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18 May 2017

EOT without delay!

by Bob Chapman, Regional Managing Director, UK - UK

The Society of Construction Law’s (SCL) Delay and Disruption Protocol was first published in 2002 and set about providing “useful guidance on some of the common delay and disruption issues that arise on construction projects” and a means “by which the parties can resolve these matters and avoid unnecessary disputes”.

Whilst the guidance in The Protocol is noted as being general in nature, it was still set out to provide the “best” guidance when it comes to deal with delay and disruption issues. There is no denying that the Protocol has received widespread recognition and is frequently adopted in debate about the right way to record and present delay, but its implementation into contract drafting and contract procedure has remained limited.

The 2nd edition of the Protocol was published in March 2017 and supersedes the 2002 version. The SCL committee in its review of the first publication aimed to address specific areas to be incorporated into the 2017 version. These were:

  • developments in the law and construction industry practices since 2002
  • feedback on the uptake of the Protocol since that time;
  • developments in technology since 2002;
  • the scale of large projects having increased, leading to a wider divergence between small scale and large scale projects; and
  • anecdotal evidence that the Protocol is being used for international projects as well as UK projects.

Unsurprisingly, given the extensive timeframe between the two Protocol editions, there are several changes which have been incorporated into the 2017 edition. Whilst this article does not address all the changes made in the updated version, particular focus has been given to what we believe are the key amendments: delay analysis methodology and concurrent delay.

 

Delay Analysis

Under the original 2002 edition, the Protocol recommended a preferred delay analysis methodology where that analysis is carried out time-distant from the delay or its effect (‘time impact analysis’). This methodology requires a baseline programme and contemporaneous updates to that programme and was recommended to be used wherever the circumstances permitted “both for prospective and (where the necessary information is available) retrospective delay analysis”.  Whilst the 2017 Protocol still favours this approach for assessing extensions of time [EOT] during a project, there is no longer a preferred methodology where the EOT applications are made after completion or considerably after the occurrence of the delay event.

The SCL Committee in drafting the 2017 edition commented that:

“contemporaneously submitting and assessing an EOT application and awarding an EOT on a prospective basis (specifically, through the use of time impact analysis) can sometimes lead to unrealistic results if it subsequently transpires that the EOT claimed is significantly more than the delay attributable to the Employer Risk Event”.

The 2017 edition instead identifies the factors which should be taken into consideration when determining the most appropriate methodology of delay analysis.  These range from:

  • the relevant conditions of contract;
  • the nature of the causative events;
  • to ensure a proportionate approach, the value of the project or dispute;
  • the time available;
  • the nature, extent and quality of the records available;
  • the nature, extent and quality of the programme information available; and
  • the forum in which the assessment is being made

The 2017 edition goes further and provides an explanation on a number of delay analysis ‘time-distant from the delay event’ methodologies in common use and the circumstances in which they might be applied. These are separated in the way in which the critical path is determined (‘prospectively’, ‘contemporaneously’ or ‘retrospectively’) and how the delay impact is determined (‘prospectively’ or ‘retrospectively’)

Whichever methodology is chosen, the Protocol makes clear that “the conclusions of the delay analysis must be sound from a common-sense perspective”

 

Concurrent delay

The approach to concurrent delay in the 2017 edition has been updated to reflect changes in the law on this topic. Under the original Protocol, where the Employer Risk Event and Contractor Risk Event arise at different times, but have concurrent effects, the Contractor Delay should not reduce the amount of EOT due to the Contractor as a result of the Employer Delay. Whilst this general rule remains as a core principle in the 2017 edition, it also introduces an exception where this may not be the case. The example given in the Protocol (paragraphs 10.10.7 to 10.10.10) describes a scenario whereby the Contractor Risk Event results in a Delay to Completion but independently, an Employer Risk Event commences and finishes within that same period of Contractor Delay. Under these circumstances, the Protocol suggests that the contractor would not be entitled to an EOT as “the only effective cause of Delay to Completion is the Contractor Risk Event” and the Employer Risk Event is not an effective cause of Delay to Completion. In this scenario, the critical path has not been affected by the Employer Risk Event.

This may have adverse consequences for a contractor as the employer may see this as an opportunity to issue variations in the period of Contractor Delay and avoid granting an EOT if such variations do not cause an effect on the revised Completion Date. Similarly, this approach seems to favour which delay comes second in the ‘concurrent effect’.

 

Key points contractors should consider following the issue of the 2nd edition

  • The parties and the contract administrator should comply with the contractual procedural requirements relating to notices, particulars, substantiation and assessment in relation to delay events.
  • The Protocol suggests that applications for an EOT should be made and dealt with as close in time as possible to the delay event that gives rise to the application. A ‘wait and see’ approach to assessing EOT is discouraged. This allows both parties the opportunity to mitigate the delay as far as possible.
  • The Protocol recommends that the parties try to agree an appropriate method of delay analysis before each embarks upon significant work on an after the event delay analysis. Failure to consult the other party on delay analysis methodology is a matter that the Protocol considers might be taken into account by the adjudicator, judge or arbitrator in awarding and allocating recoverable costs of the dispute.
  • Where true concurrent delay has been established, the Contractor Delay should not reduce the amount of EOT due to the Contractor as a result of the Employer Delay. The Contractor however should consider the Employer Risk Event not having an impact on the cause of Delay to Completion as this will not offset the enforcement of LADs.
  • The Protocol gives greater emphasis and guidance on the importance of record keeping in relation to delay and disruption issues. Contractors should take this into consideration regardless of project size or complexity.
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