AN INTRODUCTION TO INTRODUCTION the employer the purpose is to
establish a new contract completion
THE DELAY AND In October 2002, the Society of Construction Law in the United date and prevent time for DISRUPTION PROTOCOL completion of the works becoming Kingdom published its Delay and Michael Rochester Disruption Protocol. 'at large'. Senior Associate This Protocol is designed to provide An application for an EOT should be McCullough Robertson guidance on howto deal with claims made and dealt with as close in for delay and disruption this being time as possible to the delaying one of the most common areas of event which gives rise to the claim and dispute in construction application. An assessment of the contracts. The Protocol is not contractor's entitlement should be intended to be a contractual made no later than one month after document nor is it to take the application has been received precedence over the terms of a by the contract administrator contract, although it is the Society's [called CA in the Protocol)' aim that in time construction The CAshould assess the contracts will adopt the Protocol as contractor's claim by reference to a means for dealing with delay and the contractor's contractual disruption issues. entitlement. The CA should not 'wait The Protocol is divided into the and see' what the full effect of an following sections: Employer Risk Event [defined in the Protocol to be a delaying event at Section 1-Core principles in delay the employer's risk} has on the and disruption. works before dealing with the Section 2-Guidance on, the contractor's application. preparation, of programmes and Where the full effect of an records and their subsequent use Employer Risk Event cannot be forthe management of extensions predicted with certainty at the time of time. of the initial assessment they CA Section 3-Gu ida nce with how to should grant an EOT for that part deal with extension of time which be or she can predict. The applications during the course of a EOT should then be considered project. when its actual impact can be determined. Section 4-Guidance on howto analyse causes of and responsibility FLoat for delay where a project has been The Protocol also offers guidance delayed, and the analysis is on the often controversial question conducted afer the project is of who owns float and how it should completed. be treated in assessing an EOT. This paper provides an overview of Contractors often claim that they some of the key features of the own float alleging that in planning Protocol. how they propose to carry out the works, they have allowed some CORE PRINCIPALS IN additional time to give themselves DELAY AND DISRUPTION some flexibility in the event that The Purpose of the they are unable to carry out the Extension of Time works as quickly as planned. The purpose of an extension of time Therefore, it is said that any delay ('EOT') is to relieve the contractor of will erode this additional time and liability for damages for delay. An therefore the contractor should be EOT [depending upon the wording entitled to an EOT despite the delay of the contract} does not not resulting in the date for automatically bring with it an completion not being met. entitlement to compensation. For
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The opposing view is that the 1. Dedicated overheads which can contractor shou ld not be entitled to be attributed to the specific an EDT, unless the delay will result Employer Delay, and in the contract completion date 2. Unabsorbed overheads which being missed and therefore the are incurred by a contractor 'project' owns the benefit of any regardless of its volume of work float. (e.g. rent and salaries). Float and compensation For the contractor to recover Where as with respect to an EDT the unabsorbed overheads, it must Protocol takes the view that an EDT demonstrate that: should only be granted if the delay 1. It has failed to recover the causes the total float to reduce to overheads it could reasonably have below zero, a different view is taken expected during the period of with respect to prolongation. prolongation, and Unless, the contract otherwise provides, the contractor should be 2. It has been unable to recover entitled to compensation as a result such overheads because its of a delay caused by an employer, resources had been tied up by notwithstanding that there is no Employer Risk Events. delay to the contract completion If the unabsorbed overheads date. A qualification is placed on cannot be quantified, then a this, and that is that the employer formula may be used. The Protocol must be aware of the contractor's does however express the use of intention to complete the works such formulae with caution noting priorto the contract completion that they are a tool for the date, and that intention is realistic quantification of loss and do not and achievable. relieve the contractor from the Mitigation of loss burden of proving its loss. The Consistent