reasonably sufficient

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particulars or where receipt of the notice / particulars and the Completion Date is less than 12 weeks not later than the Completion Date. 8.5.2. ICE 7th edition at clause 44(3) states that should the Engineer consider that the delay suffered fairly entitles the Contractor to an extension of time such interim extensions should be granted forthwith. 8.6. In practice however it is all too common for an Architect / Engineer to delay determining the extent of the extension until the Works are complete, and base the extension on the Contractors needs at that time. In the absence of a realistic

completion date this often results in the Contractor accelerating at his own cost to reduce his liability for liquidated damages. (See lecture 5 hereafter). 8.7. Will a failure by the Architect / Engineer to comply with timescales such as those referred to at paragraph 8.5 above be fatal to the Employers right to deduct liquidated damages? There has been two legal cases where this question has been considered. Temloc -v- Errill Properties Ltd (1987) 39 BLR 34 and Aoki Corp -vLippoland (Singapore) Pte Ltd (1994). 8.8. The case of Temloc Ltd -v- Errill Properties Ltd (1987) 39 BLR 34 arose out of a contract let using JCT 80. The Architect is required by the terms of the contract to make decisions concerning extensions of time within a time scale. With regard to the effect on the Employers entitlements should the Architect fail to give his decision within the timescale, Croom-Johnson in the Court of Appeal had this to say:

"He says that that means that the certificate by the Architect fixing the later completion date shall be given not later than the expiry of twelve weeks from the date of practical completion.

In this case that period of twelve weeks was exceeded. Mr Machin therefore submits that it was a condition precedent to the operation of clause 24.2 (the liquidated damages clause) which was not complied with. But the certificate referred to in clause 24.1 and 24.2.1 (Architects non-completion certificate) is not the certificate which fixes the later completion date. It is a certificate which tells the Contractor that his liability to pay liquidated damages at the agreed rate has begun.

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In my view, even if the provision of clause 25.3.3 (requirement for the Architect to review extensions of time within 12 weeks of practical completion) is applicable, it is directory only as to time and is not something which would invalidate the calculation and payment of liquidated damages. The whole right of recovery of liquidated damages under clause 24 does not depend on whether the Architect, over whom the Contractor has no control, has given his certificate by the stipulated day." 8.9. A similar matter was the subject of the decision in Aoki Corp -v- Lippoland (Singapore) Pte Ltd (1994). Clause 23.2 of the SIA Conditions of Contract makes it a condition precedent that the Contractor notifies the Architect of any event, direction or instruction which the Contractor considers entitles him to an extension of time. The Architect is then required to respond in writing within one month indicating whether or not in principle the Contractor is entitled to an extension of time. As soon as possible after the delay has ceased to operate and it is possible to decide the length of the extension, the Architect will notify the Contractor of his award. If the Contractor fails to complete the work by the completion date or extended completion date, the Architect must issue a delay certificate as soon as the latest date for completion has passed. The Contractor notified the Architect of delays but the Architect failed to notify the Contractor of whether in principle an entitlement to an extension of time existed. Eventually, the Architect, without giving his decision in principle, refused all requests for extension except one for which he allowed 15 days. The Employer deducted 1,080,581 Singapore dollars in liquidated damages. It was held:

1) A decision by the Architect on the principle of the Contractors right to an extension was not a condition precedent to a valid determination of the Contractors entitlement.

The Contractor however could claim damages as a result of the Architects failure to make a decision. This may include the cost of increasing the labour force.

2) There is no rule that delay in the issue of the delay certificate after the date for completion or the latest extended date for completion, renders the delay certificate invalid.

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8.10.

It would seem that failure by the Architect or Engineer to make a decision concerning extensions of time within a timescale laid down in the contract is not fatal to the Employers rights to deduct liquidated damages.

8.11.

Unfortunately contracts such as JCT 98 which provide a timescale within which the Architect must grant an extension of time do not state what effect a failure to comply with the timescales will have upon the Employer s rights to deduct liquidated and ascertained damages. The decisions in Temloc -v- Errill Properties Ltd and Aoki Corp -v- Lippoland suggest that provided a proper decision is made by the Architect concerning extensions of time, a failure to meet the deadline will not affect the Employer s rights.

9. 9.1.

Balfour Beatty Building Ltd v Chestermount Properties Ltd (1993) The case, Balfour Beatty Building Ltd -v- Chestermount Properties Ltd (1993) heard before Mr Justice Colman of the commercial court, arose out of an appeal against an award of Christopher Willis, a well known and respected arbitrator.

9.2.

The works employing JCT 80 comprised the construction of the shell and core of an office block. Work commenced on 18 September 1987, the completion date being 17 April 1989, later extended to 9 May 1989. A certificate of non-completion was

subsequently issued by the Architect under clause 24.1. By January 1990 the work had still not been completed.

9.3.

During the period 12 February 1990 to 12 July 1990 the Architect issued instructions for the carrying out of fit out works as a variation to the contract. Practical completion of the shell and core was achieved on 12 October 1990 with the fit out works not finished until 25 February 1991. The Architect issued two extensions of time to give a revised completion date of 24 November 1989. The variations with regard to the fit out works were issued after the revised completion date but prior to practical completion, during a period of default. The Architect then revised the non-completion certificate to reflect the extended completion date.

9.4.

The Contractor argued that the effect of the issue of variations during a period of culpable delay was to render time at large, leaving the Contractor to complete within a reasonable time. This being the case, the Employer would lose his rights to levy

liquidated damages. Alternatively, the Contractor contended that the Architect should

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have granted an extension of time on a gross basis. In this case it was argued that the fit out work should have taken 54 weeks, this period to be added to 12 February 1990, when the fit out variation was issued.

9.5.

It was the Employer's contention that the correct approach should be a net extension of time, that is to say, one which calculated the revised completion date by taking the date currently fixed for completion and adding to it the 18 weeks that the Architect considered to be fair and reasonable for the fit out work.

9.6.

The main plank in support of the Contractor's argument was that if the net method were adopted the extended completion date would expire before the variation giving rise to the extension had been instructed, which was logically and physically impossible. If the Contractor's line were followed it would provide him with a windfall which swept up his delays. While recognising this, the Contractor considered the problem resulted from the Employer's own voluntary conduct in requiring a variation during a period of culpable delay.

9.7.

Mr Justice Colman did not agree. He found in favour of the Employer on a number of grounds:

When the Architect reviews extension of time under clause 25.3.3.2 following practical completion he is entitled to reduce the extended contract period to take account of omissions. These may have been issued during a period of culpable delay. It would, therefore, be illogical for the Architect to have to deal with additions differently to the way he deals with omissions.

The objective of clause 25.3.1 is for the Architect to assess whether any of the relevant events have caused a delay and if so by how much. He must then apply the result of his assessment to give a revised completion date. It would need clear words in the contract to allow the Architect to depart from a requirement to postpone the completion date by the period of delay caused by the relevant event.

9.8.

The final nail in the Contractor's coffin came when Mr Justice Colman said:

"...in the case of a variation which increases the works, the fair and reasonable adjustment required to be made to the period for completion may involve

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movement of this completion date to a point in time which may fall before the issue of the variation instruction".

9.9.

This decision is unlikely to apply to ICE 7th Edition where under clause 47(6) liquidated damages are suspended during a period of delay resulting from variations, a clause 12 situation, or any other delaying event outside the control of the Contractor.

9.10.

Where an Architect/Engineer issues a variation after the contract completion date but before practical completion, it is appropriate where resultant delays occur for an extension of time to be granted. Such extension of time will be calculated by extending the completion date by the net period of delay. This is unlikely to apply to ICE 7th Edition which provides for the suspension of liquidated damages during a period of delay caused by variations and the like.

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SHORTENED PROGRAMMES, FLOAT AND CONCURRENT DELAYS

10. 10.1

Shortened programmes Contractors and subcontractors when submitting tenders are always seeking to gain a competitive edge when pricing their bid. Often they consider that the proposed contract period is generous and they are capable of completing well within the period. If the tender price is based upon a period shorter than the proposed contract period a saving on site overheads and head office contribution will normally be achieved. Contractors and subcontractors will usually be reluctant to make it known at tender stage the basis of their pricing. It is only when the programme is produced usually after the contract has been signed that completion is shown earlier than the contract completion date. In the event of the Architect or Engineer failing to issue drawings and details in sufficient time to meet the shortened programme will it give rise to an entitlement on the part of the Contractor or subcontractor to be paid any resultant additional costs?

10.2

In the case of Glenlion Construction Ltd -v- The Guinness Trust (1987) 39 BLR 89, Glenlion Construction Ltd entered into a contract dated 10 July 1981 with The Guinness Trust. The contract incorporated the 1963 edition of the JCT standard form of building contract (July 1977 revision with quantities). provided for the following: "Progress Chart Provide within 1 week from the date of possession, a programme chart of the whole of the works, including the works of nominated subcontractors and suppliers and Contractors and others employed direct including public utility companies and showing a completion date no later than the date for completion. The chart to be a bar chart in an approved form. Forward 2 copies to the Architect, 1 copy to the quantity surveyor and keep up to date. Modify or redraft." Item 3.13.4 in the bills of quantities

10.3

Disputes arose which were referred to arbitration as follows: (1) Whether on a true construction of clause 2.13.4 of the contract bill the Contractor should "provide a programme chart (the programme) for the whole of the works showing a completion date no later than the Date for Completion" and

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that agreement or approval by the Architect of the programme should not relieve the Contractor of his responsibility to complete the whole of the works by the Date for Completion.

(2)

Whether on a true construction of clause 21 of the conditions, namely the 1963 JCT standard form of contract and clause 3.13.4 of the contract bills, if and in so far as the programme showed a completion date before the date for completion, the Contractor was entitled to carry out the works in accordance with the programme and to complete the works on the said completion date.

(3)

Whether there was an implied term of the contract between the applicant and the respondent that, if and in so far as the programme showed a completion date before the date for completion the Employer by himself, his servants or agents should so perform the said agreement as to enable the Contractor to carry out the works in accordance with the programme and to complete the works on the said completion date.

It was held by the Court:

As to question (1):

Although the text of question (1) did not accurately follow the wording of item 3.13.4 of the bills the full wording of item 3.13.4 was a contract provision and accordingly the question was generally to be answered in the affirmative.

As to question (2):

Yes: because:

(a)

Glenlion were entitled to complete before the date of completion in the light of clause 21 of the contract conditions;

(b)

The Contractor was entitled to complete on an earlier date whether or not he produced a programme and whether or not he was contractually bound to produce a programme or whether or not he did so;

(c)

Accordingly he was entitled to carry out the works in such a way as to enable him to achieve the earlier completion date whether or not the works were programmed.

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As to question (3):

No: since it was not suggested by the Contractor that he was both entitled and obliged to finish by the earlier completion date and if there was such an implied term as referred to in question 3 it would impose an obligation on the Trust but not on Glenlion.

10.4

It follows that the Contractor is entitled to complete the works earlier than the contract completion date and has a right to do so. There is no corresponding duty however on the part of the Employer to permit him to do so, and in particular to furnish him with information or otherwise positively co-operate so as to enable him to do so. The

Contractor is merely free from any contractual restraint and may complete earlier. The Employer must not prevent him from doing so but this does not mean that the Employer is bound to facilitate in a positive way the implementation of the Contractors privilege or liberty.

11

Programme float

11.1 11.2

Float is the time available to an activity or path in addition to its duration. Taking the simplest possible example, if a Contractor has (say) 100 days in order to construct a house, and programmes to carry out the task in 90 days, then there is 10 days float in the programme, thus;

Figure 1

B uild house 90d

F loat 10d

11.3

If at the outset, the Employer cannot give possession of site for 5 days, the Contractor loses 5 days through no fault of his own.

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11.4

The question then arises as to whether or not an extension of time is due. Most Architects or Engineers (Consultants) would say no for the simple reason that there has been no delay to completion.

11.5

However, it should be borne in mind that a completion period (in this case 100 days) sets out two things: in the contract one finds the time limited within which the builder has to do the work. This means not only that he has to do it within that time, but it means also that he is to have that time within which to do it ... (Lord Justice Vaughan Williams observation in (Wells v Army and Navy Cooperation Society (1902)).

11.6

In this analysis, then the Contractor has been denied his period of 100 days. This may provide an entitlement to a claim for loss and expense, but under most conditions of contract would not provide an entitlement to extension of time. Generally, the only contractual reason for awarding extension of time is to preserve the liquidated damages and adjust time to avoid them. The only grounds for

awarding extension of time (generally) is where a relevant event is likely to, or has delayed completion of the works beyond the completion date or extended completion date. It therefore remains the case in this example that there would be no

entitlement to an extension of time.

Figure 2

Delayed possession 5d Build house 90d Float 5d

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11.7

Note however the position is different under the ECC contract which stipulates at clause 63.3 that:A delay to the Completion Date is assessed as the length of time that due to the compensation event, planned Completion is later than planned Completion as shown on the Accepted Programme.

11.8

As planned Completion is now 5 days later than shown in Figure 1 then under the ECC contract it would appear that the Contractor is awarded a five day extension.

11.9

If the builder now finds himself in delay due to problems which do not qualify as a relevant event, and these problems delay the whole construction by 10 days, then the following arises:

Figure 3

Delayed possession 5d

100d Build house Delay 5d

11.10 The question then arises as to whether or not an extension of time is due. 11.11 Arguments abound about who got to the float first, and who owns the float. 11.12 Perhaps the first observation should be that even though a Contractor programmes to achieve early completion, he has no obligation to do so (Glenlion Construction Ltd v The Guiness Trust (1987) 30 BLR 89). It should be borne in mind that (unless otherwise provided) a programme is no more than a management tool, a budget for time prepared by the Contractor, and does not alter his contractual completion obligation.

