Lessons should be learnt from six recent cases on delayed projects and extension of time disputes. However, as with those projects, progress is slow
Two thirds of construction projects complete late, according to The Chartered Institute of Building’s study of 2008. Given the cost of delay to contractors and their employers it is not surprising that extension of time (EOT) disputes are common. It is surprising, though, that many contracts do not do more to avoid them.
Judgments regularly appear that we might learn from, with the outcomes often stark. Five recent leading cases resulted in EOTs of 95-100% of the total delay period (Steria Ltd vs Sigma Wireless Communications Ltd, Walter Lilly & Co Ltd vs Mackay, and De Beers UK Ltd vs Atos Origin IT Services UK Ltd) or less than 1% of the total delay period (Obrascon Huarte Lain SA vs Her Majesty’s Attorney General for Gibraltar, and Adyard Abu Dhabi vs SD Marine Services). City Inn vs Shepherd Construction Ltd was an 80% case but it seems this would have been 97.5% if English (not Scots) law had applied.
English law is now reasonably clear that where there is concurrent delay to completion caused by matters for which both employer and contractor are responsible, the contractor gets an EOT, unless the contract suggests otherwise. This is a helpful development in reducing the scope for argument over a key aspect of EOT disputes.
What stands out most starkly about each of these cases is that the majority, if not the entirety, of the EOT claimed was disputed even when the trial was reached
What stands out most starkly about each of the above cases is that the majority, if not the entirety, of the total EOT claimed was disputed even when the trial was reached. The EOTs sought ranged from one day (Adyard) to about three to six months (City Inn, De Beers and Steria) to approximately two years (Lilly and OHL). Therefore in each case one party proved to be nearly 100%, if not actually 100%, wrong about its EOT assessment.
How can this be, not just in one case but in all six cases? The reasons are familiar, although some of them cannot easily be drafted for.
There is a degree to which contractors are required to prove EOTs, especially in disputes on wider issues (three of the above cases concerned terminated projects). Whatever their contractual record-keeping duties, contractors can be “put to proof” of their EOT claims. However, where independent delay experts are involved one might expect concessions to be made and less of the claimed EOT to be disputed. Sadly, though, deficient (delay) expert evidence seems to have contributed to the disputes in City Inn, Adyard and Lilly. Conversely, in Steria and De Beers, long EOTs were granted without any such evidence being heard. While experts often agonise over which method to use for their delay analysis, all of the six cases show the courts preferring fact-based approaches. This basic point is frequently overlooked.
The six cases involved disputes about which events really did cause critical delay (and not just where the critical path(s) lay) and whether they justified EOTs in principle. These remain hard to avoid. However, the above cases also teach lessons that can be, but often are not, drafted for.
First, it helps to specify for, at the outset, a proper programme showing (and explaining) the critical path(s) and a resources plan.
It also helps to have updates to the foregoing, during the works, when delays are experienced. Good record-keeping is another obvious must.
Thirdly, there is the benefit of contemporaneous resolution of EOT claims by appropriate decision-makers (sadly, many contract administrators do not “do” delay analysis). This reduces the scope for later, bigger disputes. Notice provisions help, although it’s obscure why they usually say that any non-compliance entirely bars an otherwise good claim. Tribunals would perform fewer gymnastics to bypass such clauses if they provided for a proportion of any entitlement to be lost upon non-compliance.
Most of our standard forms could do better at addressing the above three points. Ten years ago PFE Change Management Supplements offered certain amendments to, inter alia, JCT forms. Unfortunately the take up was limited with the extra fees for the necessary project delay analysts perhaps putting off employers.
The CIOB Contract for Complex Projects 2013 picked up the baton while recognising that those extra fees may only be accepted on larger projects. It remains to be seen how much this contract is used.
While NEC3 already goes far in addressing the above three points, again there is the problem of extra cost - especially when for smaller, simpler projects EOTs are easier to assess. Taking a leaf out of NEC3’s book, it may help if our contracts, perhaps by checklist, offered fuller options in, say, how far to prescribe the form the original programme should take (such as software, float visibility, etc). Parties would then face clearer choices as to how far they gamble that their project will be in the timely third.
Rupert Choat is a barrister, arbitrator and mediator at Atkin Chambers