| Date | 2003 |
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| Judgment | The value of critical path analysis in proving delay claims |
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printDelay and additional cost in a construction project are an inevitable consequence of the risk and uncertainty associated with the execution of any construction project, which is likely to be unique and prototypical in nature. Whilst the risk is reduced by certainty of design and relevant experience in the construction of similar types of project for example, it is sadly all too common that the project will not be completed for the price it was tendered for and not within the agreed contract period. The now common use of the design and build forms of contract are a relatively effective means of managing and allocating many of these risks to the contractor, but the employer usually still wants the flexibility to make changes. It is usual for the employer's damages arising from late completion of the works by the contractor to be liquidated. In order to preserve the Employer's right to liquidated damages, there must be an effective mechanism that allows for the contractors' completion date to be extended for matters that are within the employer's control.(1) The extension of time provisions will normally also provide a means of risk allocation for events that are not necessarily matters for which the employer is responsible. To complicate matters there is usually an engineer or an architect appointed as agent of the employer to administer the contract on the employer's behalf. In particular he or she is charged with the responsibility of deciding whether an event is one that gives rise to an entitlement on the part of the contractor under the contract and whether that event has caused delay and affected or is likely to affect the date for completion of the work. He or she is under an obligation to act fairly and reasonably towards the contractor, notwithstanding the fact that he or she may be required to recognize his or her own failings in issuing information timeously for example. The case of Wells v Army and Navy Co-operative Society(2) is authority for the proposition that the contract period is a period within which the contractor must do the work but it is also a license for the contractor to spend that time carrying out the work. In addition, he may plan and do the work in whatever order he pleases. Although he must make sufficient progress to achieve the completion date, there is nevertheless usually an express obligation for the contractor to proceed regularly and diligently with the work. In order to provide further comfort, the employer usually requires the contractor to provide a programme at the commencement of the work to show the sequence and timing of the activities involved in the construction of the project in sufficient detail for the architect or engineer to monitor the progress of the works. It is common to use this programme as a basic model against which to consider the effect of delays. The result of all of this, unfortunately, is that disputes in relation to extensions of time are very common indeed and increasingly complex matters are being referred to adjudication. There are a number of difficult issues such as who owns any float in the programme, how do you deal with concurrent delay, and to what extent can the claim be global? Perhaps most important of all is the question: how does the contractor go about proving that the delays complained of will or have affected the completion date in a way which is persuasive and yet proportionate to the matter in dispute? Of course the answer depends on who you have to persuade, but in view of the immediacy and availability of adjudication it almost goes without saying that any submission ought to be adjudication ready and therefore capable of persuading an independent third party, which it is hoped will apply the principles of law which govern the contract and its interpretation. Most construction projects have a project programme which has been developed using computerized critical path analysis (CPA) software. This establishes the way in which the contractor intends to go about organizing his work in terms of sequencing, timing and durations of the activities. The CPA models the relationships between activities and provides a means of establishing one or more critical paths though the project to its completion. Used properly this is a very effective project management tool, against which progress and performance may be monitored and decisions made to optimise the remaining time. This information is valuable for identifying and modelling delays and their effect on progress and the use of computerized CPA techniques for proving delay is now the norm. Increasingly these techniques are being considered by the courts, and it is now almost inevitable in a litigation involving disputes over the extent of project delays that a programming expert will be appointed. The principles governing the effect of programmes, the extent to which particular delaying events can be used to justify an overall delay to completion and the extent to which a party making a claim can get away with making a global claim are all aspects of this developing area of the common law. Part of this development has arisen from need for the courts to adapt to the new techniques made so accessible by computer. However few cases have dwelt upon the techniques used to demonstrate delay and their usefulness in making a successful claim at law. The use of these techniques is more advanced in the US where CPA is central to the management of a project, and as a result there are many more relevant cases emanating from the USA than from the UK. This may in part be due to a distrust or lack of understanding in the UK of the techniques, and there are clearly a number of important questions over the probative value of such techniques:
The court of appeal decision of McAlpine Humberoak Ltd v McDermott International Inc (No 2)(3) was one in which experts for the plaintiff sub-contractor (McAlpine) and the defendant main contractor (McDermott) both used CPA techniques to analyse the effect of delays in the provision by McAlpine of nine steel pallets forming part of the weather deck for a tension leg off-shore platform. The court of appeal decision overturned the decision at first instance that the contract had been frustrated by the number of instructions issued to the plaintiff. At first instance, McAlpine's expert carried out a somewhat theoretical exercise which appears to have assumed that all the delay he had identified in relation to each instruction was critical and impacted in full upon the completion date without considering the event in the context of what was actually happening at the time and without considering what other work was being carried out at that time. Per Lloyd, LJ: "When the defendant's witnesses came to give evidence, they undertook the task which was never undertaken by the plaintiff, of tracing the impact of every drawing revision, VO and TQ. . . . The judge [at first instance] dismissed the defendants' approach to the case as being 'a retrospective and dissectional reconstruction by expert evidence of events almost day by day, drawing by drawing, TQ by TQ and weld procedure by weld procedure, designed to show that the spate of additional drawings which descended on McAlpine virtually from the start of the work really had little retarding or disruptive effect on its progress'. In our view the defendants' approach is just what the case required." This provides strong guidance on the proper approach to be taken to these situations. The analysis must be a primarily factual one, which relies on good records being available to support it, and the events and their effect should be looked at the time they occur in the context of the work actually going on at the time. In the case of Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd(4) which considers the operation of clause 25 under the JCT80 standard form, it was held that: "The respondent was entitled to respond to the claim both by arguing that the variations, late information and so on relied on by the claimant did not cause any delay because they were not on the critical path and positively by arguing that the true cause of delay was other matters..".This confirms the view that in order to establish that an event has affected the completion date you must show that it falls on the critical path. Some sort of analysis is therefore required in order to establish the critical path. However, before a matter gets to this stage, it has been established in John Barker Construction Ltd v London Portman Hotel Ltd (5) that in exercising his duty under clause 25 the architect or contract administrator must undertake a logical analysis in a methodological way of the impact of the relevant events on the contractor's programme. The application of an impressionistic rather than a calculated and rational assessment is not sufficient. The John Barker Case was considered in the recent case of Balfour Beatty Construction Limited v The Mayor and Burgess of the London Borough of Lambeth (6) in which it was said by His Honour Judge Humphrey Lloyd QC that: "In the context of a dispute about the time for completion a logical analysis includes the logic required for in the establishment of a CPN [critical path network]."The Balfour Beatty case concerned a challenge to the enforcement of an adjudicator's decision on the basis that in reaching his decision, the adjudicator had failed to act fairly and had breached the rules of natural justice by preparing his own collapsed as-built analysis in the absence of one from the referring party, but had done so without giving the responding party an opportunity to comment on the methodology or his approach. In reaching his decision, His Honour Judge Humphrey Lloyd QC observed that: "If it [adjudication] is to be utilised effectively, it is essential that the referring party gives the adjudicator all that is needed in a highly manageable form. From the material available to me, it is clear that BB did little or nothing to present its case in a logical or methodical way. Despite the fact that the dispute concerned a multi-million pound refurbishment contract, no attempt was made to provide any critical path. The work itself was no more complex than many other projects where a CPN is routinely established and maintained. It seems that BB had not prepared or maintained a proper programme during the execution of the works. By now, one would have thought that it was well understood that, on a contract of this kind, in order to attack, on the facts, a clause 24 certificate for non-completion (or an extension of time determined under clause 25), the foundation must be the original programme (if capable of justification and substantiation to show its validity and reliability as a contractual starting point) and its success will similarly depend on the soundness of its revisions on the occurrence of every event, so as to be able to provide a satisfactory and convincing demonstration of cause and effect. A valid critical path (or paths) has to be established both initially and at every later material point since it (or they) will almost certainly change. Some means has also to be established for demonstrating the effect of concurrent or parallel delays or other matters for which the employer will not be responsible under the contract."It has to be questioned whether this will always be the appropriate methodology, since indeed the SCL Protocol (7), which at the time of writing this article was in draft form, refers for example to the collapsed as-built method of analysis as appropriate where the planned programme is not sufficiently detailed or has not been regularly updated with progress data. In summary, it is clear that a good understanding of the legal principles governing the analysis of delay; the right choice of approach supported by good factual evidence and the effective presentation of that evidence via a transparent CPA analysis are now essential in order to maximise the likelihood of success in adjudication, arbitration or litigation. 1. Peak Construction (Liverpool) v McKinney Foundations (1971) 69 LGR 1 2. (1902) 86 LT 764; HBC. (4th ed.) Vol. 2, p. 353, CA 3. (1992) 58 BLR 1 4. (1999) 70 ConLR 32 5. (1996) 83 BLR 31 6. (2002) 12 April (TCC) 7. Society of Construction Law Protocol for determining extensions of time and compensation for delay and disruption (draft May 2002).
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