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11.13 It follows that the consultant only denies an extension of time due to late possession when viewed at the outset of the contract, because at that time, late possession is not likely to cause delay to completion. However, at some point during the works, it will become apparent that the Contractor does indeed need his 100 days (which he is entitled to) and at that point an extension of time is due because the completion date is likely to be delayed due to late possession of the site. 11.14 Support for this view is to be found in Hudsons Building & Engineering Contracts, tenth edition, first supplement at page 639: a Contractor may be in advance of planned progress and an event justifying an extension will only have the effect of his losing that advantage, should some later default occur, but not imperil the actual date. Ideally such an extension need only be given if the Contractor later has need of it ie by being in culpable delay 11.15 The purpose, ownership and use of float has generated much controversy over the recent past. Prior to the development of computers and supporting programming software, assessments of delay were somewhat impressionistic. This is no longer acceptable (John Barker Construction Ltd v London Portman Hotel Ltd (1997) 83 BLR31). Courts (if not arbitrators) move rather slowly in following technical

developments, but it does seem to be the case that they now accept that delay assessments must have regard to critical paths as represented by critical path analysis or logic linked programmes. (The Royal Brompton Hospital National

Health v Watkins Gray International and Others [QBD 2000]). These inevitably show activities with their respective floats and are used as models. 11.16 Until recently, there has been little technical or legal authority. This is changing slowly. Keith Pickavance has written Delay and Disruption in Construction Contract (second edition) and this (amongst others) offers more comprehensive guidance than was formerly available. At Chapter 13, he deals with float, and its ownership, and quotes from various legal authorities mainly American. He gives examples

somewhat similar to the above and illustrates the possible outcomes. 11.17 Clearly, if (as appears common in America) float is expressly dealt with in the contract, and its ownership defined (say) as belonging to the Contractor, or shared

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between Contractor and Employer, then this dictates the analysis for extension of time purposes. 11.18 Pickavance gives various examples based upon the premise that no time extensions are allowed until the float is exhausted on the activity in question. These clauses permit the individual who gets to the float first to gain the benefit of the float. This also makes good sense when the causation principle of proximate cause is considered. 11.19 He illustrates this as follows:-

Figure 4
Start Original Completion

Activity A 30 days

Activity B 10 days

Start

Original Completion Ds delay 10 days Activity B 10 days

Activity A 30 days

Start

Original Completion 10 days delay Cs delay 10 days Ds delay 10 days Activity B 10 days

Activity A 30 days

Note: D is Developer, C: Contractor 11.20 In example X, the original programme intentions are set out, showing Activity B as having 10 days float, and being none critical. 11.21 In example Y, the Developer causes 10 days delay and this results in no delay to completion, merely absorbing float. No extension of time is due.

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11.22 In example Z, the Contractor causes delay himself thereby pushing completion into a 10 day delay. According to Pickavances, proximate cause interpretation, this

would mean that the last cause of delay takes responsibility and in example Z, the Contractor would be liable. 11.23 Conversely, if example Z| below arises thus:-

Figure 5

Z|

Start Activity A 30 days

Original Completion 10 days delay Ds delay 10 days Cs delay 10 days Activity B 10 days

11.24 In this situation, because the Contractor got to the float first, the proximate cause of delay would be the Developers responsibility and extension of time would be justified. 11.25 This whole theory relies upon the thesis that liability attaches to the last cause of breach. 11.26 The term proximate cause arises principally in insurance. Traditionally, the term has been interpreted to mean that the last cause in point of time takes responsibility. However, recent authority appears to have discredited this view. A cause is The

proximate if it operated with reasonable certainty to occasion the loss.

Judgment of the House of Lords in Leyland Shipping Co Ltd v Norwich Union Fire Ins Sy Ltd [1918, AC350] marks the end in England of an earlier rule that looked at the last cause in point of time; cases decided before Leyland should be treated with caution, unless cited with approval in that or later cases. (The Law of Insurance Contracts Third Edition Malcolm A Clarke). It does appears that the rule that looks to the last cause survives in parts of the United States, and this may account for the approach adopted by Pickavance, who pays much attention to such cases.

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11.27 One recent authority which lends some assistance is the case of Ascon Contracting Limited v Alfred McAlpine Construction Isle of Man Limited (October 1999). 11.28 Ascon claimed extensions of time for completion of its sub-contract works. McAlpine (the main Contractor) denied that Ascon was entitled to extensions of time and counter-claimed that the delayed completion of the main contract works was entirely the consequence of Ascons delays. 11.29 The main contract programme contained float totalling 5 weeks. McAlpine argued that it was entitled to use the float, if it so chose, to absorb the effect of its own delays and delays caused by other sub-contractors, leaving Ascon solely liable for the whole of the delayed completion of the main contract. Judge Hicks held that float was not in the gift of the main Contractor in this way. He confirmed that the correct approach is to follow the usual legal analysis of the issues of breach, loss and the causal link between the two. 11.30 Judge Hicks went on to give a hypothetical example. In that example, 6 sub-

contractors each caused delay of one week to the main contract. The main contract programme contained 5 weeks float, and completion was therefore delayed by 1 week. The judge suggested that, in such circumstances, the defaulting sub-

contractors would be entitled to share equally in the benefit of the float and should bear equally the liability for the delayed completion. 11.31 This decision has attracted criticism from certain quarters, with critics relying upon the view that if the float has been exhausted by the time that sub-contractor number six causes delay, then on a proper analysis it would seem that he is liable for the whole of the delayed completion, the other five having taken the benefit of the float. 11.32 Without entering a debate on the relevances of insurances authorities or the propriety of the last cause approach, it is submitted that Judge Hicks approach in Ascon fits very sensibly with most conditions of contract where extension of time clauses require a fair and reasonable extension of time, and where there is no authority to argue that merely because a party is responsible for the latest delay, that party is denied use of the float because it has by then expired, and assumes responsibility for delay. Determining the proximate cause of loss is simply the application of common sense. The proximate cause is that which predominates. (Modern

Insurance Law John Birds Third Edition P218).

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12 12.1

Concurrent Delays Frequently, there is perceived to be more than one cause of delay operating at the same time. This is referred to as a concurrent, parallel or competing delay.

12.2

Clearly, difficulties may arise where the causes of delay which are concurrent fall to be treated differently under the conditions of contract, ie they may be any combination of Contractor, Employer or neutrally caused delays, each combination with different ramifications.

12.3

Before discussing the various techniques or approaches for dealing with concurrency, it is desirable to be more precise about what it means, and when or whether it has occurred.

12.4

It should be appreciated that true and absolute concurrency where two or more activities are delayed precisely in parallel with the same start, and end dates, is relatively rare. Concurrency then is said to exist only when two (or more) delays, each of which affect completion (ie they are critical items) occur at the same time.

12.5

Concurrency is only significant where both delaying events are critical to completion. If one of the events is not critical, and the other is, the delays may be concurrent, but in terms of delay to completion, there is no concurrency.

12.6

In order to illustrate this point consider the following scenario, regarding a simple steel framed building:-

Figure 6
10d

Steel Frame Building Original Plan

Install Piles 7d Pilecaps 10d G/F Slab 30d Erect Steel Frame 20d Float 7d Fabricate Steel Frame

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1) Consider a simple construction involving the erection of a small steel framed building. 2) The critical path initially runs through the concrete foundations and erection of the structural steel. 3) Note that the fabrication activity has some 7 days float. 12.7 Now consider the as built programme thus:

Figure 7
10d Install Piles 3d 7d

Steel Frame Building As Built

Pilecaps

(A)

10d G/F Slab 30d Erect Steel Frame Completion Delayed by 3 days Fabricate Steel Frame

10d

10d

10d

(B) (A) = Excusable Delay, e.g. additional rebar for pilecaps (B) = Culpable Delay, e.g. shortage of welders

1) As-built situation shows slippage occurred during construction of pilecaps (A) and steel fabrication (B). 2) When viewing this scenario retrospectively, the consultant may argue that the delays are concurrent. Furthermore, he may say that the Contractor, due to his own culpable delay could not have commenced erection of the Steel Frame any earlier than he actually did. This being so, delay A had no effect and there is no entitlement to extension of time. 3) At first glance this seems reasonable or at least arguable, but this may in fact be wrong in terms of basic legal principle and also because it is a misinterpretation of the critical path.

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12.8

Referring back to Figure 6, the baseline programme and tracking the events, it is possible to see whether there is true concurrency in terms of critical activities, and whether any entitlement to extension of time exists:-

Figure 8
10d Install Piles 3d (A) 7d

Steel Frame Building After 13 days

Pilecaps 10d G/F Slab 30d Erect Steel Frame 10d (B) (A) = Excusable Delay, e.g. additional rebar for pilecaps (B) = Culpable Delay, e.g. shortage of welders 10d Completion Delayed by 3 days Fabricate Steel Frame

1) Status of project after 13 days. 2) The delay to pilecaps still drives the date for completion and thus is ultimately critical. 3) At this stage the concurrent delay to fabrication is not impacting the completion of the project. 12.9 It follows from the above that under most conditions of contract, the Contractor would give notice of delay to completion of the Works in respect of Item A and not Item B, and the Engineer would duly take account of what was critical at the time. It is clear from the critical activities that at that time Item A is the only cause of delay.

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Figure 9
10d Install Piles 3d (A) 7d

Steel Frame Building After 19 days

Pilecaps 10d G/F Slab 30d Erect Steel Frame 10d 9d (B) (A) = Excusable Delay, e.g. additional rebar for pilecaps (B) = Culpable Delay, e.g. shortage of welders 10d Completion Delayed by 3 days Fabricate Steel Frame

1) Status of the project after 19 days. 2) The delay to pilecaps is now complete and normal progress has resumed. 3) The delay to fabrication is still ongoing, however it can be seen that the shortage of welders is still not impacting the date for completion. 4) Taking this point through to its obvious conclusion, it is apparent that steel fabrication was indeed never critical to the completion of the building. 5) Therefore, these delaying events are not concurrent in terms of critical activities and the Contractor should be awarded time against the excusable delay (A). 12.10 It can be seen by use of the windows techniques that the delays at A and B, whilst partially concurrent in terms of time, are not concurrent in terms of critical activities. The delay at B can continue for a further day before any critical delay takes place. After that, any delay will not attract an extension of time. 12.11 Taking the same scenario, an example of true concurrency may be seen as follows:-

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Figure 10
10d

Steel Frame Building Original Plan

Install Piles 7d Pilecaps 10d G/F Slab 30d Erect Steel Frame 27d Fabricate Steel Frame

12.12

In this situation, the fabrication is critical, the float having been removed. Moving then to the next scenario.

Figure 11
10d Install Piles 3d (A) 7d

Steel Frame Building After 13 days

Pilecaps 10d G/F Slab 30d Erect Steel Frame 10d (B) (A) = Excusable Delay, e.g. additional rebar for pilecaps (B) = Culpable Delay, e.g. shortage of welders 17d Completion Delayed by 3 days Fabricate Steel Frame

I 12.13 In this circumstance, genuine concurrency arises, and the consultant is faced with the dilemma as to how to deal with the matter. 12.14 The distinction between these two situations (ie true concurrency and where two delays occur at the same time but only one is critical to completion) was referred to by Judge Seymour in The Royal Brompton Hospital NHS Trust v Frederick Alexander Hammond and others (TCC 18th November 00) referring to concurrent delays.

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However , it is, I think, necessary to be clear what one means by events operating concurrently. It does not mean, in my judgment, a situation in

which, work already being delayed, let it be supposed, because the Contractor has had difficulty in obtaining sufficient labour, an event occurs which is a Relevant Event and which, had the Contractor not been delayed, would have caused him to be delayed, but which in fact, by reason of the existing delay, made no difference. In such a situation although there is a Relevant Event, the completion of the Works is [not] likely to be delayed thereby beyond the Completion Date. The Relevant Event simply has no effect upon the completion date. This situation obviously needs to be distinguished from a situation in which, as it were, the works are proceeding in a regular fashion and on programme, when two things happen, either of which, had it happened on its own, would have caused delay, and one is a Relevant Event, while the other is not. In such circumstances there is a real concurrency of causes of the delay. 12.15 There are several principle approaches to concurrency, namely:> Devlin Approach > Dominant cause > Burden of proof > Benefit from Ones Own Default

12.16 Crucially, these approaches take into account the effects of delay both on an entitlement to extension of time and also, their effect on entitlement to damages. Keating in Keating on Building (6th Edition) summarised the position as follows:(1) the Devlin approach. If a breach of contract is one of two causes of a loss, both causes co-operating and both of approximately equal efficacy, the breach is sufficient to carry judgment for the loss. This would apply where for example there were two competing causes of delay which entitled a Contractor to an extension of time, excessively adverse weather and late issue of instructions by the Architect.

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Following the Devlin approach the Contractor would be entitled to extra time and loss and expense. (2) the dominant cause approach. If there are two causes, one the

contractual responsibility of the defendant and the other the contractual responsibility of the plaintiff, the plaintiff succeeds if he establishes that the cause for which the defendant is responsible is the effective, dominant cause. Which cause is dominant is a question of fact, which is not solved by the mere point of order in time, but is to be decided by applying common sense standards. (3) the burden of proof approach. If part of the damages is shown to be due to a breach of contract by the Claimant, the claimant must show how much of the damage is caused otherwise than by his breach of contract, failing which he can recover nominal damages only. An example would be delays caused by correcting defective work running at the same time as a delay caused by the Employer. Little in the way of extra cost would be recoverable, but more time would be allowed. 12.17 The dominant cause of delay theory has been rejected by the Courts in the case of H Fairweather and Co Ltd v London Borough of Wandsworth (1987) 39 BLR 106. H Fairweather and Co Ltd were the main Contractors for the erection of 478 dwellings for the London Borough of Wandsworth employing JCT 1963 (July 1973 revision). Long delays occurred and liability for those delays and other matters were referred to arbitration. 12.18 With regard to the delays the Architect granted an extension of eighty-one weeks under conditions 23(d) by reason of strikes and combination of workmen. The

quantum of extension was not challenged but Fairweather contended before the arbitrator that eighteen of those eighty-one weeks should be reallocated under condition 23(e) or (f). The reasoning behind the contention was that only if there was such a reallocation could Fairweather ever recover direct loss and expense under condition 11(6) in respect of those weeks reallocated to condition 23(e) or condition 24(1)(a) in respect of those weeks reallocated to condition 23(f). 12.19 The arbitrators reasons are to be found in sections 6.11 and 6.12 of his interim award:-

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6.11 It is possible to envisage circumstances where an event occurs on site which causes delay to the completion of the works and which could be ascribed to more than one of the eleven specified reasons but there is no mechanism in the conditions for allocating an extension between different heads so the extension must be granted in respect of the dominant reason. 12.3 I accept the respondents contention that faced with the events of this contract, nobody would say that the delays which occurred in 1978 and 1979 were caused by reason of the Architects instructions given in 1975 to 1977. I hold that the dominant cause of the delay was the strikes and combination of workmen and accordingly the Architect was correct in granting his extension under condition 23(d). 12.20 In 6.14 he said:For the sake of clarity I declare that this extension does not carry with it any right to claim direct loss and/or expense. 12.21 The arbitrators award was the subject of an appeal. The judge in the case disagreed with the arbitrators ruling that the extension of time should relate to the dominant cause of delay. He said in his judgment:Dominant has a number of meanings: Ruling, prevailing, most influential. On the assumption that condition 23 is not solely concerned with liquidated or ascertained damages but also triggers and conditions a right for a Contractor to recover direct loss and expense where applicable under condition 23 then an Architect and in his turn an arbitrator has the task of allocating, when the facts require it, the extension of time to the various heads. I do not consider that the dominant test is correct. But I have held earlier in this judgment that that assumption is false. I think the proper course here is to order that this part of the interim award should be remitted to Mr Alexander for his reconsideration and that Mr Alexander should within six months or such further period as the court may direct make his interim award on this part. 12.22 This decision places doubt upon Keating's Dominant Cause theory.

