| Date | 1 March 2006 |
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| Judgment | A review of the requirements for the production of an effective claim for delay |
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| The Issue | What do you have to do to make a successful claim for an extension of time? |
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| Implication |
The final hurdle in the submission of a claim for an extension of time is to find a way of establishing what has been or what will be the likely effect on the completion date. To show that an event has or will cause delay to the completion date it is necessary to establish that the event was on or will be on the critical path. |
printThis article provides a basic introduction to the approach to demonstrating entitlements to extensions of time and the requirement to establish the critical effect of each event on the completion date. Critical path analysis techniques are now commonly used to analyse the effect of events on the completion date. Some of the main methods of such analyses, and the issues with these methods will be considered in subsequent articles. When faced with a situation where a project is in delay what do you have to do? The answer is quickly to establish why the project is in delay and then examine what if anything can be done to limit the effect of the problem. The contractor needs to talk to the architect or engineer and let him or her know what is happening at the time it is happening. Those involved then need to seek to agree who or what is responsible and, in the event that it is not possible to overcome the delay without incurring additional cost, it is necessary to establish the extent of the time and/or monetary entitlements arising as a consequence of the delay. Anecdotally, nine out of ten projects proceed on this basis with both parties working together to solve such problems as they arise. For a whole variety of reasons some projects do not proceed on this basis, and disputes arise. In such cases, the parties will look to the contract. Disputes arise for a number of reasons, but typically because of a lack of information, a lack of perspective about the true merits of a position or for political or commercial reasons arising from the position occupied by those involved with the project. A common cause of disputes is the inability of the claimant to properly communicate its position and to clearly establish the merits of its arguments. This is an easy criticism but on complex projects the production of a good and compelling presentation is often a lot easier said than done, particularly when making claims for delay. It is obvious that the contractor will not get a sympathetic hearing if its position is not well explained, and does not have a sounding in the entitlements provided for by the contract in question. So where should one start? What most construction contracts have in common is that there is a time for performance and liquidated damages payable by the contractor in the event of its failure to complete by the time for completion. An extension of time (EOT) mechanism is required to preserve the employer’s right to liquidated damages in the event that delay is caused by matters for which it is responsible. The EOT mechanism may also provide a means of allocating other risks for which the employer is not responsible – such as inclement weather. What standard forms of construction contract generally have in common is a requirement for the contractor to notify the architect, contract administrator, engineer or project manager (PM) of an event as soon as it becomes apparent that it has or may cause delay to the completion date and to provide an estimate of the expected effect on the completion date. The contractor then has to provide particulars necessary for the PM to make an award of an extension of time if appropriate. The easy answer to the question at the outset is therefore to establish that the contractor has entitlement to claim under the contract for an extension of time for the type of event that has caused delay. It is then necessary to set out the particulars of the event causing delay – tell the story. The final hurdle is to find a way of establishing what has been or what will be the likely effect on the completion date. This final hurdle is often the most difficult, for in order to establish that an event has or will cause delay to the completion date it is necessary to establish that the event was on or will be on the critical path of the work. The requirement to decide whether an event falls on the critical path has been considered in a number of cases including Motherwell Bridge Construction Ltd v Micafil Vakuumtechnik (2002), in which Judge Toulmin, at paragraph 562 of the judgment said: “Crucial questions are (a) is the delay in the critical path and, if so, (b) is it caused by MBST? If the answer to the first question if 'Yes' and the second question is 'No' then I must assess how many additional working days should be included.”It is important to appreciate the distinction between where you are in the life of the project when this exercise is being undertaken. If the project has not finished then you will be in a position where some history has occurred and there is a future plan setting out how it is intended that the remainder of the project will be built, but the completion date is not yet actually known. In this case the effect of an event that has occurred or is likely to occur is considered prospectively. If the project is complete then all of the events have unfolded and the actual date for completion is known. The ultimate effect of all the events that have occurred is therefore known. In this case the effect of events is considered retrospectively. Various techniques have developed over recent years that make use of critical path analysis software to identify the critical path and to seek to answer the often difficult question of whether an event has caused or is likely to cause delay to the completion of the project. These will be considered in subsequent articles.
CJ-0608
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