with its obligations at Protocol does not support the use law, the contractor should do all it of the Hudson formula, claiming reasonably can to avoid the that it results in double counting as financial consequences of delay it is derived from a numberwhich caused by the employer. itself contains an element of head office overheads and profit. The This duty to mitigate has 2 aspects. Eichlay or Emden formulae are Firstly, the contractor must take preferred. reasonable steps to minimise its loss, and secondly, the contractor Acceleration must not take unreasonable steps Compensation for acceleration is that increase its loss. assessed in accordance with the contract or if the contract does not Global claims provide for acceleration, as agreed The use of global claims is between the parties. In both discouraged by the Protocol in the instances, the contractor is not same way in which they are entitled to claim prolongation discou raged by the cou rts. The compensation forthe period of failure to maintain sufficient Employer Delay avoided by the records establishing the causal link acceleration measures. between the Employer Risk Event and the resultant loss and/or Claims for so called 'Constructive expense suffered is not an excuse Acceleration', where a contractor to make a global claim. makes a claim that it had to undertake accelerative measures Head office overheads due to not receiving an EDT, are not The Protocol divides head office recommended. There is no clear overheads into 2 categories: acceptance of such a claim in, both
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The approach adopted by the English and Australian law. The Concurrency Protocol is that float is not Protocol recommends that priorto The view adopted by the Protocol is undertaking any accelerative that where delays caused by the for the exclusive use or measures, the parties resolve the contractor occur concurrentlywith benefit of the either the disputed EOT in accordance with the delays caused by the employer, the employer orthe contractor procedure laid out in the contract. contractor's concurrent delay and that an EOT should only This suggestion is likely to be should not reduce any EOT due. be granted if the Employer unrealistic given the time it may This view is contrary as to how Delay is critical to meeting take to resolve a dispute and the AS2124-1992 (clause 35.5) deals often urgent need to overcome the with this issue. the contract completion date. effect of delays. The Protocol adopts the same view Disruption where Employer Risk Events and The Protocol defines disruption as Contractor Risk Events occur the loss of productivity, disturbance, sequentially but have concurrent hindrance or interruption to effects. progress and distinguishes it from The Protocol's view is said to be delaywhich is lateness. consistent with its approach of Disruption to construction work may assessing the entitlement to an EOT lead to late completion of the work, at the time each delay event occurs. but this is not necessarily so. It is By assessing each delay event possible forwork to be disrupted separately, the Protocol claims that and for the contract still to finish by it avoids arguments aboutwhether the contract completion date. The the 'prevention principle' applies. contractor will not have a claim for This principle will prevent an an EOT due to disruption, but may employerfrom levying liquidated have a claim for the cost of the damages against a contractor, if the reduced efficiency of its workforce if employer bas been the cause of the the employer has caused the contractor's delay. The Protocol disruption. claims that this avoids the argument of whether an Employer It is claimed that there is unfairness Delay that acts concu rrently with a in both views. The approach Contractor Delay actually hinders adopted by the Protocol is that float the progress of a contractor in any is not forthe exclusive use or way. benefit of the either the employer or the contractor and that an EOT Mitigation should only be granted if the The contractor is required under the Employer Delay is critical to Protocol, to mitigate the effect on meeting the contract completion its works of any Employer Risk date. Therefore a contractor has no Events, but that duty does not entitlement to an EOT merely extend to requiring the Contractor because an Employer Risk Event to take acceleration measures such prevents the contractor from as adding extra resources orto completing the works earlierthan work outside its planned working the contract completion date or it hours. delays the contractor's progress. Compensation for delay This aspect of the Protocol has The recoverability of compensation been the most criticised.' Critics for prolongation depends upon the have suggested that this view is terms of the contract and the cause unlikely to be welcomed by of the prolongation. contractors especially where they have built the float into the program Compensation for prolongation fortheirown use when required. should not be paid for anything otherthan work actually done, time taken up or loss and/or expense