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12.23 There is another rule which is applicable to concurrent delays. Where an Employer delays the Contractor he will not be entitled to deduct liquidated damages even though the Contractor is also in default. (Wells v Army and Navy Co-operative Society (1903)). Vaugham Williams LJ stated: In law I wholly deny the proposition (counsel) put forward, which was this really in effect: Never mind how much delay there may be caused by the conduct of the building owner the builder will not be relieved from penalties if he too has been guilty of delay in the execution of the works. I do not accept that proposition in law. 12.24 With this in mind Keith Pickavance in his book Delay and Disruption in Construction Contracts as at page 253 states:Lastly, and this is a legal conceptual problem, the rules which apply to recovery of actual damages for delay, are not the same rules that apply to the relief of liquidated damages for delay. If the Contractors progress on the critical path has been interfered with by the Developers act of prevention, then the Contractor must be given sufficient time to accommodate the effects of that and be relieved from LADs from a commensurate period. On the other hand if, during the period of disruption to progress or prolongation for which an EOT has been granted, the predominant cause of the Contractors loss and expense is disruption, or prolongation caused by a neutral event or his own malfeasance (for which he bears the risk), then he will not be able to recover damages for the compensable event unless he can separate those costs flowing from the compensable event from those costs which are at his own risk. 12.25 The Courts in the USA have addressed this problem and applied the legal maxim that a party cannot benefit from its own errors. An Employer who deducts liquidated damages during an overrun period when the delay is being caused by both late issue of information and correcting defective work running concurrently could fall into this category. The USA Courts have taken the line that where this type of situation arises

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the Employer will not be entitled to deduct liquidated damages and for the same reason the Contractor will not be entitled to payment of additional cost. 12.26 A simplistic approach sometimes taken is the first past the post approach. This adopts the logic that where delays are running in parallel the cause of delay which occurs first in terms of time will be used for adjustment of the contract period. Other causes of delay will be ignored unless they affect the completion date and continue on after the first past the post cause has ceased to have any delaying affect. In which case only the latter part of the delay will be relevant. 12.27 Learned authors in various textbooks and articles however may have different views. FIDIC 4th Edition A Practical Legal Guide by E C Corbett is particularly succinct. 12.28 At page 253, Corbett sets out three types of delay which may overlap:(i) delays only the responsibility of the Contractor: no extension of time or reimbursement of costs, liquidated damages deducted; (ii) neutral delays, where the Contractor receives extension of time but no reimbursement of costs; and (iii) delays wholly the responsibility of the Employer where the Contractor receives extensions of time and reimbursement of costs. 12.29 He then considers the various overlapping combinations thus. 12.30 If neutral and Employer caused delays overlap, the convention, at least in the UK, is that the delays are treated as the responsibility of the Employer and the Contractor should receive his reimbursement. 12.31 If a Contractor caused delay overlaps with a neutral event, then a broad principles of fairness, the Contractor should receive an extension of time but not his costs. (He would have incurred his costs notwithstanding the neutral event, and in any event he does not receive costs due to a neutral event. The Employer on the other hand has agreed to share the risks of neutral events and in the absence of the Contractors culpable delay, would in any event have to grant an extension of time).

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12.32 If a Contractors default overlaps with an Employers default, the Contractor should receive an extension of time but not his costs. 12.33 Judicial support for Corbetts views has recently been provided by the case of Henry Boot Construction v Malmaison Hotel (Manchester) TCC (1999) wherein Justice Dyson said:Secondly, it is agreed that if there are two concurrent causes of delay, one of which is a Relevant Event, and the other is not, then the Contractor is entitled to an extension of time for the period of delay caused by the Relevant Event notwithstanding the concurrent effect of the other event. Thus, to take a simple example, if no work is possible on a site for a week not only because of exceptionally inclement weather (a Relevant Event), but also because the Contractor has a shortage of labour (not a Relevant Event), and if the failure to work during that week is likely to delay the Works beyond the Completion Date by one week, then if he considers it fair and reasonable to do so, the Architect is required to grant an extension of time of one week. He cannot refuse to do so on the grounds that the delay would have occurred in any event by reason of the shortage of labour. 12.34 It is to be emphasised that all of the above is to be interpreted according to the terms of the contract which generally require fairness and reasonableness. The guiding principle is that a party should not benefit from its own default, and that common sense and the facts must prevail.

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MODERN DELAY ANALYSIS TECHNIQUES

Delay Analysis using CPM Networks


What-if or As-Planned Expanded But For or As-Built Collapsed Time-Slice or Window Analysis

13 13.1

Introduction Traditionally, extension of time claims in construction contracts were assessed by contract administrators on an impressionistic basis without much in the way of detailed analytical reasoning. See comments at paragraph 8.3 above. This was usually after the Contractor had submitted little more than a basic list of events which had caused him delay and disruption, claiming a gross extension of time usually without reference to the cause and effect of each individual delay event. This came to be termed the global claim approach; no actual analysis of the true effect of each delay event - by either party - was deemed necessary.

13.2

Nowadays however, the standard of proof often required by contract administrators by which to admit extension of time claims is significantly higher. The global claim, while still popular, succeeds with increasing rarity. Contract administrators now regularly require cogent proof that claimed delays have actually delayed the project, normally by reference to their criticality. By far the most common method of demonstrating cause, effect and criticality is to use the critical path method (CPM) network technique.

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13.3

Retrospective delay analysis using CPM networks is a relatively new phenomenon. The critical path method for project management was invented less than 50 years ago. However, analysis by hand using the method frequently involves many hundreds of laborious and repetitive calculations, and so the method was very slow to gain acceptance in the construction industry. Indeed, it is only in the last 5-10 years that computer processing power and user-friendly software have evolved to make the method available to the mainstream in the profession. This represents a revolutionary change in a very traditional industry.

13.4

Perhaps as a result of this rapid development, the methods of retrospective delay analysis using CPM networks are at present poorly understood by many across the spectrum of the industry. Contract administrators and arbitrators, more often than not, revert to making impressionistic extension of time awards; Contractors for their part are often guilty of failing to construct reasoned logical networks, working to them and re-planning and updating them when changes have occurred (even though this is nothing more than basic good project management practice).

What is a Critical Path Method (CPM) Network?


BS 4335 : 1987 Definitions:

Network

- A representation of activities with their interrelationships and dependencies - A path (sequence of activities) with least float - The time available to an activity or path in addition to its duration

Critical Path Float

13.5

These definitions are all taken from BS 4335 (the British Standard Glossary of Terms in Project Network Techniques)

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13.6

The network definition is the cornerstone. It is crucial to the operation of the network that inter-dependencies (relationships) between the various work activities are plotted out as accurately as possible.

13.7

By dint of the relationships, if any activity is delayed, then all of the following activities (successors) which are linked to it are delayed. This, indeed, is the basis of analysing delay using logically linked networks; a future effect due to a delay can be immediately predicted.

14

What if or As planned expanded analysis.

Get up Run Bath Iron Shirt

Simple Network of Activities

Take Bath Towel Dry Shave Get Dressed Breakfast Travel to Work

Arrive Office 07h00 07h30 08h00 08h30 09h00

14.1 14.2

This is a simple network of activities (an early morning routine). Why is this a network, as opposed to a bar-chart? Well once again it is the inter-relationships that are important.

14.3

A bath cannot be taken until it has been run. There is a logical link from the finish of running the bath to the start of taking it.

14.4

So what happens if there is a delay to any of these activities? Well lets take the shaving activity as an example: Imagine a shaving cut is suffered, and it takes 10 minutes to heal (i.e. a 10 minute delay is incurred).

14.5

It follows that getting dressed will occur 10 minutes later, which will in turn mean that taking breakfast will be 10 minutes later and thus the travelling to

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work will be 10 minutes later than normal. This all holds true because of the logical links in this plan.

14.6

Now assume that because of leaving the flat 10 minutes late, a rush-hour traffic jam is encountered, and the journey to work takes 15 minutes longer than usual. Thus a second delay, this time to the Travel to Work activity, has been incurred.

Get up

What-if/As-Planned Expanded Analysis


Run Bath Iron Shirt Take Bath Shaving: 10 mins delay Traffic Jam: 15 mins delay Shave Get Dressed Breakfast Travel to Work

Towel Dry

Delay=25 mins
Arrive Office 09h25 07h00 07h30 08h00 08h30 09h00

14.7

Here the delays have been added (or impacted) into the original plan, and it can be seen that the total delay is calculated at 25 minutes.

14.8

Note that it is the logical links which have done the work here the impact of the 10 minute delay (at about 8.15am) when the shaving cut was suffered has been felt by all of the successor activities so that when the second delay occurs to the travel activity, this activity is in the right place (in time) to give the accurate result for the total delay of 25 minutes.

14.9

This is very important; the effect of any delay can be assessed way ahead into the future because of the network logic.

14.10 This is in fact the first method of analysing delays; the original plan is taken, the delays added (impacted), and the network logic does the rest. 14.11 This is the what-if, or as-planned expanded/impacted method of analysis. It is by far the most popular CPM network-based method used in the
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construction industry at the present time, and it seems to work very well in the above example, so whats the catch? Well this early morning plan is one which is followed almost robotically. When the alarm goes off at 7.00am, it is guaranteed that the above activities will be followed strictly to order: there is, in other words, a high degree of certainty that the plan will be adhered to. 14.12 The more rigidity and certainty existing in the project, the more accurate and suitable a what-if method will be

Advantages and Strengths of What-if Analyses


Work well with simple logic-driven sequences of activities Work well when there is a high level of certainty that a given order of activities will be followed (e.g. manufacturing processes) Simple to understand

14.13 Indeed, for a strict manufacturing process (e.g. a car, or a watch) on a production line, then the what-if analysis is an eminently suitable method. The method also has the often overlooked advantage of being simple to present and to understand.

14.14 However construction is not a strictly controlled manufacturing process, and it certainly is nowhere near as predictable as the early morning routine. There are many factors which can and do affect construction programmes, which are examined on the next slide. All of these, tend to restrict the reliability and accuracy of the what-if method when used in complex construction projects.

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Factors affecting Construction Programmes


Delayed possession of works areas or access routes, ordered variations, late release of design information, faulty design information, additional or omitted works Failure to start/resource/manage work, poor workmanship resulting in abortive work, acceleration by increase of resource Inclement weather, unforeseen ground conditions, interference/obstruction by third parties Contractor changes his methodology/order of working

14.15 The main problem with basing any analysis on the initial plan is that the Contractors plan (and, therefore, his critical path) is dynamic: it can and does change throughout the currency of a project due to many factors. These include not only influences from the Employer/Contract Administrator, such as additional work, variations, and faulty design information, but also failure to start work on time, failure to resource work adequately, and defective workmanship (emanating from the Contractor), and inclement weather, unforeseen ground conditions, and third party interference (neutral events).

14.16 There is yet another category which can produce even more dramatic changes to a Contractors plan than any of the above: the Contractor changes his methodology or his order of work.

14.17 Changes in this latter category are often precipitated by financial considerations (a new supplier or subcontractor offers a saving with a previously unconsidered material or method), however another cause is that the Contractor simply corrects mistakes in his previous plan.

14.18 In summary, the Contractors plan to execute the works is subject to change throughout the project duration. The programme and its critical path is, in fact, constantly evolving.

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14.19

This is the most persistent criticism of the what-if method when applied to construction.

Main Criticism of what-if Method

The Contractor, for a multitude of reasons, rarely keeps to his initial plan

14.20 Contractors, usually for a combination all of the above reasons, almost never keep to their initial plans.

14.21 Indeed, the only way to frame an extension of time claim on a complex project when using the what-if method is to make a statement along the lines of: This is what our original programme would have been, had we known in advance about all of the delaying events which have befallen us

14.22 Obviously, this is an extremely theoretical approach. The what-if method, whilst being overwhelmingly the most popular method of analysing delay, suffers from the serious limitation of being a static analysis. That is to say, it only uses one single programme as the basis for the analysis. This often leads to very distorted results.

14.23 Thus it often transpires that a contract administrator, when faced with an analysis based purely upon the initial plan, rejects it with a comment along the lines of: This is too theoretical. It seems not to take account of any of your own defaults, or changes in planning. Please show me an analysis based upon how youve actually built the project

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15

But for or as built collapsed

15.1

At this juncture then, it is convenient to introduce the second CPM-based approach: the but-for or as-built-collapsed/subtracted method.

But-For or As-built-subtracted Method


1) As-built programme including delays
A B C D E
Actual Finish
0 1 2 3 4 5 6 7 8

15.2

Here is an as-built programme. This Contractor has completed 5 activities (A through to E) but has encountered delays on two of them (B and D.) The project has been certified complete on the 8th month

15.3

The but-for method, like the what-if technique, is extremely simple. In the what-if method, the delays were added (or impacted) into the original plan.

15.4

The but-for method is a game of subtraction; the as-built Programme is simply taken, and then the delays are subtracted from it the resultant programme is then collapsed as shown overleaf (Slide 10).

