| Date | 25 September 2002 |
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| Judgment | Yorkshire Water Authority -v- Sir Alfred McAlpine (Northern) Limited, Commercial Court 25 June 1985 |
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| The Issue | The effect of including a programme and a method statement as a contract document. |
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| Implication |
The incorporation of a programme and a method statement into the contract will impose both an obligation and an entitlement upon the contractor, such that if the intended programme or method proves impossible, the Contractor will be entitled to a variation instruction. |
printThe widely publicised Society of Construction Law protocol for "determining extensions of time and compensation for delay and disruption" advises, amongst many other points, that as early as possible in a construction project, the contractor should submit a programme using commercially available critical path project planning software. The programme should show the manner and sequence in which the contractor plans to carry out the works, for acceptance by the employer. The protocol goes on to state that for the programme to be fully understood, it should be read in conjunction with a method statement, describing in detail how the contractor intends to construct the works and the resources it intends to use. The programme and the method statement should be fully cross-referenced. The protocol does not suggest that the programme and method statement should be made contract documents, but should instead be generated post-contract. These days, contractors are increasingly required to produce programme and method statements together with their tenders, to allow the employer to assess the tender on the basis of "quality", as well as price. If this is the case, and if the employer intends to make use of the protocol in any way, then an awareness of the wider ramifications of these issues is essential. All of this brings to mind a classic case which was heard in the Commercial Court in June 1985 between the Yorkshire Water Authority and Sir Alfred McAlpine & Son. The contract between the parties involved substantial work to extend the Grimwith Reservoir in North Yorkshire and in particular to build an outlet tunnel underneath the dam to take water into the River Dibb. Tenders were invited to be submitted on the basis that the contract would be based on the ICE fifth edition, but the tender documents included the following clause, headed "Programme of Work": "In addition to the requirements of clause 14 of the Conditions of Contract, the Contractor shall supply with his tender a programme in bar chart or Critical Path Analysis form sufficiently detailed to show that he has taken note of the following requirements and that the estimated rates of progress for each section of the works are realistic in comparison with the labour and plant figures entered in the Schedule of Labour, Plant and Sub-Contractors". McAlpine submitted with its tender a programme in bar chart form, along with a method statement. In due course, prior to the contract award, these documents were discussed and accepted by Yorkshire Water through its engineers. The formal contract was signed some three months later and this confirmed that the programme and method statement submitted by McAlpine were documents which formed part of the contract. The programme and method statement stipulated that McAlpine should work upstream in constructing the outflow tunnel. This, McAlpine discovered, proved impossible. A long delay resulted, at the end of which work recommenced at the upstream end of the tunnel and proceeded downstream. McAlpine argued that they were entitled to a variation order under the provisions of Clause 51(1) of the ICE conditions and payment for the additional costs they had incurred. Yorkshire Water, unsurprisingly, responded that the adoption of a new method statement and a new method of working was entirely McAlpine's responsibility. The contract set out the works the contractor had to perform, according to Yorkshire Water. The contractor's job, they argued, was to decide how to do it. The matter found its way to the Commercial Court and McAlpine argued that by incorporating the method statement into the contract, both parties had made it clear that it was a specified sequence and method by reference to Clause 51(1) and not merely a programme showing the order of procedure by reference to Clause 14. Clause 51(1) provides that the engineer may order variations and defines variations to include additions, omissions, alterations and changes in the quality, form and character of the works and "changes in the specified sequence, method or timing of construction". These words are broadly reflected in the latest version of the ICE conditions of contract. The judge concluded that it would be wholly artificial and unrealistic to regard the method statement as a document provided under Clause 14. It was a document which was expressly provided in addition to the requirements of Clause 14 and was incorporated into the contract in the same way as the programme. If the parties had intended the method statement to be regarded as a component of the Clause 14 programme, they could and would have said so. It was clear, according to the judge, that Yorkshire Water had wanted tie the contractor to a particular programme and method of working before the contract was signed. This was to be secured as a contractual obligation, which they could not have done by simply relying upon Clause 14. Accordingly, the method statement was a "specified" method of construction by agreement between the parties. As a result, where it proved impossible to complete the works in accordance with that method statement, McAlpine became entitled to a variation order with a consequent entitlement to payment of the value of the variation as provided in Clauses 51 and 52.
CJ-0237
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