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actual actually suffered. The when the effect of the Employer damage must therefore be 'actual'. Risk Event was 'felt' by the contractor and not be reference to The Protocol recommends that the the extended period at the end of contract should contain an agreed the contract. Therefore if a amount that can be applied to each contractor was delayed by 3 days day of prolongation. It during the contract; the acknowledges that there should be prolongation is assessed when that a different agreed amount to be delay is incured during the contract, applied, depending on the stage of not by assessing what is the cost of the project where the delay occurs. 3 additional days to the end of the This overcomes the criticism of contract. agreed amounts which are often calculated by reference to a daily Disruption claims are brought overhead cost. This overhead cost pursuant to either: often fluctuates at different times in 1. a specific clause in the contract the project meaning either a (a lthoug h it is ra re to see such a windfall or a loss to the contractor. clause); or If the prolongation is caused by a 2. breach of the implied term that variation then the Protocol the employer will not prevent or recommends that the hinder the contractor in the compensation for prolongation is execution of its work. valued as part of valuing a variation. Contractor's often claim Like delay, disruption has to be that such costs should form part of established in the normal cause the variation by relying on for and effect manner and is not just example, clause 40.5[f) of AS2124- the difference between what 1992, despite the express valuation actually happened and what the clause for delay costs in clause 36 contractor planned to happen. of that contract. The Protocol claims that the most Concurrency and appropriate way to establish disruption is to apply the 'Measured prolongation Mile' technique. This technique Unlike the assessment of an EOT if compares the productivity achieved there are concurrent delays, the' on an unimpacted part of the Protocol states that if the contractor contract, with that achieved on the incur additional costs for delays impacted part. The comparison is caused by both the employer and often used byway of man hours the contractor, then the contractor expended orthe units of work should only recover compensation performed. The Protocol cautions if it is able to separate the that care must be taken so that the additional costs caused by the 2 periods which are compared are employer from those caused by the like periods. It cites the example contractor. If the contractor would that it would not be correct to have incurred the additional costs in compare work carried out in the any event as a result of the learning curve part of an operation contractor delays, the contractor with work executed after that will not be entitled to recover those period. additional costs. This approach is sensible and consistent with the If the Measure Mile approach is usual principles of assessing unsuitable, then the Protocol damages. suggests:
When are prolongation 1. a comparison of productivity on
costs to be assessed? other contracts undertaken by the The Protocol recommends that contractor, provided that sufficient prolongation costs be assessed records from the other contracts
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are available so as to ensure that (consequently referred to as the the comparison is on a like for like Updated Program). basis; and The Accepted Program, should be 2. model productivity curves and updated with actual progress at factors, such as those prepared by intervals of no longerthan 1 month. the US Army Corp of Engineers, Actual progress should be Chartered Institute of Building, etc. recorded by means of actual start and actual finish date for activities, Both methods in the writer's view together with a percentage will need to be used with some completion of currently caution, given the necessity to prove uncompleted activities and/or the cause and effect. extent of remaining activity The contractor must keep good durations. Each monthly Updated records so that the CA can assess Prog ra m shou ld be saved so as to disruption and also so that matters provide contemporaneous evidence which can affect productivity, but of what happened on the project in are unrelated to the employer's case of dispute. liability are isolated, such as In addition to the program the weather, plant breakdowns, dilution Protocol recommends that the of supervision, contractor parties reach a clear agreement on management and acceleration. the records to be kept throughout GUIDELINES ON the project. Recommended clauses PREPARING AND as to the kind of records to be kept MAINTAINING PROGRAMS are contained in the Protocol.