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But-For Method
2) As-built programme with delays omitted A B C D E
Finish but for delays
0 1 2 3 4 5 6 7 8

Entitlement

Actual Finish

15.5

This gives a new theoretical finish, the finish which would have been achieved BUT FOR the Employers delays.

15.6

The entitlement is thus the difference between the theoretical but-for finish and the actual certified finish date.

15.7

On the face of it, this is quite a powerful argument for the Contractor. He can make strong statements to the Employer such as: This is the as-built programme without the delays caused by you. It can be seen that, but for your delay, I would have finished on [date] this even includes for my own culpable delays

But For Method


ADVANTAGES DISADVANTAGE

Based on actual build Highlights delays times - leads to a which are on the convincing argument longest path, and not necessarily those which may have been Simple to present critical to completion. and understand

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15.8

The big argument in favour of the but-for method is this: because the method is based upon actual build times, the argument is extremely convincing the Contractors own malfeasances are built into his as-built bars

15.9

Like the what-if method described previously, the but-for method is also extremely simple and relatively quick to digest.

15.10 So, what are the problems with the but-for method?

15.11 Well, the but-for method has one major disadvantage: it tends to emphasise those delays which are on the longest as-built path Because of changes to the workscope and sequence due to the reasons discussed earlier (see Slide 7), these delays may not necessarily be those which delayed the project (i.e. were critical to completion.)

15.12 This, therefore, is precisely the same problem as the what-if method, but in reverse:

With the what-if method, a big disadvantage is that the initial plan is very rarely followed: how can one be sure therefore that the critical path at the beginning will be the same mid-way through a project?

However, the but-for method looks at the critical path at the end of the project (the longest path or last activity to finish.) Similarly, how can one be sure that this was always the critical path, for example much earlier in the project?

15.13 There is no easy answer. For all of its apparent strengths, the but-for method is just as static as the what-if technique: it is based upon just one network, and therefore fails to record changes in criticality which may have occurred previously.

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16

Time slice or window analysis

Contemporaneous Period or Time-Slice or Window Analysis

16.1

So the limitations of the what-if and but-for approaches are equal and opposite. They both suffer from the fact that they analyse delays over a long period (i.e. a construction contract) from just a single network (either the initial programme, or the as-built programme).

16.2

Neither method therefore can take account of the changes to a programme, and its critical status, throughout the duration of the work.

16.3

A third method, which is known variously as contemporaneous period analysis, time-slice analysis or window analysis, seeks to address this limitation.

16.4

Instead of using one single programme to analyse delays, this method uses several programmes, taken at regular time-slice intervals (or windows of time) throughout the duration of the project.

16.5

Each programme, at the different slices of time, will naturally incorporate the progress (or otherwise) that the Contractor has made up to that point; each programme will also have a critical path based upon the progress and outstanding work left at the end of that window of time

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16.6

So in the window analysis, it is possible to take the delays, and see if they impacted upon the contemporary critical path; that is, the critical path in the time window in which the delay occurred.

16.7

The method is inherently much more complex than the but-for and what-if analyses. A discussion of general principals may be confusing, and the optimal way to explain this method is therefore with a worked example

Contract for New Bridge & At-Grade Approach Roads for Anytown Council
Client : Anytown Council Designer : Know-it-all & Partners Contractor: Big Builder (General Civil Engineering Contractors) Ltd. Contract Duration = 10 months

16.8

This is a fictitious contract for a new bridge and approach roads. It has been extremely well-planned by the Contractor (Big Builder), who have had extensive experience in this type of project. However, just like the best laid plans of mice and men, this one will go horribly wrong!

16.9

All we need to know to begin with is that the Contract Duration is 10 months (300 days); note that we are not concerned with money here, the dispute will be purely regarding extensions of time.

16.10 The progress of the project will be analysed in 3-month time-slices (or windows).

16.11 Any delaying events will be assessed as to whether they impact upon the contemporary critical path: that is to say, the critical path within the 3-month time-slice in which the delay occurs.

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16.12 At the end of the analysis the delays in each time-slice and their effects on the contemporary critical path (the critical path in the previous window in time) are tabulated.

Clause 14 Programme Bridge


Site Clearance Cofferdams Abutments Deck Structure Deck Furniture / E&M Finishes & Commissioning

At-Grade Approach Roads


Appoint Subcontractor Construct Approach Roads (2km) Open Bridge & Roads
0 1 2 3 4 5 6 7 8 9 10 11

MONTHS

16.13 This is Big Builders initial works programme.

16.14 Big Builder (BB), are a careful, conscientious Contractor who place great emphasis on the planning and programming of their work. They have, after visiting the site and careful study of the tender documents, given thought to all of the activities above: the methods, resources, and production rates which will be needed to complete them.

16.15 In accordance with the contract specification (and good project management practice!) they have informed the Engineer (Know-it-all) of all of their assumptions, by submission of calculations and a method statement along with their initial programme.

16.16 It can be seen that the bridge works forms the critical path. BB have looked at the work required, and consider that they will need the entire 300 day contract period in which to complete the works, including successful commissioning.

16.17 The approach roads, on the other hand, are relatively minor works which BB intend to subcontract: once the subcontract is let (for which they anticipate 1

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month of work) they only consider that the approach roads will take 3 months to construct.

Events from Month 0 - Month 3 (1st time-slice)


Day 1 - Anytown Council advise that they are unable to obtain wayleave to land for site clearance at abutments for 10 days. Day 4 - BB requests EoT of 10 days, backed up by copies of his critical path (bridge works) before and after the delayed possession.

Day 12 - The Engineer, upon consideration of the Contractors detailed particulars, concurs and awards EoT of 10 days.

16.18 The events are simply described above. Basically a 10-day delay to possession at the bridge has impacted upon the contemporary critical path.

16.19 During this period, the Contractor makes his first extension of time request, within a reasonable time of it becoming apparent that this event will [be likely to] delay the whole of the Works.

16.20 Even though the programme is being periodically updated (in this case every three months), it is very good practice to back up extension of time requests with (1) current critical path (including progress status) just prior to delaying event, and (2) [expected] status of critical path after event. If necessary backing up the two (before and after) paths with a calculation explaining the difference between the two.

16.21 (This is strictly a step which is additional to a normal time-slice analysis. By also supplying critical path analyses/programme updates at the time each individual delay event commences and completes, the Contractor is entering the realms of what is known as a time-impact or snapshot analysis.)

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Events from Month 0 - Month 3 (1st Window)


Day 25 - Know-it-all vary the Works by increasing size of abutments to take account of some late geotechnical information Day 35 - BB estimates that the additional work will add 45 days to abutment construction, however due to the increased working space in the enlarged abutments, they can mobilise additional resource and reduce the delay to 30 days (calculations are provided to back this up, along with additional costs) Day 50 - The Engineer, upon consideration of BBs detailed particulars, agrees with BB delay recovery measures, and awards EoT of 30 days.

16.22 A further delay has occurred, this time due to a variation, which again impacts upon the contemporary critical path (the bridge works).

16.23 Again calculations of the contemporary critical path before and after the instructed variation should be sent by the Contractor as a matter of good practice, and to help establish the true impact of the variation on the completion of the Works.

16.24 Another important feature of the time-slice and time-impact methods is featured here. Because the methods are dynamic, they deal automatically with the kind of mitigative or accelerative actions such as those taken by BB here (their additional resources brought in to deal with the variation works). This type of change in the planning cannot be accommodated in the static what-if and but-for type analyses.

16.25 It is important, however, that a record is kept of such mitigative or accelerative actions such that a delay audit trail is established through the project until final completion.

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Events from Month 0 - Month 3 (1st Window)


Apart from these delays progress on bridge abutments was satisfactory during the first 3 months No progress was made on the appointment of a subcontractor to carry out the at-grade approach roads; (BB were too busy starting the bridge, and did not have the resource to compile any s/c packages.) Extended date for completion at end of first window = 10 months + 40 days

16.26 The time-slice method is dynamic, and thus measures delay against the progress and contemporary criticality. The CPM network needs to thus reflect slippage and/or better than expected progress in order to track the relative criticality of all activities in the network. 16.27 Consider the following example: three activities A, B, and C are to be carried out concurrently. Each are programmed with a duration of 10 days, thus:

10 A B C

16.28 After 5 days, all activities would be expected to have been 50% complete (per activity A, below). If however, activity B makes better than expected progress (say 70%), its remaining duration is only 3 days, hence a finish on Day 8 is now programmed and 2 days of float have been generated. Similarly, activity C has progressed poorly (say only 20% complete at Day 5); this means that the remaining duration is 8 days, with an expected finish at Day 13. At this juncture, activity C is the critical activity (see below).

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10 A

13

B C

16.29 This method of measuring progress slippage is utilised in the following slides.

Progress after 3 months Bridge


Site Clearance Cofferdams 10 Deck Structure Deck Furniture / E&M Finishes & Commissioning Abutments 30

At-Grade Approach Roads


Appoint Subcontractor Construct Approach Roads (2km) Open Bridge 0 1 2 3 4 5 6 7 8 9 10 11 12

MONTHS

40d EoT

16.30 This is the first updated programme. It should be noted that this programme includes for BBs mitigation by use of extra resources, else a 45-day delay (instead of 30 days) would have been shown here.

16.31 The critical path (thin red line through the activities) still runs through the bridge works at this stage, even though the approach roads have not commenced.

16.32 The delay bars are shown in red; in normal circumstances they would be denoted as individual activities linked into the CPM network, here they are shown as part of the overall activity bar in order to save space. Bars coloured blue denote that progress has been made, for example the activity for constructing the cofferdams has completed.
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16.33 The blue vertical line is the progress data line: all progress made up to this point is recorded. Since we are considering time-slices of 3 months, this line will advance at quarterly intervals as the analysis is carried out.

16.34 Note that the approach roads have not commenced (0% progress). Thus there is no progress (blue) bars to report, and the progress data line has effectively pushed the approach road activities back by 3 months.

Events from Months 3 - 6 (2nd Time-Slice)


No further variations/delays to bridge during this period; and the bridge progresses as planned. Day 110-130 - BB sends out enquiries for s/c works on approach road, and makes appointment on day 130. Day 150 - Anytown want route of approach road revised, and Know-it-all issue a V.O. extending the road by a further 1km (now 3km long); should now take 4.5 months to construct - a delay of 1.5 months to the approach road. Day 160 - BB request 45d EoT. Engineer refuses. Subcontractor constructs less than 0.5km of the 3km road; still 4.25 months of work to do.

16.35 Now the events in the second 3-month time-slice are described.

16.36 The bridge goes exactly as planned.

16.37 However there are three separate delays to the approach roads: (i) (ii) (iii) The late appointment of the subcontractor; The variation order effectively increasing the road workscope by 50%; The slow initial progress once s/c is appointed (still 4.25 months - out of 4.5 initially - remaining as at the end of the 6-month window)

16.38 The interesting point here is the non-award of the extension of time for the approach roads based upon its non-criticality, even though the workscope was significantly increased. Here the Engineer has used the programme update in order to make his assessment. The programme updates not only

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encourage better project management, they also allow for more reliable contract administration.

Progress after 6 months Bridge


Site Clearance Cofferdams 10 Deck Structure Deck Furniture / E&M Finishes & Commissioning Abutments 30

At-Grade Approach Roads


Appoint Subcontractor Construct Approach Roads (3km) 45 0 1 2 3 4 5 6 7

Open Bridge & Roads


8 9 10 11 12

MONTHS

40d EoT

16.39 This is the second programme update, with the status as at 6 months (compare with the 3-month update above).

16.40 The bridge has progressed as planned and thus still has a completion date of 10 months + 40 days (Day 340). It is still the critical element of the work, but it can be visually deduced that the slow progress of the approach roads means that they are threatening to overtake the bridge in terms of criticality.

16.41 For the approach roads themselves, the increased workscope variation has been added as the 45-day delay shown in red. Since the approach road is still not the critical item of work, there is no extension of time entitlement due to the Contractor as a result of this significant delay.

16.42 However it is interesting to note that the completion of the approach roads is now forecast beyond Month 10, the initial Date for Completion of the whole project. This highlights a common problem where extensions of time are not granted promptly, within a reasonable time, by the contract administrator. If the Contractor were still working to the original Month 10 completion, then he could frame an argument that the approach roads were critical and the 45-day delay should operate.

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16.43 In more complex projects than the present (very simple) example, this is indeed a common problem; because no extensions of time have been awarded the parties are thrown into confusion as to exactly what is critical. Timely extension of time awards allow all sides to know exactly where they stand, and allows better allocation of resource to critical activities etc.

Events from Month 6 - 9 (3rd Time-Slice)


No further variations/delays due to Employer this period; Bridge progresses as planned; BBs s/c fails to resource the approach road adequately; BB withhold payment from the s/c, but this leads to still more productivity problems; Only 2 months progress is made in this 3-month period (i.e. still 2 months work to be done)

16.44 Here are the events in the 3rd time-slice. Just as in the previous 3 months the bridge progresses as-planned, and it is the approach road which causes all of the problems; a dispute with the sub-contractor has caused further delay.

16.45 The status update after 9 months is given overleaf.

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Progress after 9 months Bridge


Site Clearance Cofferdams 10 Deck Structure Deck Furniture / E&M Finishes & Commissioning Abutments 30

At-Grade Approach Roads


Appoint Subcontractor Construct Approach Roads (3km) Open Bridge & Roads 45 0 1 2 3 4 5 6 7 8 9 10 11 12

MONTHS

40d EoT

16.46 This is the programme update after 9-months.

16.47 The bridge is still planned to complete at Day 340, but the further slippage to the approach roads, due to the argument with the sub-contractor, have brought them to almost be running as late as the bridge works.

Events from Month 9 - Month 12 (4th Window)


No further variations/delays due to Employer this period; Bridge progresses completion 10 days ahead of schedule, due to better than expected commissioning tests. I.e bridge complete on Month 10 + 30 days; Approach road encounters workmanship problems; some DBM road base found to be defective; Engineer orders it to be taken up and re-laid; Only 1 months progress is made in this 3-month period (i.e. still 1 months work to be done); Approach road now delaying completion of the project.

16.48 In the fourth time-slice the bridge completes. Indeed the commissioning testing activity had contained some contingency for re-testing which was not

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in the event required. Thus the bridge finishes at Day 330, or 10 days ahead of the extended Date for Completion.

