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Easier claims for time and money

Briefings

The Society of Construction Law recently published a document with a title so long it is unlikely to grab your attention. But if you have the time to read it, it might save or even make you money and reduce your stress levels at the same time. For most construction professionals delay and disruption claims are a large headache but the Protocol for Determining Extensions of time and Compensation for Delay and Disruption may lead you to conclude that many such headaches are self-inflicted. The purpose of the Protocol is the avoidance of unnecessary disputes by appropriate contract drafting and project management Contract drafting and project management Sometimes contracts do not have the detailed clauses necessary to deal properly with issues of delay and disruption. The Protocol includes some handy model clauses and suggestions for practice that can be included in the contract. You may be familiar with some or all of the following types of clauses but you will be surprised how many contracts do not include them:

Having an agreed Approved Programme, linked to a method statement, with an agreed means of periodic review and amendment, to function as the work programme, the means of evaluating the impact of delay and as a record of how the project proceeded and the impact of delays.

Requiring the contractor to submit to the employer a sub-network to the Approved Programme, explaining the additional activities and time caused by the relevant event and its effect upon the completion date (if any).

Giving the contract administrator the power to grant an extension of time on his own initiative.

Giving the contractor the right to an extension of time in the event of employer breach, etc.

Using agreed industry-standard critical path method project planning software.

The Protocol recommends use of time impact analysis on a real-time basis as the method for assessing delay.

Requiring the contractor to notify and substantiate claims within a definite period (such as 28 days of the event causing delay or disruption) and possibly making any failure to do so a deemed waiver of right to claim.

Requiring the contract administrator to make a decision within a stated period.

Excluding common law rights to damages for breach of contract, thus limiting the contractor's rights to claims made in accordance with the expressly defined procedures set out in the contract.

Requiring subcontractors to carry out the subcontract works to ensure the main contractor can meet the Approved Programme.

An agreed records clause explaining what records are to be collected and submitted to the employer - and when.

Agreeing extensions of time and compensation for loss and expense as the project proceeds: i. e. real-time evaluation of claims. Extensions of time can be granted incrementally if the actual effect of a relevant event unfolds over time.

Use of 'the float' is no excuse

Contractors sometimes give their programmes more time than they need to complete an activity or the works as a whole, as a general cushion (called a 'float') against events that might cause delays.

So what happens if the employer causes a delay that the float absorbs without affecting the completion date?

The Protocol recognises the obvious fact that regard must be had to the wording of the contract. The wording of most contracts provides for extensions of time if a relevant event causes a delay to the date for completion.

By definition, as reduction of the float does not affect the completion date (unless the float is entirely used up), its use does not constitute an excusable delay for which the contractor is entitled to an extension of time.

If a contractor wishes to be entitled to maintain his float, then the wording of the contract must be amended to provide for an extension of time for all excusable delays to programme and irrespective of whether the completion date is affected.

The Protocol recognises that loss of float may involve disruption to productivity and programme, so that the contractor is entitled to loss and expense, irrespective of the position relating to time.

General overheads A contractor should always claim for direct overheads if he can show that they were directly incurred as a result of an event for which the employer is contractually responsible Claims for general overheads often fail because the contractor cannot show that the delay caused a loss. A contractor would have to show that the prolongation of the contract has prevented the contractor from taking on fresh work that would have contributed to general overheads or that he would have incurred lower general overheads had the project come to an end earlier.

Concurrent delays It is actually quite rare for two delaying events to occur at the same time. It is more likely that there is an employer caused event and a contractor caused event at different times but the impact upon the programme is felt at the same time so it is difficult to distinguish what delay has been caused by the employer and what has been caused by the contractor.

But in many cases close scrutiny of the facts may show that you can distinguish between the effect of the employer's delay from that of the contractor's delay. For this reason, good contract management, use of time impact analysis on a real-time basis and thus good record keeping is essential. In respect of extensions of time, the Protocol recommends that the contractor must still be entitled to an extension of time for delay caused by the employer, even if it is concurrent with delay caused by the contractor. This will prevent the contractor from arguing that time is at large on the grounds that he has been delayed by the employer but has received no extension of time.

For claims for loss and expense, fundamental contractual principles apply: the contractor must show that loss and expense has been caused by an event for which the employer is liable. Again, good records are required.

Global claims Another old legal favourite: you must be able to show a breach of contract or other duty that has caused you an actual loss. Global claims are claims where the contractor cannot show cause and effect for each individual cause, and therefore he lumps causes and cost consequences together.

Global claims are unacceptable to courts if they are made because the contractor has not kept sufficient records.

Courts may in exceptional circumstances accept a global claim if the contractor can show there has been a series of delaying events but it is impossible to show cause and effect for each owing to the complexity of the situation.

Manches' view The Protocol is a good idea. Much of what it says is common sense and helps to clarify issues that can be expensive to resolve. The consultation period for the SCL Protocol has come to an end and the general response has been positive. A second and final draft is to be issued in May 2002. To benefit from this event, remember that disputes, expense and stress can be reduced by three actions:

Appropriate contract drafting - many problems could be avoided by amending the contract to deal with issues of delay and disruption in greater detail.

Better project management involving an approved programme and revisions as works progress.

Creating certainty by keeping accurate records.

Preparation costs The Protocol states that if the contractor administers his claims during the project, as the contract usually implies, the costs of claim preparation are part of the contractor's general overheads.

Claim preparation costs could only be claimed if the employer acts unreasonably, thus entitling the contractor to damages for breach of contract or loss and expense.