AND RECORDS GUIDELINES FOR DEALING
The Protocol states, what is WITH EXTENSIONS OF TIME submitted is a correct proposition, DURING THE COURSE OF that many EOT disputes would be THE PROJECT avoided if the parties properly The Protocol makes a somewhat monitored and recorded progress obvious statement that all the of the works during the course of requirements of the conditions of construction. contract relating to the application The most important tool for doing for and the granting of extensions of this is the program. The Protocol time should be followed strictly. recommends that an agreement be In addition to what may be required reached between the parties as under the contract, the Protocol early as possible concerning: suggests that a contractor submit a 1. the form the prog ra m shou ld 'sub-network' which can be inserted take; into the updated program. A sub- 2. how the program interacts with network shows the actual or any method statement describing in anticipated effect of the Employer detail how the contractor intends to Risk Event and its linkage into the construct the works and the Updated Program. An example is resou rces it intends to use to do so; given for a variation with the sub- network comprising the instruction 3. the time within which the for the variation, the activities Contractor should submit a draft required to carry out that variation program for acceptance (called the and its linkage to the updated Accepted Program) and the Program. mechanism bywhich that program, is to be accepted; The amount of any EOT should be assessed by undertaking the 4. requirements for updating and following steps: saving the Accepted Program
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1. the program should be brought 2. Impacted as planned is based There has been some comment fully up to date to the point on the effect of Employer Risk that adoption of the Protocol will immediately before the occurrence Events on the planned program of cause an increase in the required of the Employer Risk Event; work. The usefulness of this level of record keeping and technique is restricted due to the administration. It has also been 2. the program should then be theoretical nature of the predicted stated that the Protocol requires modified so as to reflect the delays that are determined by its the constant use (and therefore contractor's realistic and achievable use. expense) of programmers. The plans to recover any delays that costs involved in administration and have occu rred; 3. Collapsed as-built is based on programming need to be the effect of Employer Risk Events 3. the sub-network representing considered in determining whether on the program of work as it was the Employer Risk Event should to adopt the Protoco1. 2 Such actually built. It suffers from the then, be entered into the program; comments have some validity but and same problems as the as-planned the costs incurred in retrospectively versus the as-built method. 4. the impact on the contract analysing delay or formulating a 4. Time impact analysis is based claim in the absence of good completion date should be noted. on the effect of delay events on the records and programs must also be The Protocol notes that although contractor's intentions for the futu re considered. the program should be primary tool conduct of the work in the light of fordetermination, in orderto A copy of the Protocol can be progress actually achieved at the ensure that the EDT is fair and obtained at the Society's web site, time of the delay event. The reasonable it should be used in www.scl.org.uk. Protocol claims that this is the best conjunction with whatever technique for determining the REFERENCES contemporary evidence is available. amount of EDT, although 1. See Sims 'A Landmark Protocol GUIDELINES ON DEALING acknowledged as the most time but Fundamentally Flawed' consuming and costlywhen Building Magazine 1 November WITH DISPUTED performed forensically. 2002. EXTENSION OF TIMES The Protocol recommends that if a 2. See for example, Russell AFTER COMPLETION OF retrospective delay analysis is to be 'Valuing Delay and Disruption' THE PROJECT- performed, that the parties agree Electrical Times December 2002 RETROSPECTIVE DELAY upon the method to be used. and Birkby RIBAJournal ANALYSIS December 2002. In determining an EDT, any If the parties have otherwise adjudicator, judge or arbitrator complied with the Protocol, then should so far as it is practicable put any retrospective analysis of the him or herself in the position of the impact of delaying events should be CA at the time the Employer Risk relatively simple. If not, then the Event occurred. By doing so, he or extent and success to which a she should then determine what (if retrospective analysis can be done any) EDT entitlement could or will be dictated by the relevant should have been recognised by the conditions of contract, the nature of CA at that time. This may result in a the course of events, the value of different conclusion than that the dispute, the time available, the shown on the as-built program. records available and the program information available. CONCLUSION Althoug h not without its critics, the The Protocol makes the following Society of Construction Law should comments about the most be commended on providing commonly used forms of guidance on this often troublesome retrospective analysis: topic. Some of the concepts in the 1. As-planned versus as-built Protocol do not automatically analysis. This can be used for translate into the terms of identifying delays to progress, but is Australian contracts (for example restricted by its inability to identify concurrency) but practical advice concurrency, re-sequencing, and application can be found in the mitigation or acceleration. Protocol.
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(Cambridge Studies in International Relations) Thomas Risse, Stephen C. Ropp, Kathryn Sikkink - The Persistent Power of Human Rights - From Commitment To Compliance 126 (2013, Cambridge University