16.49 However the approach road has turned into a disaster for the Contractor, with workmanship problems now adding to the previous problems that BB had experienced with the sub-contractor.

16.50 This has led to the approach road delaying the project, as depicted below.

Progress after 12 months Bridge


Site Clearance Cofferdams 10 Deck Structure Deck Furniture / E&M Finishes & Commissioning Abutments 30

At-Grade Approach Roads


Appoint Subcontractor Construct Approach Roads (3km) 0 1 2 3 4 5 6 Open Bridge & Roads 7 8 9 10 11 12 45

Expected finish now Month 13

13

14

15

MONTHS

40d EoT

16.51 This is the programme update as at 12 months.

16.52 The most important point to note is that the critical path has changed. It is the approach road which now determines the Date for Completion of the project (indeed by default in this case, since the bridge works are complete.) This change in criticality would go undetected in the what-if and but-for methods discussed previously.

16.53 The Contractor is now in a period of culpable delay, since the extension of time entitlement and granted so far takes him only to Day 340.

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Events from Months 12 - 15 (5th Time-slice)


Further productivity and resourcing problems cause slower than expected progress on the approach road; Day 400 - Know-it-all issue a variation changing the routes and depths of some of the U - channel surface water drains alongside the road; Day 406 -BB complete the works associated with the v.o. and claim EoT up to Day 406; Day 415 -Engineer, upon due consideration, awards a further 6 days EoT; Contract completion date now 10 months + 46d EoT; Day 450 - Approach Road & Bridge certified complete

16.54 These are the events in the final time-slice. The bridge works have already been completed, so we must concern ourselves solely with the approach roads.

16.55 The point of interest here is the variation ordered in the extended period. The Contractor has claimed a gross extension of time, whereas the Engineer has (correctly) awarded a net extension of time, taking the total extension to 46 days.

16.56 The works have been certified complete, and so this marks the end of our analysis.

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Progress after 15 months Bridge


Site Clearance Cofferdams 10 Deck Structure Deck Furniture / E&M Finishes & Commissioning Abutments 30

At-Grade Approach Roads


Appoint Subcontractor Construct Approach Roads (3km)
0 1 2 3 4 5 6

45

Actual Finish Month 15

Open Bridge & Roads


7 8 9 10 11 12 13 14 15

MONTHS

46d EoT

16.57 This then, is the final programme update. It is also (of course) the as-built programme, and so can be used to perform a but-for analysis (see below).

16.58 The time-slice analysis is now completed by examining every delay within each time-slice, and assessing whether or not it was on the contemporary critical path.

Tabulation of Delays & Entitlement


Window 1 (Mths. 1-3) Delay(s) 10d delayed possession 30d abutment variation 45d Additional Road nil nil 6d Drainage variation On Critical Path (y/n) Yes Yes No N/A N/A Yes Entitlement 10d 30d Nil Nil Nil 6d

2 (Mths. 4-6) 3 (Mths 7-9) 4 (Mths. 10-12) 5 (Mths. 13-15)

TOTAL

46 days

16.59 In the table above, the delays are tabulated for each time-slice and assessed for their contemporaneous criticality. This step is required if the analysis is carried out retrospectively. Otherwise, if, as part of proper project management practice, updated or revised programmes have been produced

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and have been worked to, and extension of time awards have been made promptly, within a reasonable time of delays occurring, the correct entitlement should follow as a matter of course.

16.60 Either prospectively or retrospectively, the analysis determines that the delay, given the events which have occurred, is 46 days.

16.61 It is now desirable, by way of direct comparison, to carry out a what-if and but-for delay analysis on this particular case.

Progress after 15 months Bridge


Site Clearance Cofferdams 10 Deck Structure Deck Furniture / E&M Finishes & Commissioning Abutments 30

At-Grade Approach Roads


Appoint Subcontractor Construct Approach Roads (3km)
0 1 2 3 4 5 6

45

Actual Finish Month 15

Open Bridge & Roads


7 8 9 10 11 12 13 14 15

MONTHS

46d EoT

16.62 Once again, the as-built programme is shown above. As discussed previously, a but-for analysis is simply carried out by subtracting the delays from the as-built programme.

16.63 The result of doing this in this particular example is shown on the following slide:-

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As-Built But For Analysis Bridge


Site Clearance Cofferdams Abutments Deck Structure Deck Furniture / E&M Finishes & Commissioning As-Built but for Finish: Month 15 minus 51 days Actual Finish Month 15

At-Grade Approach Roads


Appoint Subcontractor Construct Approach Roads (3km)
0 1 2 3 4 5 6 7 8

Open Bridge & Roads


9 10 11 12 13 14 15

MONTHS

51d Entitlement

16.64 Once the delays are subtracted, we end up with a but-for finish 51 days earlier than the actually certified completion date. Note that it is only those delays on the approach road, which formed the longest path (or the last critical path), which have been considered by this analysis (45 + 6 days). This means that the 45-day delay to the approach roads, due to a VO ordered when the roads were non-critical, has actually affected the result here.

16.65 As pointed out earlier, this analysis tends to skew the criticality of the entire project towards the last critical path (or the longest path), and that is precisely what has happened here. The static nature of the approach has meant that the critical delays to the bridge (which was the initial critical path) have not been taken into account.

16.66 Now, for the sake of completeness, the what-if analysis shall be carried out.

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What-if Analysis Bridge


Site Clearance Cofferdams Abutments Deck Structure Deck Furniture / E&M Finishes & Commissioning

At-Grade Approach Roads


Appoint Subcontractor Construct Approach Roads Open Bridge and Roads
0 1 2 3 4 5 6 7 8 9 10 11 12

MONTHS

16.67 Here, once again, is BBs initial programme showing the bridge completion at Month 10 (day 300). As was seen earlier, the what-if method involves simply adding (or impacting) delays into the initial network. The result of this exercise is shown on the following slide.

As-Planned Impacted Analysis Bridge


Site Clearance Cofferdams 10 Deck Structure Deck Furniture / E&M Finishes & Commissioning Abutments 30

At-Grade Approach Roads


Appoint Subcontractor 45 6 Construct Approach Roads Open Bridge and Roads
0 1 2 3 4 5 6 7 8 9 10 11 12

MONTHS

40d Entitlement

16.68 Adding the delays into the network extends the Date for Completion by 40 days, due to the initial delayed possession of site, and the VO increasing the size of the abutments.

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16.69 This can be considered completely the opposite to the result obtained in the but-for analysis in that the delays which have been picked up are those which were on the initial critical path (the bridge) and not those on the longest path (the approach road).

16.70 Once again, the failure to detect the change in criticality from the bridge to the approach road had meant that a delay critical to completion has been ignored in the analysis (this time the late 6-day drainage VO to the approach road).

16.71 This serves to prove that this type of analysis, based as it is on the initial programme, tends to skew the final result in favour of those delays which occurred on the initial critical path.

Summary
Analysis Method What-if But-for Time-slice Calculated Entitlement 40 days 51 days 46 days

16.72 Here are the results tabulated: three different methods have produced three different entitlements. Only the time-slice analysis, however, can be said to have accounted for all delays which were contemporaneously critical to completion; due to their static nature, the other two methods have missed out or ignored delays which were contemporarily critical.

16.73 It should be noted that the order of finishing of the above result is dependant purely upon the quantum of the individual delay events. That is to say, it is not the case that the but-for analysis always produces the largest entitlement.

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By choosing a different quantum of time for each delay event in this example, the three methods could have finished in any other order.

16.74 Nonetheless, it is submitted that the time-slice analysis, because of its dynamic nature of tracking progress, changes in plan, mitigation and consequent changes in criticality, is the method which produces the optimal result in determination of a fair and reasonable extension of time for the Contractor.

16.75 The real beauty of the time-slice analysis is that it need not be carried out retrospectively. Indeed, if a Contractor exercises normal good management practice: by first setting up a logically linked network of work activities, and then regularly monitoring his progress against that network (including any changes he makes to his programme to suit revised order of work), then he will always know where his critical path lies and will be in a position to assess how and why he is being delayed. A contemporaneous time-slice analysis, (i.e. carried out as the project unfolds), gives a result which is relatively free from the distortions which the more popular what-if and but-for delay analysis methods can introduce. It therefore appears that, simply by normal, good project management practice, the best determination of the Contractors entitlement to extension of time can be made.

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OBLIGATION TO USE BEST ENDEAVOURS, THE DUTY TO MITIGATE, CONSTRUCTIVE ACCELERATION AND TIME AT LARGE

17 17.1

Obligation to use best or reasonable endeavours Most construction contracts provide a clause which obliges the Contractor to use a certain degree of endeavour to prevent and/or to reduce delay. For example under JCT 98 a proviso to the Contractors entitlement to an extension of time is as follows: Provided always that the Contractor shall use constantly his best endeavours to prevent delay in the progress of the Works, howsoever caused, and to prevent the completion of the Works being further delayed beyond the Completion Date.

17.2

The term best endeavours has been defined (in Vincent Powell-Smith David Chappell - Building Contract Dictionary) as follows:It must be read in the context of the contract in order to determine its meaning. Best endeavours, in this context, means that the Contractor must constantly do everything reasonably practicable to prevent delay, short of incurring additional expenditure. In the majority of cases, best endeavours means simply that the Contractor must continue to work regularly and diligently and nothing more. Put another way, provided the Contractor has not contributed to the delay by his own fault, he can be said to have used his best endeavours. The point is often disputed. If, for example, the Contractor could reduce delay by switching a gang of bricklayers from one portion of the work to another and does not do so, it could reasonably be said that he is not using his best endeavours. Similarly, if the Contractor foresees delay, he must reprogramme if it is practicable to do so.

17.3

Keating on Building Contracts 6th Edition at page 642 says of the same proviso: This proviso is an important qualification of the right to an extension of time. Thus, for example, in some cases it might be the Contractor's duty to reprogramme the works either to prevent or to reduce delays. How far the Contractor must take the other steps depends upon the circumstances of

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each case, but it is thought that the proviso does not contemplate the expenditure of substantial sums of money. 17.4 In Victoria Stanley Hawkins -v- Pender Bros PTY Queensland (1994) it was held that the term best endeavours should be construed objectively. The test as to whether it had been fulfilled would be that of prudence and reasonableness 17.5 In the case of IBM UK Ltd -v- Rockware Glass Ltd (1980) FSR 335, Rockware agreed to sell IBM some land for development, and one of the conditions of sale was that IBM "will make an application for planning permission and use its best endeavours to obtain the same". The local authority refused planning permission. IBM did not appeal against that decision to the Secretary of State. The parties disagreed on whether, by not

appealing, IBM had failed to use its best endeavours to obtain planning permission. 17.6 The project was a substantial one, in which the purchase price of the land alone was 6,250,000. It was accepted that making an appeal to the Secretary of State would cost a significant amount of money. 17.7 The court said that taking into account the background to the matter, and the amount of money involved, it was not likely that the parties would have considered a refusal of planning permission at a local level to be the end of the matter, but that they must have had in mind the prospect of an appeal to the Secretary of State. The test of best endeavours which was approved was that the purchasers of the land are bound to take all those steps in their power which are capable of producing the desired results, namely the obtaining of planning permission, being steps which a prudent, determined and reasonable owner, acting in his own interests and desiring to achieve that result, would take. 17.8 It was expressly stated that the criterion was not that of someone who was under a contractual obligation, but someone who was considering his own interests. 17.9 Two more recent cases have involved the court in having to decide the meaning of best endeavours. In Midland Land Reclamation Ltd v. Warren Energy Ltd (1997) the judge in deciding the case said: "I reject the submission made on behalf of the defendant that a best

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endeavours obligation is the next best thing to an absolute obligation or guarantee." 17.10 He also quoted with approval the rather obvious statement from Sheffield District Railways v Great Central Railways, that " best endeavours means what it says - it does not mean second best endeavours" 17.11 In Terrell v. Maby Todd and Co (1952) 69 RPC 234 the judge held that a best endeavours obligation only required a party to do what was commercially practicable and what it could reasonably do in the circumstances. 17.12 Therefore the obligation to use best endeavours is actually no more than do what is commercially practicable and reasonable in the circumstances which corresponds in construction terms with the Contractor being expected to apply such organisation and management skills, and to best apply available resources to minimise the effects of the problem. 17.13 Having addressed the term best endeavours the next issue to discuss is the extent of the obligation reasonable endeavours. Given the limited obligation imposed by best endeavours what is required by reasonable endeavours? 17.14 In the case of UBH (Mechanical Services) Limited -v- Standard Life Assurance Co, (1990) BCLC 895 the court described reasonable endeavours as being "appreciably less than best endeavours". Given the discussion on best endeavours it appears that the term reasonable endeavours" can mean precious little. In assessing a reasonable endeavours obligation, a party can have regard to its own interests, particularly its own financial interests (Phillips Petroleum Co UK Limited and Ors -v- Enron Europe Limited [1997] CLC 329). 17.15 Despite this lack of clarity and definition arising from all the case law with regard to the terms best endeavours and reasonable endeavours two things can be said with some degree of certainty. Firstly, the extent of the obligation will depend upon the circumstances of each case and secondly, the position is uncertain and is open to the courts simply to come to a decision which they consider to be fair. It is evident from the authorities quoted that the courts will allow wide latitude to parties who take

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on best endeavours and reasonable endeavours obligations. 17.16 In summary, where a contract requires a Contractor to use his best or reasonable endeavours to prevent or reduce a delay he is obliged to keep the effect of any matters which could cause delay down to a minimum or to eliminate them if at all possible. If the delay is the responsibility of the contract administrator or the Employer the Contractor is not required to expend substantial amounts of his own money to reduce the delay. 18. 18.1 The duty to mitigate One of the most common initial responses to the Contractors claims for extensions of time is that the contract administrator will request that the Contractor demonstrate that he has taken steps to mitigate the effects of the delay. Similarly when

Contractors submit cost claims there are often inquiries as what steps the Contractor took to mitigate the losses. 18.2 To mitigate means avoiding the consequences of a wrong whether in tort or breach of contract (McGregor on Damages 15 Edition section 272). 18.3 This is a general rule of damages which relates to all cost type claims. There are three basic rules (McGregor): The first and most important rule is that the plaintiff must take all reasonable steps to mitigate the loss to him consequent upon the defendants wrong and cannot recover damages for any such loss which he could thus have avoided but has failed, through unreasonable action or inaction, to avoid. Put shortly, the plaintiff cannot recover for avoidable loss. The second rule is the corollary of the first and is that where the plaintiff does take reasonable steps to mitigate the loss to him consequent upon the defendants wrong, he can recover for loss incurred in so doing; this is so even though the resulting damage is in the event greater than it would have been had the mitigating steps not been taken. Put shortly, the plaintiff can recover for loss incurred in reasonable attempts to avoid loss.

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The third rule is that, where the plaintiff does take steps to mitigate the loss to him consequent upon the defendants wrong and these steps are successful, the defendant is entitled to the benefit accruing from the plaintiffs action and is liable only for the loss as lessened; this is so even though the plaintiff would not have been debarred under the first rule from recovering the whole loss, which would have accrued in the absence of his successful mitigating steps, by reason of these steps not being ones which were required of him under the first rule. Put shortly, the plaintiff cannot recover for avoided loss. 18.4 In practical terms a delay caused by the Employer is a breach, and subject to the provision of the contract would be governed by the rules of mitigation irrespective of whether the contract contained express terms requiring mitigation. 18.5 With regard to time, the obligation with respect to mitigation is similar to the situation with respect to the obligation to use best endeavours i.e. if by resequencing the work, a Contractor can reduce the delay caused by an Employer, then he must do so. He cannot simply maintain his contract programme and allow the contract to run into delay, and at the same time seek payment for prolongation.(Rule 1) 18.6 If, however, in resequencing the works in an attempt to mitigate the effects of the delaying event, he incurs additional cost, then he could seek to recover those costs, even though the attempts proved abortive.(Rule 2) 18.7 With regard to loss and expense claims the basis of recovery is similar to that of damages for breach of contract. 18.8 The principles applied by the courts in measuring damages date back to case of Robinson v Harman(1848) where it was stated: The rule of common law is that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed. 18.9 Similarly the recovery of any such loss will be measured by the rules of mitigation as enunciated by McGregor. However before addressing the effect of these rules we need to consider whether the duty to mitigate should have a controlling influence on

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conduct of the injured party or whether it is merely a method of assessing the recoverable loss. 18.10 In the English case of British Westinghouse Electric & Manufacturing Co. Ltd. v Underground Electric Railways of London Ltd (1912) Viscount Haldane said: A plaintiff is under no duty to mitigate his loss, despite the habitual use by the lawyers of the phrase duty to mitigate. He is completely free to act as he judges to be in his best interest. On the other hand a defendant is not liable for all losses suffered by the plaintiff in consequence of his so acting. A defendant is only liable for such part of the plaintiffs loss as is properly to be regarded as caused by the defendants breach of duty. 18.11 It appears that the common law rules of mitigation apply to the measure of damages recoverable and not to the conduct of the party. However where there are express clauses in the contract which require the Contractor to mitigate the effects of such a loss then this may import a contractual obligation to undertake mitigatory measures and failure to do so may amount to breach of contract. 18.12 With regard to the common law duty the best way to demonstrate the practical application of these rule is to use an example of a hypothetical project. On completion of the sub-structure the contract administrator advises the Contractor that the details for the superstructure will not be available for two months. Accordingly the Contractor will be unable to progress the works. This would be a default by the Employer in failing to provide the details necessary to construct the works. 18.13 If the Contractor already has his resources on site then in accordance with Rule 1 he must take reasonable steps to mitigate the loss. In this scenario the mitigatory steps would include the re-allocation of resources to other sites and the return of hired plant. 18.14 In accordance with Rule 2 the costs of demobilising and subsequently remobilising of these resources to another site or another part of the works would be recoverable as costs incurred in mitigation as would the costs incurred by way of loss and expense from sub-contractors so affected.

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18.15 In accordance with Rule 3 as the Contractor has taken mitigatory measure in reallocating his resources to other sites he cannot then claim the costs as if no such mitigation had taken place i.e. he cannot claim his full cost of all his resources for the full extent of the delay period when they had in fact been re-deployed elsewhere. 18.16 Whilst this example is simple in that the extent of the delay is known in advance, the reality is often very different thus leaving the Contractor with difficult decisions concerning mitigation. If the extent of the delay was unknown then the Contractor would have to decide whether to, and at which point, to start mitigating the losses. Should the Contractor elect to remove the resources from site only to find that the following day details are issued to enable him to construct the superstructure, will he be able to recover the cost of de-mobilising and subsequent re-mobilising his resources even though the costs of doing so may be in excess of the prolongation costs of leaving the resources idling? 18.17 From the following words in the second of McGregors rules: even though the resulting damage is in the event greater than it would have been had the mitigating steps not been taken. the plaintiff can recover for loss incurred in reasonable attempts to avoid loss. It appears that the costs would be recoverable providing that the decisions made by the Contractor were, in the circumstances, reasonable.

19. 19.1

Constructive acceleration Considerable commercial pressure exists on all parties to adhere to the contract period stated in the contract. Notwithstanding this on nearly all major projects,

events occur which delay the project and which give the Contractor entitlement to have the time for completion extended. However the entitlement arising from these delaying events is often not so clear cut and there will normally be differing views on the entitlement and how it is assessed. 19.2 The net result of this is that extensions of time, to which the Contractor considers he is genuinely entitled, are often not granted promptly which leaves the Contractor with an obvious dilemma. He can continue to work at his planned rate of progress in full confidence that justice will eventually prevail and that he will ultimately be granted an

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extension of time by the contract administrator or ultimately an arbitrator. Alternatively he can engage additional resources and work additional hours in an attempt to meet the current completion date and avoid the imposition of liquidated damages altogether. 19.3 Claims for the cost of such acceleration are often presented by a Contractor. The basis for such claims is that the Contractor has not been awarded an extension of time that he ought to have received and has therefore had to accelerate in order to meet a contract completion date and to avoid the imposition of liquidated damages. In doing so the Contractor has incurred additional costs which he seeks to recover. Where acceleration does take place in these circumstances it is commonly referred to as constructive acceleration and the entitlement to be paid for such measures causes considerable debate amongst construction writers and lawyers alike. 19.4 Before addressing the entitlement to payment it is prudent to consider whether constructive acceleration does actually take place in the circumstances described. 19.5 I N Duncan Wallace, the respected editor of Hudsons Building and Engineering Contracts, states in his book Construction Contracts: Principles and Policies in Contract and tort that: in the UK at least, there is little or no sign of Contractors who, in the absence of an exceptionally heavy liquidated damages provision, believe themselves to be in the right about an extension of time claim but feel constrained to incur expenditure in order to accelerate progress.. 19.6 Notwithstanding these comments the practice on many projects is that, Contractors, being faced with liquidated damages, feel that they cannot take the risk of being unable to obtain the extensions they believe are due, and proceed to accelerate, advancing claims for recovery of the cost, irrespective of whether or not the measures prove successful. 19.7 The concept of payments for constructive acceleration is acknowledged and apparently accepted in the United States with the principles relating to payment in such an event being defined in and regulated by terms within contractual documents.

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19.8

Whilst not of direct relevance to the situation in the United Kingdom the definitions contained within these documents provide a useful definition of the term constructive acceleration. This is defined in the US Corps of Engineers Claims Guide as: An act or failure by the Engineer which does not recognise that the Contractor has encountered excusable delay for which he is entitled to [ an EOT ] and which required the Contractor to accelerate his programme in order to complete the contract requirements by the existing completion date. This situation may be brought about by the Engineers denial of a valid request for a contract time extension or by the Engineers untimely granting of an extension of time.

19.9

The legal basis of this doctrine in the United States is that the failure or refusal to award an extension of time is an implied (constructive) instruction to accelerate.

19.10 The difficulty expressed by many writers on this subject is that there is no doctrine of 'constructive acceleration within English law and that without such a doctrine there can be no entitlement to payment. The following quote from Hudsons is an example of such concern:Nor does it seem a reasonable inference that a person mistakenly and wrongly blaming another for delay, and demanding an improvement in progress, can be said to be impliedly authorising a payment of compensation if that should turn out to be wrong. 19.11 Similarly the following passage from (Building Contract Claims, Powell Smith & Sims, Third Edition) is equally dismissive of claims for constructive acceleration:Where the Architect wrongfully fails to make an extension of time, either at all or of sufficient length, the Contractors clear remedy under the contract is arbitration either immediately, if that is possible under the terms, or after practical completion has been achieved. If, as a matter of fact and law, the Contractor is entitled to an extension of time, he should confidently continue the work, without increasing resources, secure in the knowledge that he will be able to recover his prolongation loss and/or expense, and any liquidated damages wrongfully deducted, at arbitration. If he increases his resources,

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that is not a direct result of the Architects breach, but of the Contractors decision. In practice, it must be acknowledged that a Contractor in this position may not be entirely confident. The facts may be complex and the liquidated damages may be high. It may be cheaper, even without acceleration costs, for the Contractor to accelerate rather than face liquidated damages with no guarantee that an extension of time will ultimately be made. As a matter of plain commercial realism, the Contractor may have no sensible choice other than to accelerate and take a chance as to recovery. In our view, unless the Contractor can show that the Architect has given him no real expectation that the contract period will ever be extended and in those circumstances the amount of liquidated damages would effectively bring about insolvency, this kind of claim has little chance of success. 19.12 Clearly these two examples follow the rationale that construction contracts provide a remedy for failure to award an extension and this is to be found in subsequent formal proceedings whether this be in adjudication, arbitration or in the courts. The Contractor should have confidence in his own claims and should follow the remedy provided in the event he is temporarily dissatisfied. The Employer may well argue that when a Contractor decides to accelerate his works, it is this decision which causes the loss and not any breach by the Employer. 19.13 However it could be said that this ignores the commercial reality of the situation and others, notably Keith Pickavance in his book Delay and Disruption in Construction Contracts argue that there is no need for a specific doctrine of constructive acceleration as the English law is fully capable of dealing with similar factual situations without recourse to such a doctrine. Others argue that payment in respect of constructive acceleration can be justifiable on ordinary principles for breach of contract and damages, whether it be damages for breach of contract, recovery of mitigation costs, or alternatively an implied (constructive) instruction to accelerate constituting a collateral agreement. 19.14 This being the case the term constructive (implied) acceleration is not broad enough to cover all the possible situations under which this acceleration takes place. However in order to avoid confusion I shall continue to use 'constructive acceleration' as a generic term for all these possible situations.

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19.15 As stated there are various views as to this type of claim, and certainly some authority that such a claim is justified. The issue is fundamentally related to the initial refusal or failure to grant extensions of time and whether such a failure or refusal is a breach or an implied instruction to accelerate. 19.16 The other and most compelling argument advanced in support of 'constructive acceleration' is that if it is no payment is made then the Employer will be benefiting from his own breach. If a contract administrator is permitted to decline to grant an extension of time for an excusable delay and subsequently apply pressure for the original time to be achieved causing the Contractor to accelerate in order to achieve this date then the Employer will obtain his building on the original completion date despite having caused a breach which would normally give rise to an extension of time and associated prolongation costs. In this scenario the Employer has benefited from his own breach which is contrary to the principle of law and as such some remedy should be made available to the Contractor. 19.17 Under most modern contracts there is provision for review of extension of time at the end of the contract, and the general arrangement seems to be one of acceptance that extension of time may be granted after the delaying event has occurred and/or the work carried out (Amalgamated Building Contractors v Waltham Holy Cross [1952] 2 All ER 452, and Balfour Beatty v Chestermount Properties (1993) 62 BLR 1. 19.18 However in other some forms of contract there are specific time limits within which the Contract Administrator should either grant extensions of time or in some cases give an indication whether in principle the Contractor claim gives entitlement. 19.19 Whilst the contract administrator may grant extension either prospectively or retrospectively this does not preclude the payment of monies for any enforced acceleration. Abrahamson touches on the subject at page 371 (Engineering Law and ICE Conditions Fourth Edition page 371/372). (c) The Contractor does not appear to have any right to recover

compensation from the Employer merely because a refusal by the Engineer to grant an extension or the amount of an extension granted is later increased by the Engineer himself or an arbitrator. But if the Contractor is driven to

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expedite in order to avoid possible liability for damages or as a result of instructions by the Engineer under cl. 46 or requirements under cl. 14(2) because the Engineer has failed to consider the Contractors right to an extension in good faith at the times at which he is directed to do so by cl. 44, then it seems that the Contractor may have a claim. The claim is for

damages for breach of contract by the Employer by way of the failure of the Engineer as his agent to administer the contract in accordance with its term . 19.20 In order therefore for constructive acceleration to be considered there must either be a breach of an express timescale for responding to an application for extension of time or a failure to award within a reasonable time where no such time is expressed. 19.21 The authority most commonly relied upon in support of such a contention is Perini Corporation v Commonwealth of Australia (1969) 12 BLR 82. Further this case gives authority that where there is an express or even implied time requirements on the certifier the Employer may be liable for the costs of accelerate costs if he fails to comply with these requirements: Bearing in mind that Perini was decided on implied terms, the answers to the questions on breach and consequences arising from late granting of extensions prior to completion may be as follows. if there are express or implied time requirements on the certifier and the Contractor accelerates to avoid liquidated damages he may be entitled to his costs;" Eggleston in Liquidated Damages and Extension of Time 19.22 Where there are express timescales within the contract there is further support in the Singapore case of Aoki Corporation v Lippoland (Singapore) Pte Ltd (1994) that a failure to comply with these timescales will allow the costs of engaging additional labour to be recovered as breach of contract resultant from the failure. 19.23 In the Lippoland case Clause 23.2 of the SIA Conditions of Contract makes it a condition precedent that the Contractor notifies the Architect of any event, direction or instruction which the Contractor considers entitles him to an extension of time. The Architect is then required to respond in writing within one month indicating whether or

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not in principle the Contractor is entitled to an extension of time. As soon as possible after the delay has ceased to operate and it is possible to decide the length of the extension, the Architect will notify the Contractor of his award. If the Contractor fails to complete the work by the completion date or extended completion date, the Architect must issue a delay certificate as soon as the latest date for completion has passed. 19.24 The Contractor notified the Architect of delays but the Architect failed to notify the Contractor of whether in principle an entitlement to an extension of time existed. Eventually, the Architect, without giving his decision in principle, refused all requests for extension except one for which he allowed 15 days. 19.25 The Employer deducted liquidated damages. 19.26 It was held: 1) A decision by the Architect on the principle of the Contractors right to an extension was not a condition precedent to a valid determination of the Contractors entitlement. 2) The Contractor however could claim damages as a result of the Architects failure to make a decision. This may include the cost of increasing the labour force. 19.27 This appears to give authority that where there is an express time requirement on the certifier and the certifier fails to meet these obligations then the Contractor can recover acceleration costs as damages. 19.28 Where there is no express time limit expressed in the contract the situation is far less clear. In practice it will be difficult to base a constructive acceleration claim on a single failure of the contract administrator to grant an extension of time. However it may be possible to mount such a claim for the contract administrators express refusal or continuing failure or unnecessary or unreasonable delay in dealing with the application for extension of time, notwithstanding the entitlement. 19.29 It also appears that in addition to refusal or denial of entitlement to extensions of time some pressure brought to bear on the Contractor to complete by the existing (and un-extended) completion date will enhance a claim for constructive acceleration.

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19.30 In addition it seem to be clear that if a Contractor intends to accelerate, he must inform the Contract Administrator of the consequences of his failure to grant an extension of time and of the measures to be taken. It is risky to merely embark on acceleration without making clear these points, as the Contract Administrator and Employer will not link the consequences of their actions with the Contractors acceleration. 19.31 The Contractor must then show that the loss that he has suffered by way of acceleration costs was caused by the breach or as a consequence of the implied instruction to accelerate. The Contractor must demonstrate how his costs with acceleration exceeded those he would have incurred if he had not accelerated. Acceleration is one form of disruption. In Whittal Builders -v- Chester Le Street DC the court accepted a calculation based on the difference between the value of work undertaken in a non-disrupted period with that undertaken in a disrupted period. To produce a similar calculation for acceleration the Contractor must have maintained sufficient records to demonstrate both the planned resourcing and programming for the work as it would have been carried out but for the acceleration, and the actual resourcing and programming of the accelerated work. If the Contractor can overcome all the earlier hurdles, a properly prepared and regularly updated contract programme, together with comprehensive plant and labour records will go a long way to substantiate his acceleration claim. 19.32 In summary whilst the contractual/legal basis for such a claim is not universally accepted it appears that for a claim for reimbursement of constructive acceleration costs to be considered the more of the following essential ingredients that are in place the better the chance of success:

There needs to be a delay which would give entitlement to an extension of time The Contractor should have given the notices required and the provided the details stipulated in the contract.

The extension must either be refused or not given within the time stipulated in the contract or where no such time exists within a reasonable time.

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There must have been some act or direction by the Employer or his agent the Architect whether in terms of a notice stating a failure to proceed regularly to meet the completion date, a requirement to engage additional labour etc.

The Contractor must inform the contract administrator that as a result of the failure to grant an extension of time he is going to accelerate his performance; and

Loss must be incurred in the acceleration which is not recovered elsewhere.

20. 20.1

Time at large Time at large is one of those expressions which is often cited in contractual arguments regarding extensions of time and liquidated damages but of which, few people have a thorough understanding.

20.2

Brian Eggleston in his book Liquidated Damages and Extensions of Time aptly sums up the Contractors perceptions of time at large as follows: "The phrase time at large is much loved by Contractors. It has about it a ring of plenty; the suggestion that the Contractor has as much time as he wants to complete the works

20.3

Employers, Architects and Engineers have fundamentally different views. They often view the claim that time is at large to be nothing more than a excuse used by dilatory Contractors who have failed to meet their completion obligations and want to avoid the deduction of liquidated damages.

20.4

Essentially, time becomes at large:where an act of prevention by the Employer creates delay and that delay is not covered by an extension of time provision; and, to a lesser extent: where the provisions for extension of time have not been properly administered or have been misapplied; where there has been waiver of the original time requirements;

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where there has been interference by the Employer in the certifying process. 20.5 In its simplest form time is said to be at large where there is no specific time for completion or where a previously fixed time for completion no longer applies. This can occur in two main ways. Firstly, where agreements for work to be carried out are entered into without a completion date, or period, being stated. Common examples of this type of situation are found in letters of intent which often contain instructions to commence work without a completion time being agreed. Where there is no subsequent agreement as to the time for completion then time will be said to be at large. 20.6 The second situation occurs where a previously agreed time for completion has been rendered inoperable. This can occur in a number of ways the most common of which is where there is an act of prevention by the Employer for which there is no express provision within the contract for extending the completion date. 20.7 This derives from a fundamental principle of commercial law referred to earlier at paragraphs 5.3 and 5.4 which was articulated in Barque Quilpue v Bryant (1904). In this case Lord Justice Vaughan Williams said:"There is a term implied into every contract by each party that he will not do anything to prevent the other party from performing a contract or to delay him in performing it. I agree that generally such a term is by law imported into every contract" 20.8 Where the Employer or his agents does undertake some act or omission which prevents the Contractor completing the works by the date for completion, for example, by failing to provide necessary drawings at the appropriate time, then he can no longer maintain that the Contractor finishes his works by the stipulated date for completion. Time is set at large unless the contract provides for extending the date in such circumstances. 20.9 To overcome this problem most forms of building contract acknowledge that acts of prevention are a reality in construction and provide mechanisms for changing the completion obligations when delays by the Employer occur. These mechanisms, the extension of time clauses, give the Engineer or Architect the power to grant extensions of time for delays caused by the Employer or his agents. This allows a

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definite time for completion to be maintained and preserves the Employer's rights to deduct liquidated damages if completion occurs after the extended date. 20.10 The case of Rapid Building Group v Ealing Family Housing (1984) illustrates the dangers to Employers where the extension of time clause does not encompass the Employers act of prevention. Due to the presence of squatters the Employer was unable to give possession of the site on the prescribed date. Since there was no provision to extend time for late possession, the Contractor was successful in his argument that that time had become at large and accordingly the obligation for completion was altered to that of a reasonable time, and the Employer lost his right to levy liquidated damages. 20.11 A similar argument was put forward in the case of Peak Construction (Liverpool) Ltd v. McKinney Foundations Ltd heard before the Court of Appeal in 1970. It was held that, as delays on the part of the City Council in approving remedial works to the pilling were not catered for in the extension of time provisions, the right to liquidated and ascertained damages was lost and time became at large. The corporation was left with an entitlement to claim such common law damages as a result of the Contractor failing to complete within a reasonable time as it was able to prove. 20.12 It is also clear from the case of Peak Construction (Liverpool) v McKinney Foundations Ltd.(1970) that the extent of the delay caused is not a relevant factor to be considered in assessing whether time has been set at large. Lord Justice Phillimore in this cases summarised the law and the rationale behind it as follows:I would re-state the position because I think it needs to be stated quite simply. As I understand it, a clause providing for liquidated damages (clause 22) is closely linked with a clause which provides for an extension of time (clause 23). The reason for that is that when the parties agree that if there is delay the Contractor is to be liable, they envisage that the delay shall be the fault of the Contractor and, of course, the agreement is designed to save the Employer from having to prove the actual damage which he has suffered. It follows, once the clause is understood in that way, that if part of the delay is due to the fault of the Employer, then the clause becomes unworkable if only because there is no fixed date from which to calculate that for which the Contractor is responsible and for which he must pay liquidated damages.

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However, the problem can be cured if allowance can be made for that part of the delay caused by the actions of the Employer, and it is for this purpose that recourse is had to the clause dealing with extension of time. If there is a clause which provides for extension of the Contractors time in the circumstances which happen, and if the appropriate extension is certified by the Architect, then the delay due to the fault of the Contractor is disentangled from that due to the fault of the Employer and a date is fixed from which the liquidated damages can be calculated. 20.13 In this case it was also held that if any delay, no matter how slight, was caused by the Employer and there was no appropriate provision to extend the time for completion then time would be at large. The extent of the delay was not a factor in whether time was rendered at large. 20.14 Similarly in the case of Inserco Ltd v. Honeywell Control Systems (1996), Inserco contracted to complete all work by 1 April 1991. Due to additional and revised work, and lack of proper access and information, Inserco was prevented from completing on time. There was no provision in the contract for extending the completion date and time was held to be at large. 20.15 In circumstances where time is said to be at large the Contractor's duty is then to complete the works within a reasonable time. Further, where time is at large the Employer loses his right to deduct liquidated damages, since it is obvious that as there is not time from which liquidated damages can run then there can no upholding of the clause. Therefore any claims for damages for late completion (beyond what may be considered a reasonable time) will have to be made on the basis of general damages, the amount of which must be proved to have been incurred. 20.16 If time is at large, then as mentioned, the Contractors duty is to complete within a reasonable time but what is a reasonable time? If time does become at large, the Contractors obligation is complete within a reasonable time. Fisher v. Ford (1840). 20.17 Whilst a profound statement it gives no great assistance in practice and has led to writers on construction law being divided as to how a reasonable time should be What is a reasonable time is a question of fact.

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calculated. Calculating a reasonable time remains a notoriously difficult exercise and depends depend on the circumstances of each case. 20.18 The opinions fall into two main categories-: > The starting point for calculation should be the original completion time onto which should be added extensions of time for the delays occurring prior to time becoming at large. Thereafter a reasonable time allowance should be added in respect of the act of prevention which caused time to be at large. Therefore this method results in a time which is the same as that which would have been calculated had the act been covered by the extension of time clause in the first place. This view is in general terms the view advocated in Hudson's. > The second option is to consider that the original time was not reasonable in that it was a time agreed between the parties usually under competition and for a price which included the risk of late completion. This being the case it is argued that it should not be used as a starting point for calculating a reasonable time. This latter view appears to receive some support in Contracts 8th edition Volume 1 at page 177: Where a reasonable time for completion becomes substituted for a time specified in the contract then in order to ascertain what is a reasonable time, the whole circumstances must be taken into consideration and not merely those existing at the time of the making of contract. 20.19 To summarise, the circumstances where time is at large continue to occur within construction contracts. Generally this occurs where there is no agreed time for completion or where a previously agreed time has been rendered inoperable usually by there being no express provision to extend time as a consequence of prevention by the Employer. Whether the courts will accept that a reasonable time is as long as it takes or whether they will merely extend time as if there was an extension of time provision is unclear, however it is clear that when time is at large the Employer no longer has a right to deduct liquidated damages. Emdens Building

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CHALLENGES TO LIQUIDATED DAMAGES

21.

Challenges to liquidated damages

21.1

Liquidated damages are levied when the Contractor achieves the specified degree of completion later than the date by which he is contracted to do so subject, of course, to the provisions within the contract for extending the completion date.

21.2

This being the case the most common defences raised by Contractor to the payment of liquidated damages are

That there is entitlement to have the time for completion extended beyond the date that has been awarded by the contract administrator.

That the specified degree of completion was achieved at a date earlier then the date certified.

21.3

Even after these matters have been resolved Contractors may still be faced with a liability for liquidated damages and in these situations the Contractors will often seek to challenge the enforceability of the liquidated damages.

21.4

Before addressing potential challenges to liquidated damages it is prudent to revisit the nature and intention of liquidated damages clauses which are:

An amount agreed between the parties to be paid in the event of nonperformance of a contractual obligation

This provides certainty to the Employer as to the amount which he will be entitled to recover in the event of non-performance without having the difficulty of proving loss.

During tender stage it also provides Contractors with certainty as to the extent of the risk they are taking and allows them to estimate and price this risk within their tender.

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21.5

Most construction contracts provide a contractual mechanism which allow the Employer to deduct liquidated damages from amounts due to the Contractor and as such it is common for the Contractor being in the position of taking the action to recover damages which they consider to have been wrongly deducted. The most common grounds for such challenges are set out below.

22. 22.1

Liquidated damages a penalty Where the courts hold that a liquidated damages provision constitutes a penalty the sums will not be enforceable.

22.2

As to the essential nature of the difference between liquidated damages and penalties, Lord Dunedin in the case of Dunlop Tyre -v- New Garage (1915) stated: The essence of a penalty is payment of money stipulated as in terrorem of the offending party; the essence of liquidated damages is a genuine covenanted pre-estimate of damage.

22.3

He went on further to define a test for identifying what constitutes a penalty: If the sum is extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed the breach' it will be regarded as a penalty and unenforceable.

22.4

Many forms of contract attempt to avoid this potential pitfall by stating that the sums referred to in the liquidated damages clauses are liquidated damages and not penalties. However the case of Public Works Commissioner -v- Hills (1966) it was stated that clauses such as this have no bearing on whether a sum is to be construed as a penalty or a liquidated damage and will depend solely on the facts of each case. The Judge in this particular case said: The question whether a sum stipulated is a penalty or liquidated damages is a question of construction to be decided upon the terms and inherent circumstances of each particular contract, judged of as at the time of the making of the contract, not as at the time of the breach.

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22.5

This position is given support in the following passage from Keating on Building Contracts 6th Edition at page 243 which states: Though the parties to a contract who use the words penalty and liquidated damages may prima facie be supposed to mean what they say, yet the expression used is not conclusive. The court must find out whether the

payment stipulated is in truth a penalty or liquidated damages. 22.6 Where the liquidated damages are held to be a penalty, the Employer will be able to recover only the amount of unliquidated damages he can prove. It is unlikely however for the courts to allow an Employer to recover losses which he can prove in excess of the amount of the liquidated damages expressed in the contract. 22.7 In summary liquidated and ascertained damages are a reasonable pre estimate of the losses the Employer is likely to incur if work is completed late. Such a sum is enforceable if due to his own default the Contractor completes work late. A penalty on the other hand is a sum included in the contract which is intended to penalise the Contractor and is far greater than the Employer s estimated loss. Such a sum would be unenforceable. 23. 23.1 No loss On some occasions despite a delay to a project which is the responsibility of the Contractor there may be no loss suffered by the Employer. More commonly the Contractor may consider that the loss suffered by the Employer is significantly less than is provided for in the liquidated damages provisions and may seek to raise a challenge to enforcement on the basis that the sum is a penalty. 23.2 It was said by Lord Woolf in the Hong Kong case of Philips Hong Kong Ltd -v- The Attorney General of Hong Kong (1993): Since it is to their (the parties) advantage that they should be able to know with a reasonable degree of certainty the extent of their liability and the risk which they run as a result of entering into the contract. This is particularly true in the case of building and Engineering contracts. In the case of those contracts

provision for liquidated damages should enable the Employer to know the extent

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to which he is protected in the event of the Contractor failing to perform his obligations. 23.3 In the case of BFI Group of Companies Ltd -v- DCB Integration Systems Ltd (1987) a contract had been let using the JCT Minor Works Form to alter and refurbish offices and workshops. A dispute arose concerning liquidated damages and was referred to arbitration. The arbitrator held that there had been a delay in completion but declined to award liquidated damages on the grounds that the Employer had suffered no resulting loss. 23.4 An appeal was lodged against the arbitrator's award. His Honour Judge John Davies QC who instinctively disliked provisions for liquidated damages heard the appeal. He decided that the liquidated damages clause automatically came into play when the Contractor without a contractual justification completed late and the Employer was not required to demonstrate that he had suffered loss. The arbitrator was wrong in law in refusing to award payment of liquidated damages. 23.5 In summary following the decision in BFI Group of Companies -v- DCB Integration Systems Ltd (1987) an Employer may, where provision is made in the contract, deduct liquidated damages even though in the event he has suffered no loss. 24. 24.1 Certificate not valid Other challenges arise where the Contractor considers that the contract administrator has not administered the contract correctly in relation to extension of time provisions and accordingly liquidated damages provisions are rendered unenforceable. 24.2 Many modern contracts such as JCT 98, ICE 7th Edition lay down timescales within which extension of time awards are to be decided. The question arises as to whether a failure by the contract administrator to comply with these timescales are fatal to the Employers right to deduct liquidated damages? 24.3 There has been two legal cases where this question has been considered. Temloc v- Errill Properties Ltd (1987) 39 BLR 34 and Aoki Corp -v- Lippoland (Singapore) Pte Ltd (1994).

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24.4

The case of Temloc Ltd -v- Errill Properties Ltd (1987) 39 BLR 34 arose out of a contract let using JCT 80. The Architect is required by the terms of the contract to make decisions concerning extensions of time within a time scale. With regard to the effect on the Employers entitlements should the Architect fail to give his decision within the timescale, Croom-Johnson in the Court of Appeal had this to say: He says that that means that the certificate by the Architect fixing the later completion date shall be given not later than the expiry of twelve weeks from the date of practical completion. In this case that period of twelve weeks was exceeded. Mr Machin therefore submits that it was a condition precedent to the operation of clause 24.2 (the liquidated damages clause) which was not complied with. But the certificate referred to in clause 24.1 and 24.2.1 [Architects non-completion certificate] is not the certificate which fixes the later completion date. It is a certificate which tells the Contractor that his liability to pay liquidated damages at the agreed rate has begun.

In my view, even if the provision of clause 25.3.3 [requirement for the Architect to review extensions of time within 12 weeks of practical completion] is applicable, it is directory only as to time and is not something which would invalidate the calculation and payment of liquidated damages. The whole right of recovery of liquidated damages under clause 24 does not depend on whether the Architect, over whom the Contractor has no control, has given his certificate by the stipulated day. 24.5 A similar matter was the subject of the decision in Aoki Corp -v- Lippoland (Singapore) Pte Ltd (1994). 24.6 There is no rule that delay in the issue of the delay certificate after the date for completion or the latest extended date for completion, renders the delay certificate invalid. 24.7 It would seem that failure by the Architect or Engineer to make a decision concerning extensions of time within a timescale laid down in the contract is not fatal to the Employers rights to deduct liquidated damages.

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24.8

In summary it appears contracts such as JCT 80 which provide a timescale within which the Architect must grant an extension of time do not state what effect a failure to comply with the timescales will have upon the Employer s rights to deduct liquidated and ascertained damages. The decisions in Temloc -v- Errill Properties Ltd and Aoki Corp -v- Lippoland suggest that provided a proper decision is made by the Architect concerning extensions of time, a failure to meet the deadline will not affect the Employers rights.

25. 25.1

Conditions precedent not observed JCT 80 is an example of a contract which makes reference under clause 24.2.1 to the Architect issuing a certificate when the Contractor fails to complete on time

25.2

The question is whether, in the absence of the Architects certificate, the Employer remains entitled to deduct liquidated damages where the Contractor finishes late.

25.3

The procedure was the subject of a decision of the High Court in the case of A. Bell and Son (Paddington) Ltd -v- CBF Residential Care and Housing Association (1989) 46 BLR 102. A. Bell, the Contractors, entered into a contract with CBF Residential Care for the construction of an extension to Heinrich Stahl House, The Bishops Avenue, London N2. The contract was JCT 80 Private Edition with Quantities. A date for possession of the site was given as 28 May 1985 with a date for completion of 28 February 1986. Liquidated damages for late completion were stated to be 700 per week.

25.4

Work commenced on time but completion was not achieved by 28 February 1986. The Contractor served a delay notice and Mr Mellinge, the Architect, granted an extension of time to provide a new completion date of 25 March 1986. Completion however, was not achieved by the new date for completion. At this stage the Employer, CBF Residential Care considered that as completion was late, liquidated damages would be due. JCT 80 requires the Architect to issue a certificate of non completion and provides for the Employer to write to the Contractor indicating an intention to deduct liquidated damages. Both Architect and Employer complied with this procedure. However, subsequently the Architect had second thoughts and granted two further extensions of time. The first extended the completion date to 14 April 1986, the second further extended the date to 21 April 1986. Unfortunately the Contractor did not complete the work until 18 July 1986 when the Architect issued a certificate of practical completion. A long delay then

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occurred before the Architect on 3 December 1987 granted another extension of time extending the completion date to 20 May 1986. There was still however a shortfall between the date of 20 May 1986 by which time the Contractor should have completed and the 18 July 1986 when practical completion was achieved. 25.5 The Architect issued a Final Certificate on 25 February 1988 but the balance due was reduced by 4,900 as being amounts owed by the Contractor in respect of liquidated damages. It was argued by the Contractor that liquidated damages should not have been deducted as the procedures required by JCT 80 had not been properly complied with. Following his first granting of an extension of time showing a revised date for completion of 14 April 1986, the Architect had issued a non completion certificate indicating that the Contractor had failed to achieve this date. However, following the granting of further extensions of time it was argued that the non completion certificate should have been re-issued to reflect the revised dates for completion. In the absence of properly re-issued non completion certificates the Employer, it was argued, lost the right to deduct liquidated damages. The Architect had issued a Final Certificate and it was therefore too late to re-issue the certificate. 25.6 In finding in favour of the Contractor and ordering that the 4,900 be repaid plus interest and costs, the court held: Construing clause 24.1 strictly and in accordance with its plain and ordinary meaning, it demands the issue of a certificate when a Contractor had not completed by the completion date ...... I think that when a new completion date is fixed, if the Contractor has not completed by it, a certificate to that effect must be issued, and it is irrelevant whether a certificate has been issued in relation to an earlier, now superseded completion date. Construing clause 24.2.1 in a similar manner to clause 24.1, since the giving of a notice is made subject to the issue of a certificate of non-completion, if the certificate is superseded, then logically the notice should fall with it. ... If a new completion date is fixed, any notice given by the Employer before it is at an end. 25.7 Accordingly the condition precedent to the permissible deduction of liquidated damages, i.e. the issue of an Architect's non-completion certificate had not been fulfilled and the Employer therefore lost the right to deduct liquidated damages.

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25.8

The matter of a non-completion certificate was again referred to in J F Finnegan -vCommunity Housing (1993) when it was held that a written notice from the Employer under JCT80 is a condition precedent to the right to deduct liquidated damages.

25.9

In summary the Employer will lose the right to deduct liquidated damages where fails to issue a proper non-completion certificate under clause 24.1.

26. 26.1

Provisions void for uncertainty One of the essential features of liquidated damages provisions is that they provide certainty to the parties as to the amount to be recovered/paid in the event of nonperformance. This was highlighted by Lord Woolf in the Hong Kong case of Philips Hong Kong Ltd -v- The Attorney General of Hong Kong (1993): Since it is to their (the parties) advantage that they should be able to know with a reasonable degree of certainty the extent of their liability and the risk which they run as a result of entering into the contract. This is particularly true in the case of building and Engineering contracts. In the case of those contracts

provision for liquidated damages should enable the Employer to know the extent to which he is protected in the event of the Contractor failing to perform his obligations. 26.2 Given that certainty is one of the essential features of a liquidated damages

provision there is authority from Bramall & Ogden v Sheffield City Council (1983) that where provisions for liquidated damages can be shown to be uncertain or inconsistent they will be held to be unenforceable. 26.3 In this case the terms of the contract were inconsistent with the amounts for liquidated damages stipulated in the appendix to the contract in relation to Sectional completion. This was held to cause uncertainty and despite the fact that the

Employer chose to interpret this uncertainty in a reasonable manner, the courts held that this could not affect the position at law and that the liquidated damage provisions were unenforceable as being void for uncertainty. 27. Effect of a successful challenge to liquidated damages

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27.1

If as a result of a successful challenge the Employer would still be entitled for general damages for the period of culpable delay. The measure of these damages will be to place the Employer in the same situation, with respect to damage, as if the Contract had been performed. (Robinson v Harman(1848)).

27.2

Whilst this may ultimately result in the calculated damages being in excess of the amount of liquidated damages, the important distinction is that the Employer will have to prove such damage occurred before becoming entitled.

27.3

Further there is a school of thought that general damages cannot exceed the amount stipulated as liquidated damages however despite there being no authority for this the proposition has been accepted by the Canadian courts Elsley v J G Collins Insurance Agencies Ltd.

28. 28.1

Position of sub-contractors Assume that the subcontractor has a contractual obligation to finish within a timescale and is in breach of the obligation if he completes late. Where a subcontractor is in breach he will have a liability to pay damages to the main Contractor.

28.2

The general principles covering damages for breach of contract are explained in Hadley -v- Baxendale (1854) and later fully considered in Victoria Laundry (Windsor) Ltd -vNewman Industries (1949).

28.3

Briefly the injured party is entitled to recover any loss likely to arise in the usual course of things from the breach, plus also such loss outside the usual course of things as was in the contemplation of the parties at the time of the contract and which is likely to result from the breach.

28.4

The Contractor, as injured party, is entitled to levy a claim for damages against a subcontractor who completes late. These damages should include only those losses which under normal circumstances are likely to arise and are within the contemplation of both parties. In all probability a Court would hold that the Contractor's claim should include his own additional costs plus any legitimate claims received from the Employer and other subcontractors who have suffered financially as a result of the subcontractor's late completion. If the normal standard forms of contract are employed the Employer will levy a claim for liquidated damages against the main Contractor if the main contract

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completion is delayed due to a default on the part of a subcontractor. Under normal circumstances these liquidated damages will form a part of the main Contractor's claim against the defaulting subcontractor irrespective of the value of the subcontract works.

28.5

This rule will apply in all cases except where the subcontractor is nominated and the terms of the main contract provide the main Contractor with an entitlement to an extension of time where delays are caused by a Nominated Subcontractor's default. Delays by the Nominated Subcontractor would result in an extension of time being granted to the main Contractor and hence no claim from the Employer for liquidated damages.

28.6

Where the sum for liquidated damages under the main contract could be classed as out of the ordinary and therefore not within the contemplation of the subcontractor, it may be argued that the subcontractor is obliged to reimburse the main Contractor only that element of the Employer s liquidated damages which is normal and usual. Two

problems arise out of this type of argument. Firstly, what do we mean as normal and usual and secondly, if the sum for liquidated damages is so out of the ordinary it may be regarded as a penalty and unenforceable.

28.7

Usually main Contractors will send to subcontractors, with the tender enquiry, details of the main contract including the sum for liquidated damages. This procedure prevents subcontractors from arguing that the sum was outside their contemplation when they entered into the subcontract.

28.8

One way out of the dilemma is to include in the subcontract an amount for liquidated damages which provides a cap on the subcontractors liabilities. In M J Gleeson plc -vTaylor Woodrow Construction Ltd (1989) Taylor Woodrow were management Contractors for work at the Imperial War Museum and entered into a subcontract with Gleeson. The management contract provided for liquidated damages at 400 per day and clause 32 of the subcontract provided for liquidated damages at the same rate. Clause 11 (2) of the subcontract also provided that if the subcontractor failed to complete on time the subcontractor should pay:

a sum equivalent to any direct loss or damage or expense suffered or incurred by (the management Contractor) and caused by the failure of the subcontractor. Such loss or damage shall be deemed for the purpose of this

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condition to include for any loss or damage suffered or incurred by the authority for which the management Contractor is or may be liable under the management contract or any loss or damage suffered or incurred by any other subcontractor for which the management Contractor is or may be liable under the relevant subcontract.

28.9

Gleeson finished late and they received from Taylor Woodrow a letter as follows:

We formally give you notice of our intention under clause 41 to recover monies due to ourselves caused by your failure to complete the works on time and disruption caused to the following subcontractors. The following sums of money are calculated in accordance with clause 11(2) for actual costs we have incurred or may be liable under the management contract.

28.10 Then followed a summary of account showing deductions of 36,400 for liquidated damages, being 400 per day from 31 May 1987 to 31 August 1987, and 95,360 in respect of set-off claims from ten other subcontractors.

28.11 Gleeson applied for summary judgement under Order 14 in respect of the sum of 95,360 and were successful. defence: Judge Davies found that Taylor Woodrow had no

On the evidence before me, therefore, TWLs course of action against Gleeson in respect of set-offs is for delay in completion. It follows that it is included in the set-off for liquidated damages, and to allow it to stand would result in what can be metaphorically described as a double deduction.

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28.12 Subcontractors who, in breach of their subcontract, complete late will be liable to pay the resultant damages incurred by the Contractor. These damages will include any liability the main Contractor has to pay liquidated damages to the Employer which result from the delay. This procedure will apply irrespective of the value of the subcontract works.

28.13 It is open to the subcontractor to argue that if the main contract liquidated damages are extremely high, the sum involved was outside his contemplation at the time the contract was entered into. Main Contractors, usually with the tender enquiry documents, set out details of the main contract including the sum included for liquidated damages and thus forestall this type of argument.

28.14 Where the subcontractor is nominated and the main contract provides for an extension of time where work is delayed by the subcontractor no claim from the Employer will arise.

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